EAST-WEST CENTER WORKING PAPERS
`
`I
`
`I
`
`~ EAST-WEST CENTER
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 1
`
`

`

`The U.S. Congress established the East-West Center
`in 1960 to foster mutual understanding and coopera(cid:173)
`tion among the governments and peoples of the
`Asia Pacific region including the United States.
`Funding for the Center comes from the U.S. govern(cid:173)
`ment with additional support provided by private
`agencies, individuals, corporations, and Asian and
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`
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`work in progress at the Center.
`
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`
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`
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`Website: www.EastWestCenter.org
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 2
`
`

`

`EAST -WEST CENTER WORKING PAPERS
`
`~ EAST-WEST CENTER
`
`Economics Series
`
`No. 47, May 2002
`
`E-Business and the Semiconductor
`Industry Value Chain: Implications for
`Vertical Specialization and Integrated
`Semiconductor Manufacturers
`
`Jeffrey T. Macher, David C. Mowery, and Timothy S. Simcoe
`
`Jeffrey T. Macher is an Assistant Professor with the McDonough
`School of Business, at Georgetown University, Washington, D.C.
`
`David C. Mowery is a Milton W. Terrill Professor of Business
`Administration, and Director, Ph.D. Program, Haas Business
`School, University of California, Berkeley. His publications
`include Sources of Industrial Leadership: Studies of Seven
`Industries by D. Mowery and Richard Nelson (editors), New
`York: Cambridge University Press, 1999, and major books on the
`global semiconductor, software, and aircraft industries.
`
`Timothy S. Simcoe is currently a Ph.D. student at the Business
`and Public Policy Program, Haas School of Business, University
`of California, Berkeley.
`
`This paper will appear in Industry and Innovation, Vol. 9 No. 2
`(August), Special Issue, "Global Production Networks,
`Information Technology and Local Capabilities." Dieter Ernst
`and Linsu Kim (guest editors).
`
`East-West Center Working Papers: Economics Series is an
`unreviewed and unedited prepublication series reporting on
`research in progress. The views expressed are those of the
`authors and not necessarily those of the Center. Please direct
`orders and requests to the East-West Center's Publication Sales
`Office. The price for Working Papers is $3.00 each plus postage.
`For surface mail, add $3.00 for the first title plus $0. 75 for each
`additional title or copy sent in the same shipment. For airmail
`within the U.S. and its territories, add $4.00 for the first title
`plus $0. 75 for each additional title or copy in the same
`shipment. For airmail elsewhere, add $7.00 for the first title plus
`$4.00 for each additional title or copy in the same shipment.
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 3
`
`

`

`1. Introduction
`
`During the past 30 years, the global semiconductor industry has experienced rapid rates of
`
`technological change, rising costs for production capacity and declining prices for final products.
`
`Not coincidentally, this period also has witnessed an increase in vertical specialization in
`
`semiconductor design and manufacturing, illustrated by the growth of "fabless" design and
`
`marketing firms and their manufacturing counterparts, "foundries," that contract for the
`
`production of new product designs. During the past five years, increased vertical specialization
`
`has also been associated with an expanded role for equipment suppliers in developing new
`
`manufacturing process "modules" that integrate and complement the semiconductor
`
`manufacturing tools that they produce. Vertical separation of design and production of
`
`semiconductor components also has led to further specialization among design firms that create,
`license and trade "design modules" for use in integrated circuits (Linden and Somaya 2001 ). 1 In
`
`this paper, we examine the influence of Internet-based eBusiness applications on these trends and
`
`consider their effects on global production networks in the semiconductor industry. Although
`
`these trends began long before the development oflnternet-related "eBusiness" applications, the
`
`Internet appears to be accelerating vertical specialization and may provide a fresh impetus to
`
`"design module" trading among firms. At the same time, however, Internet applications should
`
`enable integrated semiconductor manufacturers to increase their competitiveness and efficiency,
`
`and we briefly consider the effects of the Internet on these firms as well.
`
`Although the widespread adoption of eBusiness applications within the semiconductor
`
`industry is likely to accelerate the long-term trend of increased specialization throughout the
`
`industry value chain, the Internet appears to be a catalyst, rather than primary cause, for such
`
`structural change. Ultimately, new Internet applications are likely to reinforce many of the
`
`underlying trends that have shaped the evolution of the semiconductor industry for the past three
`
`decades. These trends will influence the location of employment, design and production, and
`
`Design firms are either the aforementioned ··fabless" semiconductor firms or ""chip-less" firms that do not sell any
`semiconductor products of their own. and instead rely on licensing revenue. Design modules represent a pre-designed
`function to be implemented in a semiconductor device. These functions include physical library functions, basic blocks and
`system-level macros. Design modules are also known in the industry as IP blocks, design cores and virtual components
`(Linden and Somaya 200 I).
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 4
`
`

