Semiconductor Materials 1997
Critical Technology Assessment of the U.S. Semiconductor Materials Industry
The first five years of the 1990s were a period of tremendous growth for
the semiconductor materials industry. The increase in production of computers
swelled the need for semiconductors, as did the significant increase in semiconductor
orders from the communications industry, various consumer products manufacturers,
and the automotive industry. The U.S. re-emerged over Japan as the largest
producer of semiconductors in 1995. As a result, most segments of the U.S.
semiconductor materials industry -- manufacturing equipment, components and
parts, and raw materials -- were healthier in 1995 than they were in 1991.
The 1990s also witnessed the increased globalization of the semiconductor
manufacturing and semiconductor materials industry. Japan remains the second
most important producer, but major new industry centers emerged in such nations
as South Korea and Taiwan, and nascent but important industries appeared in
Singapore, Malaysia, and Hong Kong. This increased competition and the rising
costs of research and development forced some smaller U.S. companies to join
larger corporate entities, domestic or foreign, to win needed capital for
Global competition has impaired one significant area of the U.S. semiconductor
materials industry. Total shipments of domestic packaging materials declined
in several important areas between 1991 and 1995, the time period studied
for all aspects of this assessment. In addition, total research and development
in this area fell a dramatic 94 percent between 1991 and 1995. The decline
in R&D was indicative of the abandoned effort by two U.S. companies to
challenge the foreign domination of the U.S. ceramic materials industry. The
episode demonstrates that even in a time of sharply increasing demand for
semiconductors, global competition has itself also correspondingly increased.
- This critical technology assessment of the domestic semiconductor materials
industry was initiated to assess the capabilities and competitiveness of
the U.S. industry. The U.S. Government is interested in the ability of the
domestic supplier chain to meet the needs projected in the industry's National
Technology Roadmap to the 21st Century, a 15-year business plan. A primary
objective of this assessment is to provide industry executives and government
policy makers with information and analysis on the production and technology
status, economic performance, and international competitiveness of private
sector firms involved in the semiconductor materials industry. A more detailed
version of this assessment which contains proprietary industry data was
prepared for senior government policy advisors.
- A comprehensive questionnaire was developed and used by the Department
of Commerce's Bureau of Export Administration (BXA) to collect data from
a wide range of companies that produced any of the eight distinct groups
of products within the semiconductor materials industry: wafer fabrication
materials; packaging materials; high temperature materials; wet processing
materials; testing materials; assembly materials; shipping and handling
materials; and clean room/antistatic/antiparticle materials.
- BXA is grateful for the support it received from various semiconductor
industry experts, both within the industry and the government, who provided
support in the area of survey design and field testing, technical advice,
mailing lists, and establishing company contacts.
- A total of 110 companies that had either domestic manufacturing or domestic
sales operations participated in the data collection effort. Approximately
37 percent of the responding companies were based in California, confirming
the state's continued importance in the U.S. semiconductor industry. The
other 63 percent were located in 22 individual states.
- Thirty-one of the firms in the survey were owned by foreign parent companies,
a number that reflects the global nature of the semiconductor industry.
Japanese companies accounted for two-thirds of the total foreign-owned semiconductor
manufacturing material firms, along with smaller shares owned by such nations
as Belgium, France, Germany, South Korea, Taiwan, and the United Kingdom.
- Survey respondents identified 133 domestic semiconductor materials plants.
The greatest numbers, 38, were located in California. The majority of plants
were spread among 28 different states. Texas had the second highest number
with 16 plants, and New York the third with eight plants.
- Survey respondents identified 37 foreign plants. Nine of these (25 percent)
were located in Japan. Asia overall hosted 22 manufacturing facilities,
or 59 percent of the total, demonstrating the strength of the region's semiconductor
- U.S. plants in the survey were on average 19 years old, with 56 percent
built since 1980. Foreign plants were on average 10 years old, with 89 percent
built since 1980.
- In 1994, domestic plants on average operated at 66 percent of capacity
while foreign plants operated at 60 percent. However, foreign plants operated
at a higher capacity in three of the four materials categories with sufficient
data to make a comparison -- wafer fab materials, shipping and handling
materials, and assembly materials. U.S. plants outperform foreign plants
in the packaging materials category.
