Billions smashed into 12-inch production line, TI launched another analog chip revolution

Billions smashed into 12-inch production line, TI launched another analog chip revolution

According to a recent report by Reuters, Texas Instruments announced that it will acquire Micron Technology’s Lehi, Utah (Lehi) plant for US$900 million to increase its production capacity. It is reported that after the completion of the acquisition, Lehi fab will become TI’s fourth 300mm (12-inch) fab.

Looking back at TI’s acquisition history, the two more typical acquisitions were in 2000. They consolidated its dominant position in the field of data converters and amplifiers through the acquisition of Burr-Brown. In 2011, TI spent 6.5 billion US dollars to acquire National semiconductor (NS), which established their position in the analog chip market.

From the perspective of these acquisitions, TI’s acquisitions can always bring them breakthrough development. So, what are the mysteries behind TI’s acquisition of the 12-inch wafer fab?

 Open the 12-inch era of analog chips

For the analog chip industry, TI is the first to open the door for 12-inch analog chips, and this acquisition may be able to promote the entire analog chip industry to the threshold of 12-inch production.

Since 2009, TI has been enhancing its 12-inch manufacturing capabilities and initiated a series of mergers and acquisitions—including the acquisition of its largest 12-inch wafer fab in the United States from Qimonda in 2009. According to the report, this is the first step in the second phase expansion of the TI Richardson wafer fabrication facility (RFAB), which is also the industry’s first 12-inch analog wafer fab.

Since then, TI has also strengthened its analog position by transitioning to 300mm manufacturing capabilities in its newer RFAB and older DMOS 6 fabs.

In 2010, in order to further expand its production capacity, TI acquired two fabs in Aizuwakamatsu, Japan. One can be used for 200mm production, and the other can be used for both 200mm and 300mm production.

In April 2019, TI announced a plan to build a 12-inch wafer fab, with an estimated investment of US$3.1 billion. According to their plan, the fab will be completed by 2021 and will begin operations in 2024.

The Lehi wafer fab acquired this time is after the completion of the transaction. Lehi wafer fab will become TI’s fourth 12-inch wafer fab after DMOS6, RFAB1 and RFAB2 to be completed.

From the perspective of TI’s layout, they have been in the production of 12-inch wafers for more than ten years. In the past ten years, their analog products produced with 12-inch wafers have also flowed into the market. According to related reports, TI’s first 12-inch wafer fab started to produce chips at the end of 2010. . According to TI’s vision at the time, after the completion of the first stage of equipment installation and mass production, the total value of the factory’s annual analog chip shipments will exceed 1 billion U.S. dollars. In addition, TI announced that the new plant was also reported by the media last year that it has gradually entered the start-up phase.

From the perspective of TI’s competitors, take ADI, which ranks second in the analog chip market, as an example. In fact, they also carried out a transformation of their wafer fab in 2009. Its fabs in Wilmington, Massachusetts, USA and Lee Lee Merrick’s factory is the object of their transformation. According to related reports, ADI’s Limerick plant has all been converted from 6-inches to ADI’s high-capacity 8-inch wafer foundries.

From the perspective of this process, TI’s layout in this area has far surpassed other competitors.

Although the current supply of 8-inch wafers continues to be tight, for the 8-inch production line that has existed in the market for many years, its dividend is approaching the afterglow of the setting sun. Switching to the 12-inch production line may also be the path that more IDM companies choose. Under this circumstance, TI’s acquisition may lead analog chip manufacturers to start large-scale 12-inch production lines.

 12 inches is the key to ensuring high gross profit

As the world’s leading company in analog chips, high gross profit is one of TI’s secrets to maintain its market position.

Switching to a 12-inch production line is also their way to ensure high gross profit and profit in the future.

Therefore, in addition to building a 12-inch production line for analog chips, TI is also reducing its expenditure on 6-inch wafers. At last year’s financial report meeting, TI stated that it will close its last two 6-inch wafers in the next few years. Fab. Dave Pahl, Director of Investor Relations at Texas Instruments, once said: “About US$1.5 billion of products are produced in these two 150mm wafer fabs each year, and a large part of it will be transferred to the 12-inch wafer fab to increase productivity and economic efficiency.”