`

`technology development in the semiconductor design, semiconductor manufacturing and
`
`equipment and materials industries.
`
`2. Organization Of The Global Semiconductor Industry
`
`Semiconductors in 2000 were a $204 billion global industry (SIA 2001 ), organized into a
`
`number of different product and geographic segments. But the basic sequence of operations
`
`required to fabricate semiconductor components is very similar across virtually all of these
`
`product segments (Figure 1 provides a schematic depiction). Individual semiconductor "chips"
`
`are designed with the aid of advanced software and computer workstations. Chemicals, gases,
`
`and materials are combined in an intricate series of operations that utilize complex
`
`manufacturing equipment to produce "wafers" containing a large number of "die," each of which
`
`(assuming that it does not suffer from fatal defects) forms the basis for a semiconductor chip.
`
`Individual die are cut from fabricated wafers, tested for defects, and assembled into complex
`
`"packages" that combine wire contacts with insulating material to form the finished
`
`semiconductor component.
`
`Although semiconductor design activities are concentrated in specific regions of the
`
`United States (including such areas as Silicon Valley, CA; Austin, Texas and northwest Oregon),
`
`as well as in Europe and Japan, semiconductor manufacturing is more widely dispersed.
`
`Semiconductor chips are sold directly to end-users (e.g. DRAMs or embedded systems), but are
`
`more often used as intermediate inputs in electronic systems. The industries that provide
`
`manufacturing inputs-with the possible exception of product designs-and purchase finished
`
`semiconductor products are dominated by large, multinational organizations. Semiconductors are
`
`usually classified by technological sophistication (i.e., leading edge, trailing edge, etc.) and by
`product type (i.e., memory, logic, discrete devices, etc.). 2
`
`International SEMATECH ' Global Economic Workshop classifies products into five specific groups: (I ) Leading edge
`memory includes DRAMs: (2) Leading edge logic includes microprocessors and DSPs: (3) Other leading edge includes
`ASICs (PLDs and Standard cells), Flash memory. micro-peripherals and SRAMs. (4) Other !Cs includes EPROMs,
`EEPROMs and other memory and gate arrays, standard logic and analog/linear circuits; and (5) Other semiconductor
`includes discrete circuits.
`
`2
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 5
`
`

`

`Figure 1: Semiconductor Industry Value Chain
`
`I Design I
`
`Equipment &
`Materials
`
`u
`
`u
`
`Fabrication
`
`u
`Assembly & Test
`
`I
`
`I
`
`I
`
`I
`
`u
`
`I End User I
`2. 1. The evolution of industry structure
`
`u
`Systems User I
`
`Although a complete treatment of the history of structural change within the
`
`semiconductor industry is beyond the scope of this paper,3 a selective discussion of the
`
`industry's evolution is useful for understanding the implications of eBusiness for structural
`
`change in semiconductor production. For the first two decades of the computer and
`
`semiconductor industries, large integrated producers, such as AT&T and IBM, designed their
`
`own solid-state components, manufactured the majority of the capital equipment used in the
`
`production process and utilized internally produced components in the manufacture of electronic
`
`computers and computer software that was leased or sold to their customers (Braun and
`
`MacDonald 1978). During the late 1950s, "merchant" semiconductor manufacturers entered the
`
`semiconductor industry in the United States and rapidly gained market share at the expense of
`
`the firms that produced both electronic systems and semiconductor components. Merchant
`
`producers remain more significant within the U.S. semiconductor industry than in those of either
`
`More complete treatments of the semiconductor industry's history can be found in Braun and MacDonald (1978), Tilton
`(1971), Langlois and Steinmueller (2000) and Macher, Mowery et. al (1998).
`
`3
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 6
`
`