- Forty-eight respondents planned to add a total of 69 new factories, a
figure indicative of a rapidly growing industry. Approximately 27 percent
are to be built overseas, almost all in such Asian nations as Japan, Singapore,
South Korea, and Taiwan. This figure is higher than the 22 percent of total
plants currently identified by respondents as located in foreign nations.
- No respondents had any future plans for plant closings and only three
firms reported a previous closure. Two factories closed so companies could
move production into newer facilities. One factory closed in 1990 because
of overseas competition.
- The capital intensive nature of the industry, particularly the high cost
of research and development, generated a large number of joint projects.
Survey respondents reported a total of 191 such cooperative agreements,
with a roughly even number of agreements between U.S. firms and foreign
- The most common type of domestic agreement was for the research and development
of new products. There were also a number of distributor agreements and
agreements concerning the use of patents.
- Of the agreements with foreign firms, 40 percent were with Japanese companies.
South Korea was second with 11 percent and Taiwan third with eight percent.
Overall, 70 percent of the foreign cooperative agreements were with companies
based in the Asian nations of Hong Kong, Japan, Malaysia, Singapore, South
Korea, and Taiwan.
- The largest number of foreign cooperative agreements were either patent
license agreements or sales agreements, each with 30 percent. Research and
development agreements, which were first on the list of domestic agreements,
were fifth on the list of foreign cooperative agreements.
- Financial information was collected on both a corporate basis and on a
divisional basis, since many companies in the semiconductor materials industry
are operating units of large diversified corporations. When the corporation's
sole business was semiconductor materials, the study combined that corporate
information with the semiconductor material divisional data to calculate
the total semiconductor material sales covered by the survey.
- Seventy-four domestic companies provided five years of information on
their total semiconductor materials sales. Total sales rose from $1.554
billion in 1991 to $3.154 billion in 1995, an increase of 103 percent.
- Sixty-three domestic companies provided five years of information on total
semiconductor materials sales, income, and profit. Net income rose 335 percent
between 1991 and 1995. The average profit rate almost tripled from 2.9 percent
to 8.6 percent. The number of firms operating at a loss fell from 28 percent
in 1991 to only eight percent in 1995.
- In the assembly materials category, sales accounted for 1.2 percent of
semiconductor material sales reported by the 63 companies in 1991. This
figure dropped to 0.95 percent in 1995. Sales within this sector during
the same period rose 73 percent, although this growth rate was less than
those of other categories. Average profits for this sector, however, rose
from 16.2 percent to 21.2 percent during the same period.
- In the testing materials category, sales dropped from 2.1 percent of total
materials sales in 1991 to 1.4 percent in 1995. Sales collectively rose
by 92 percent within this category, and average profits rose from 0.4 percent
to 7.1 percent during the same time period.
- In the high temperature materials category, sales declined slightly from
2.9 percent of total materials sales in 1991 to 2.6 percent in 1995. The
actual dollar amount of sales rose 92 percent during this time period, as
average profits rose from [-5.0] percent to 7.7 percent.
- In the shipping and handling materials category, sales were a constant
4.2 percent of total materials sales in 1991 and 1995, yet sales within
this category rose by 120 percent. Average profits rose from 10.6 percent
to 15.2 percent during this period, and no firm reported a loss.
- In the packaging materials category, sales dropped from 38.1 percent of
total materials sales in 1991 to 31.1 percent in 1995. Sales within this
industry sector rose by 78 percent during the review period, and average
profits rose from 2.0 percent to 7.3 percent, yet in 1995 this was the second
lowest profit rate of any materials sector in this study.
- In the wafer fab materials category, sales rose from 42.8 percent of total
1991 materials sales to 52.5 percent in 1995. Sales within this sector rose
167 percent during this period, although a number of firms experiences losses
each year. Average profits rose from 2.8 percent to 9.0 percent.
- Respondents reporting five consecutive years of employment data saw total
employment in all materials categories rise by 36.2 percent between 1991
- Total domestic employment grew by 32.8 percent, while total foreign employment
increased by 50.5 percent. The ratio of foreign to domestic workers increased
from 24.4 percent in 1991 to 27.6 percent in 1995, demonstrating the increasing
importance of the foreign semiconductor materials industry.
