[OPE-L:4685] inter-imperial cooperation

From: Rakesh Narpat Bhandari (rakeshb@Stanford.EDU)
Date: Tue Dec 12 2000 - 13:45:49 EST

Rivals Cooperate on Chip Equipment

December 12, 2000


SAN FRANCISCO, Dec. 8 - A decade ago, when a Japanese company sought
to acquire a Silicon Valley operation making crucial equipment for
semiconductor manufacturing, the prospect was treated in this
country as a threat to national security. Chip industry executives
and politicians feared that the sale would touch off a chain of
events ending an era of American technological supremacy.

Now those fears have all but vanished. And a growing number of
industry executives say the most important lesson is not the threat
of overseas competition, but the value of international

The reason is a practical one: it will require almost $1 billion to
develop the essential technology for the next generation of
chip-making equipment. And with fears of Japanese domination having
abated, the United States government is underwriting less and less
of the underlying research. So chip makers say continuing advances
are now beyond the grasp of Americans alone.

Indeed, an alliance of American, Dutch and German chip makers is
expected to reach a milestone in April when they switch on a
futuristic chip-making machine able to etch circuit lines no more
than several hundred atoms across. It is a commercial engineering
challenge - and an international collaboration - on a scale rare if
not unequaled in any other industry.

``The semiconductor industry has been unique in pursuing this form
of global cooperation,'' said Ulrich Schumacher, president and
chief executive of the German participant, Infineon
Technologiescoei. ``It's because our costs are brutally high.''

The privately financed cooperative effort is being conducted in
national laboratories better known for their work on the American
nuclear arsenal. It harnesses optical technologies involving highly
reflective mirrors and high-powered laser light sources borrowed
from research done as part of a missile-defense program known as
Star Wars.

If the researchers succeed, the resulting chip-fabrication plants -
which themselves will cost $1 billion to $2 billion apiece - will
be able to produce chips for myriad applications that will be 100
times as fast as those in use today, with 100 times the storage

While the burden of developing chip technologies has brought a
trend toward global cooperation, it has also led to the emergence
of new players in the race to build state-of-the-art computer
chips. In the last decade, the semiconductor industry has expanded
significantly with aggressive new chip makers emerging in Taiwan,
Korea and Europe.

The globalization of the industry is accelerating partly part
because other regions are adopting gadgets like cell phones and
wireless digital devices at a faster rate than the United States
is. But the role of American chip makers in sharing and
transferring technology has also been a factor. I.B.M., for
example, rather than bear the cost of research and development on
memory chips by itself, entered into a venture with Infineon, and
the partnership was instrumental in helping make Infineon a world
leader in memory technology.

And though the result has indeed been a dilution of American
leadership in the chip industry, there has been almost no evidence
of the anxiety that shaped a national debate on industrial policy
in the United States a decade ago.

``There was a concern in Washington that this had to be a U.S.-only
technology, and we've been working hard to explain to them that
this has to be an international technology,'' said Charles W. Gwyn,
program director of the American-European consortium working on the
next generation of chip making gear. In 1999 global sales of the
semiconductor equipment industry were $28.6 billion and worldwide
chip sales reached $149 billion. Growth rates for chip production
and chip-equipment purchases in Europe, Korea and Taiwan indicate
that those regions are rapidly gaining on Japan and the United
States, particularly in the most advanced memory chips - widely
used in the most popular consumer products, from desktop PC's to
digital music players - and in state-of-the- art factories.

Today three European chip makers - Infineon, ST Microelectronics
and Royal Philips - are among the world's 10 leading chip makers.
Meanwhile, a decade after the Japanese had come to dominate the
memory-chip industry and were threatening to overtake the United
States in microprocessors, they are now being outpaced, in part
because they have tried to go it alone rather than cooperate in
research and development, Mr. Schumacher said.

``They thought it was about controlling the technology,'' he said.

The shift toward collaboration can be seen most clearly here in the
Bay Area, where the privately financed international effort to
design the next generation of chip-making gear is under way at
three national laboratories, Lawrence Livermore, Lawrence Berkeley
and Sandia California.

Infineon of Germany, cobiASM Lithographycoei of the Netherlands and
three American chip makers - Intel, Advanced Micro Devices and
Motorola - are underwriting the initiative, which involves an
exotic new technology known as extreme ultraviolet lithography, or
E.U.V.. The research is considered crucial to continuing advances
in the semiconductor industry beyond 2004, when current technology
is expected to reach its limits in etching ever-smaller circuits on

When Robert Noyce, co-inventor of the silicon chip, set out four
decades ago to build one of the first chip- making machines, he
drove to a photographic supply house in search of an inexpensive,
used camera lens for his new machine.

In contrast, the new machines, called steppers, are custom-made
devices of the highest order. They are based on a laser-generated
light source at wavelengths far shorter than those used today. And
they require engineering feats, like the ability to create a
machine that can send light through a vacuum - and one that moves
fast but produces no vibration.

The consortium researchers acknowledge that they still have thorny
technical problems to solve. And I.B.M. and Lucent Technologies are
pursuing an alternative direction, using ultrashort-wavelength
X-rays to etch the circuits, instead of light.

But the Semiconductor Industry Association points to E.U.V. as the
more promising technology, and the confidence of the
California-based researchers has been growing in recent months.
Their approach is expected to lead to a prototype machine by April.
If all goes well, such machines will be producing chips
commercially within five years.

The company that figures to bring the technology to market is, in
fact, the Silicon Valley Group, the outfit that caused a furor when
it was coveted by Nikon of Japan a decade ago. At the time it was
the lithographic division of Perkin Elmer; I.B.M. ultimately
stepped in to ensure that it stayed in American hands. But after
further changes in ownership, it was recently sold to ASM.

At the same time, Japan is independently pursuing the E.U.V.
technology in a government-financed consortium. Whichever team
arrives there first, it appears likely that for the first time
there will not be an independent American-owned maker of the most
advanced chip-making machines.

Today the new landscape is being hailed by many in the computer
industry as a major step toward a borderless world in which
economic and technical interdependence are the hallmark of a global

But some American officials remain concerned that while
government-financed consortiums in Japan and Europe are continuing
to spend hundreds of millions of dollars on new technology, United
States government money for research in semiconductor making is

In the early 90's, the Defense Advanced Research Projects Agency
was spending more than $300 million a year to develop new
semiconductor capabilities, in part to ensure that the Pentagon
would not have to turn to foreign suppliers for its own needs. With
such concerns fading, that outlay is now $55 million a year, and is
to be phased out by 2005.

``The United States programs in basic research are a lot smaller
than the Japanese or European efforts,'' said Gordon Moore, a
co-founder of Intel, the leading American maker of chips. ``But
people here are riding high and so there just isn't a great deal of
concern right now.''

There is another, more fundamental reason there has been no
political outcry about the new globalization of the chip field,
according to many industry executives.

The rapid internationalization of the industry has made it possible
for large and small American companies to take advantage of the low
and subsidized cost of capital in countries like Taiwan and South

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