Why is it directly transferred to 12-inch? This question can also be glimpsed from TI’s information in its financial report meeting. The company has said that the output of 12-inch wafer fabs is higher than that of 8-inch technology used by competitors. Chips are 40% cheaper. In addition, for analog applications, the return on investment of a 12-inch wafer fab may be higher because it can be used for 20 to 30 years.

According to the data of Southwest Securities cited in the previous report of the semiconductor industry observation, from 2013 to 2018, TI’s gross profit margin rose from 56.9% to 65.1%, while ADI’s gross profit margin rose from 63.9% to 68.3% during the same period. At the same time, thanks to the well-controlled R&D expense ratio and declining sales and management expense ratio, Texas Instruments’ EBIT margin in recent years has risen from 30.3% in 2013 to 42.5% in 2018, which is significantly higher than ADI (2018: 30.3 %).


This is also one of the benefits for TI to switch to the 12-inch production line, and at the same time, they have also widened the distance between them and their competitors.

High gross profit is one of TI’s weapons to maintain its position in the analog chip market. This may be one of the reasons why they took the lead in launching 12-inch analog chip production.

 Open the future market with 12-inch manufacturing

From another perspective, the increased market demand for analog chip products this year may also be one of the driving forces for TI to shift to 12-inch production.

According to a report released by IC Insights, due to the tight supply in the analog IC market, it is expected that the analog average selling price will rarely rise by 4% this year (the last analog IC ASP increase was 17 years ago in 2004). Each of the major general-purpose analog and dedicated analog market segments it tracks is expected to achieve double-digit growth in 2021, with the growth of analog chips used in automobiles receiving the most attention (31%).

The automobile is regarded as the next emerging application that may disrupt the semiconductor industry pattern. Under this driving force, TI has also made a layout for the automotive field.

According to previous reports from the semiconductor industry observation, after 35 years of development, TI has 100,000 types of components, of which nearly 2,000 types of automotive-grade products, including advanced driver assistance systems, passive safety systems, body electronics and lighting Five major automotive Electronic systems including, infotainment systems and cluster systems, hybrid vehicles and electric vehicles.

Among them, there is no shortage of car simulation chips produced on 12-inch wafers.

At the same time, it is worth noting that TI announced the completion of the new 12-inch factory in 2019. After completion, it is also expected to increase the company’s chip production for smart phones, connected cars, and industrial machinery.

Therefore, grabbing a larger market is also the key to TI’s choice to switch to 12-inch production.

 Write at the end

In the end, let us work together to roughly calculate an “account”:

In 2009, TI bought Qimonda’s 12-inch wafer fab for US$172.5 million. According to related reports, after the completion of the second phase of TI RFAB, the simulated manufacturing capacity of its North Texas manufacturing plant will double, and revenue will reach approximately US$2 billion.

In 2019, TI announced that it is expected to spend US$3.1 billion to build a new 12-inch wafer fab. At the same time, they announced that they will close the last two 6-inch wafer fabs. According to them, the new fab will be able to provide competitive delivery. Time and cost of delivery of products, because the number of analog chips produced on larger 12-inch wafers is more than twice that of 6-inch wafers. According to the production of approximately US$1.5 billion in these two 6-inch fabs each year, this new 12-inch fab will also bring TI US$3 billion in revenue after the official launch.

At the same time, according to TI, 12-inch wafers have vitality for the next 20 to 30 years. It is believed that the transfer to the 12-inch production line after the completion of depreciation will help TI further expand its position in the analog chip market. And their move may also lead other analog chip manufacturers to switch to 12 inches.

Although the semiconductor industry is currently prevalent in the light-wafer foundry model, or Fabless, for the field of analog chips, since it is not affected by the development bottleneck of Moore’s Law, investing in wafer fabs has also become an advantage for them to improve their market position. One of the weapons.


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