- Foreign firms hired a significantly lower number of new workers in the
important labor categories of production workers and scientists/engineers.
Only 58.2 percent of new employees hired by foreign companies were in these
two categories. By contrast, of new employees domestic firms added between
1991 and 1995, 81.6 percent were either production workers or scientists/engineers.
- The different rate of growth within employment categories significantly
narrowed the gap between foreign and domestic firms in the percentage of
total employment comprised of scientists/engineers and production workers.
Employees in these two categories comprised 67.5 percent of total domestic
employment in 1991, as compared to 79 percent in foreign firms. In 1995,
domestic firms increased the figure to 71 percent while the number for foreign
firms had declined to 72 percent.
- Total domestic salaries for the companies with complete information rose
from $282.989 million to $406.598 million, an increase of 43.7 percent.
The largest increase was in the category of production workers, which grew
by 52.4 percent overall.
- The average salary for domestic production workers ($24,633 in 1991) and
engineers/scientists ($39,345 in 1991) experienced increases of 11.2 percent
and 4.6 percent, respectively. The average domestic management salary rose
from $62,251 to $68,184, or 9.5 percent. Salaries for marketing and sales
as well as administration employees rose 15.4 percent and 18.9 percent each,
from $44,470 and $36,378 to $51,314 and $43,257, respectively.
- Total foreign employment salaries from reporting firms rose from $18.848
million to $31.733 million from 1991 to 1995, an increase of over 68 percent.
Average annual salaries for both management and administration fell, the
first from $21,206 to $21,069 (0.6 percent) and the second from $5,890 to
$4,081 (30.7 percent). The annual salary for foreign marketing and sales
employees rose by 27.4 percent, from $24,257 to $30,898, making them the
highest paid workers in the foreign semiconductor materials industry.
- Foreign marketing and sales personnel were the closest to wage parity
with U.S. workers of any category of semiconductor employees. In 1995, they
earned 60.2 percent of the wage of a U.S. marketing and sales employee.
- The category with the next closest wage parity was foreign engineers and
scientists, who made $21,008, or 51 percent of their American counterparts
at $41,160. Foreign production workers earned $7,661 in 1995, 28 percent
of a U.S. worker's salary of $27,394. The lowest wage parity was in administration.
In 1995, foreign semiconductor firms paid $4,081, only 9.4 percent of what
these domestic administration workers earned ($43,257).
- Survey respondents provided 137 product-specific responses for domestic
shipments and 22 product-specific responses for foreign shipments for all
five years in the study. These firms accounted for approximately $1.1 billion
in shipments in 1991 and $1.9 billion in 1995, an increase of 73.2 percent.
- The percentage of total shipments represented by foreign facilities was
relatively constant, ranging from a low of 15.6 percent of 1992 shipments
to a peak of 17.0 percent in 1994.
- The rate of growth was slightly higher for foreign firms. Between 1991
and 1995, shipments of foreign semiconductors materials rose from $175.275
million to $326.585 million, an increase of 86.3 percent. Domestic shipments
rose from $943.943 million to $1.612 billion, an increase of 70.1 percent.
- Four materials categories reported information only from domestic plants
and could not be broken down into any materials subcategories. Shipments
from these four categories -- shipping and handling materials, and clean
room/antistatic/antiparticle materials, high temperature materials, and
wet processing materials -- all increased at or above the overall industry
- Total shipments of wafer fab materials were $554 million in 1991, which
represented 49.5 percent of all reported semiconductor materials shipments.
In 1995, total wafer fab shipments increased to over $1 billion and represented
52.7 percent of all reported semiconductor shipments. Every wafer fab materials
subcategory experienced significant increases, with the vast majority of
reported shipments being from domestic facilities.
- Shipments in the testing materials category showed significant differences
between subcategories TM1 (probe card materials) and TM2 (die/package burn-in
fixtures). Domestic shipments in TM1 increased by 263 percent between 1991
and 1995, while TM2 shipments rose by 47 percent.
- Domestic shipments of assembly materials rose by 72 percent between 1991
and 1995, while foreign assembly materials rose 238 percent. This increase
left foreign suppliers controlling the majority of the U.S. assembly materials
- Shipments of domestic packaging materials increased by 36 percent while
shipments from foreign facilities increased by 81 percent. Most of the growth
in domestic shipments occurred in the last year of the survey, 1995. Domestic
packaging materials shipments in the 1991-1994 period grew by only 12 percent.
- Domestic shipments of packaging materials (PM) actually declined in three
subcategories. Shipments of PM4 (bonding processes) declined by 14 percent
between 1991 and 1995. Shipments of PM6 (die attach materials) declined
by almost 28 percent during the same period. Shipments of the largest category,
PM2 (ceramic packaging), declined by four percent.
- Foreign shipments in PM9 (other packaging materials) rose from 1.4 percent
of total PM9 shipments in 1991 to 18.3 percent in 1995. Foreign shipments
of PM2 (ceramic packaging) increased from 47 percent to 62 percent. Foreign
shipments in PM3 (encapsulating resins) remained at approximately 74 percent
of total PM3 shipments.
- Few respondents reported a significant level of military shipments. Total
military shipments for the 22 firms with five reported years of such sales
declined from over $33 million in 1991 to $13 million in 1995. A small increase
in wafer fab shipments was overshadowed by a decline in packaging materials
- Respondents both experienced and expected little decrease in sales from
defense spending reductions. In a time of a rapidly expanding world market
for semiconductor materials, the decline in the U.S. military budget has
not significantly affected the U.S. semiconductor industry.
Research and Development
- Fifty-four companies operated 88 research and development (R&D) facilities,
72 in the United States and 16 overseas, equally divided between Europe
and Asia. The 17 companies that owned more than one R&D facility accounted
for 39 of the 72 domestic R&D centers and 12 of the 16 overseas R&D
- These 17 companies, accounting for only 15 percent of survey participants,
owned approximately 58 percent of the research and development facilities
listed in this survey.
- Research and development spending rose in almost every materials category.
Total R&D spending, excluding packaging materials, rose from $40 million
in 1991 to $67 million in 1995, an increase of 67.7 percent.
- Research and development expenditures in packaging materials (PM) decreased
significantly between 1991 and 1995. Spending for R&D declined in two
PM subcategories, die attach materials and lead frames, by 42 percent and
23 percent, respectively.
- The largest decline in R&D expenditures was in the ceramic packaging
materials category, which fell by 94 percent between 1991 and 1995. The
decline was indicative of the effort by two U.S. companies, since abandoned,
to challenge the domination of the ceramic materials industry by Japanese
- Firms reported government R&D support only in the wafer fab and packaging
materials categories, and even there the support was minimal. Government
R&D grew from 0.8 percent to 5.0 percent of wafer fab R&D expenditures,
and 0.0 percent to 0.9 percent of packaging materials R&D expenditures.
Sourcing and Dependency
- Respondents identified 44 examples of key imported manufacturing equipment,
with 30 of these items (68 percent) from Japanese suppliers, seven (16 percent)
from German suppliers, and the remainder from Australia, Israel, the Netherlands,
- Respondents identified nine items of key imported manufacturing equipment
(22 percent) that had no known domestic source and 14 items (34 percent)
in which the domestic source was inadequate. Frequently listed items were
presses, lathes, edgers, plating, and platers.
- Price does not appear to be the prime motivation in the import of semiconductor
manufacturing equipment. Respondents listed price only seven times - - twice
as the sole factor for importing an item, five times in conjunction with
better quality, and once paired with faster delivery. By contrast, respondents
listed better quality as a reason for importing an item 21 times - - five
times as the sole factor, nine times paired with inadequate domestic source,
five times paired with better quality, and twice paired with supplement
to domestic source.
- Respondents identified 26 examples of key imported components and parts,
with 10 of these items (38.5 percent) from Japanese suppliers, three each
(11.5 percent) from both Germany and Luxemburg, and the rest from Australia,
Canada, Italy, New Zealand, Singapore, Switzerland, and Taiwan.
- Surveyed firms listed seven key imported components and parts (27 percent)
with no known domestic source and seven items (27 percent) in which the
domestic source was inadequate. Frequently listed items were lead frames,
burn-in sockets, scanning magnet and beam lines, and optical equipment.
- Quality was more important than price in the importation of components
and parts. Price was listed once as the sole reason for importing, and once
in conjunction with inadequate domestic supply. By contrast, respondents
listed better quality 10 times - - three times alone, four times paired
with inadequate domestic supply, twice paired with faster delivery time,
and once paired with supplement to domestic supply.
- Respondents listed 85 key imported raw materials, with 58 (68 percent)
from Japanese suppliers, 14 (14 percent) from German suppliers, and the
remainder from Australia, Canada, Finland, France, the Netherlands, Norway,
Switzerland, and the United Kingdom.
- Twenty-nine items of key imported raw materials (34 percent) were imported
because of no known domestic supplier, and 25 items (29.5 percent) were
imported because the domestic supply was inadequate. Frequently listed items
were silicon, resins, fillers, quartz, and high purity minerals and chemicals.
- Price was listed 18 times as a reason to import raw materials. Five items
were imported for lower costs alone, six items were listed as imported because
of lower costs and an inadequate domestic source, five items as lower costs
and better quality, and two items as lower costs and other. However, quality
was listed 31 times. Four items were imported on grounds of better quality
alone. Respondents paired better quality with inadequate domestic source
11 times, with supplement to domestic source seven times, with lower costs
five times, and with other four times.
- Respondents were asked to estimate the foreign share (as a percentage)
of the domestic market for each material subcategory. These figures provide
one rough measure of the competitiveness of particular sectors of the U.S.
semiconductor materials industry. Absent categories and subcategories signify
areas where respondents did not supply enough information to estimate the
foreign market share of the U.S. market.
Die/Package Burn-In Fixtures
Single-Crystal Silicon Wafers
Glass/Frit or Epoxy Seal Ceramic
Die Attach Materials
Etched/Stamped Lead frames
Pin Grid Arrays
Cerquad Ceramic Packages
Dicing Saw Blades
Lead frame Plating Chemicals
Gold Bonding Wire
Boron Nitride Crucibles
Hybrid Packaging Materials
- The U.S. packaging materials industry has suffered significant reverses
in the last five years and, in most major product subcategories, is no longer
- Survey respondents also identified a growing dependency on foreign suppliers
for high quality silicon.
- Survey respondents also expressed concern about the increasing dependence
on foreign firms for a number of high quality chemicals. High purity chemicals
are crucial for the production of the most advanced semiconductors.
| | | | | | |
- The double-figure annual growth in semiconductors sales in the last five
years has won increased sales for the U.S. semiconductor materials industry.
Overall, the higher sales increased profits, and left the industry in a
far stronger position in 1995 than 1991.
- The U.S. materials industry is rapidly expanding production capacity to
meet increased market demands. Based on the survey data, a 38 percent increase
in the number of plants is expected by 1998.
- Competition in the semiconductor materials industry also increased, both
because of the strong existing industry in Japan and the development of
new production centers in a number of Asian nations. This competition, combined
with the industry's strong need for high levels of research and development
funds, rewards size and has created a tendency toward consolidation.
- Respondents were split on the effects of such consolidation for the relative
position of the U.S. semiconductor industry. Some believed foreign companies
might use their lower costs abroad to dominate the U.S. market, as well
as buy small innovative U.S. firms in need of capital. An equivalent number
believed that the semiconductor industry requires a continuing large investment
in research and development and that capital -- whether foreign or domestic
-- provides needed resources for technological innovation.
- Competitive pressures have weakened some sectors of the U.S. materials
industry. This market for ceramic packaging materials, and numerous other
packaging materials subcategories, are now largely controlled by foreign
- A modest but growing number of other specific semiconductor materials
identified in the report can only be bought in sufficient quality and quantity
from foreign producers. Among the most important are silicon products, resins,
quartz, lead frames, burn-in sockets, optical equipment, and high purity
minerals and chemicals.
- Trends in the next five years promise to bring even more competition to
the semiconductor materials field. The industry appears to be moving toward
a competitive phase similar to the last half of the 1980s, even while retaining
the large annual growth rates of the first half of the 1990s.