`

`Europe or Japan. Specialized producers of semiconductor manufacturing equipment also began
`
`to appear in the early 1960s.
`
`During the 1980s and 1990s, hundreds of "fabless" semiconductor firms that design and
`
`market semiconductor components, relying on contract manufacturers called "foundries" for the
`
`production of their designs (the fabless/foundry business model), entered the industry. Fabless
`
`semiconductor firms serve a variety of fast-growing industries, especially personal computers
`
`and communications, and seek to dominate their markets by offering more innovative designs
`
`and shorter delivery times than so-called merchant semiconductor firms. Foundries, in contrast,
`
`are firms specialized in semiconductor manufacturing, but may also represent the more
`
`traditional integrated device manufacturers (IDMs) with excess fab capacity.
`
`A related structural change within the semiconductor industry has been the emergence of
`specialized design module providers,4 Electronic Design Automation (EDA) suppliers5 and
`
`systems houses that compete in the provision of intellectual property (IP) design blocks and
`
`systems-on-a-chip (SOC) technology (Linden and Somaya 2001 ). This networked business
`
`model of design and manufacture competes with large integrated firms who have maintained
`
`their design and manufacturing capabilities.
`
`Along with increased vertical specialization, consolidation has occurred within the
`
`semiconductor and semiconductor materials and equipment industries. As product lifecycles
`
`continue to shrink, especially in the computer and communications markets, fabless firms and
`
`integrated device manufacturers understand that it is often more economical to acquire, rather
`than internally develop, new technologies. 6 Partnering with or acquiring design firms, or being
`
`acquired by an integrated device manufacturer (IDM) or other larger, fabless firm can help to
`facilitate product introductions or market entry. 7
`
`These firms license out product designs known as .. IP blocks.'' .. design cores'' or ·'virtual components." but do not market or
`sell any tangible products. Some of the more successful design module providers are Advanced Rise Machines (ARM),
`MIPS, and DSP group--all of which license microprocessor-based designs. These firms are successful because they have
`focused on design niches with multiple applications, developed ··architectural" modules that are difficult to duplicate and are
`based on successive generations, and implemented effective strategies to protect the knowledge assets in place (Linden and
`Somaya 200 I).
`
`Besides offering design automation software, EDA firms offer ··commodity OM warehouses," whereby a broad range of
`relatively low value design modules can be licensed. Synopsys and Mentor Graphics are examples.
`
`For example. National Semiconductor's purchase of Cyrix helped facilitate the building blocks necessary for systems on a
`chip (SOC).
`
`On the other hand, acquisitions and mergers also aid the acquiring firm by tapping into high growth product markets. The
`acquisitions by Intel of Level One Communications and Chips & Technologies allowed Intel to enter into the high growth
`communications market and gain additional silicon content around the CPU. respectively.
`
`4
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 7
`
`

`

`2.2. Forces Supporting Specialization
`
`The growth in vertical specialization in semiconductors, particularly during the past 15
`
`years, reflects the influence of market-related and technological factors. The expansion of
`
`markets for semiconductor devices means that vertically specialized semiconductor design or
`
`production firms can exploit economies of scale and specialization. These scale economies lower
`
`production costs, expanding the range of potential end-user applications for semiconductors and
`
`creating additional opportunities for entry by vertically specialized firms. The increasing capital
`
`requirements of semiconductor manufacturing provide another impetus to vertical specialization.
`
`Large fixed costs make it necessary to produce large volumes of a limited array of
`
`semiconductor components in order to achieve the economies of scale associated with high
`
`throughput. The design cycle for new semiconductor products also has become shorter and
`
`product lifecycles more uncertain, making it more difficult to determine whether demand from a
`
`single product will fully utilize a fabrication facility, and increasing the risks of investing in a
`
`new fabrication facility dedicated to a particular product. Foundries produce a wider product mix
`
`and therefore lower these financial risks for both foundry firms and customers who might
`
`otherwise have to invest in new capacity to manufacture the devices.
`
`Another factor driving the emergence of specialized design and manufacturing markets
`
`are the "network effects" created by the semiconductor industry' s standardization around a single
`
`production technology and the resulting improvements in complementary design software for the
`
`layout and simulation of new semiconductor devices. Manufacturing process technology for
`
`digital semiconductor devices is dominated by Complementary Metal Oxide Semiconductor
`
`(CMOS) processes, differentiated by feature size, level of interconnects and voltage levels. The
`
`emergence of this CMOS standard has facilitated the division of labor between product
`
`designers, who are able to operate within relatively stable design rules, and process engineers,
`
`who are able to incrementally improve new process technologies (Macher et al. 1998).
`
`Finally, technological innovations have supported vertical disintegration. The "open(cid:173)
`
`standards" architecture of personal computers, which have dominated growth in markets for
`
`semiconductor components since the 1980s, contributed to the development of standardized
`
`interfaces among components that in tum facilitated the specialized production of individual
`
`components, as well as vertical specialization in component designs and component
`
`manufacturing. More recently, the advent of partially programmable semiconductor devices has
`
`s
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 8
`
`

`

`allowed semiconductor designers to incorporate increasing levels of functionality onto devices
`
`(system-on-a-chip technology) without sacrificing the applications flexibility required of a true
`
`"systems" product. Advances in computer-aided design (CAD) software and tools, as well as
`
`high-bandwidth digital communications networks, also have facilitated the exchange of huge
`
`amounts of standardized design data among design specialists and between fabless design firms
`
`and manufacturing foundries.
`
`At the same time, however, a number of semiconductor manufacturing companies
`
`continue to integrate semiconductor device design and device manufacture. The advantages of
`
`such integrated management of design and manufacture appear to be greatest in semiconductor
`
`product lines at the leading edge of technology, especially in DRAMs (Macher 2001). In these
`
`areas, the demanding requirements for close coordination of design and process innovation mean
`
`that intrafirm management of these activities can yield advantages in flexibility, responsiveness,
`
`and the "debugging" of new manufacturing methods.
`
`2.3. Implications for the Global Distribution of Semiconductor Design and
`Production
`
`Regional specialization in different types of products and processes has characterized the
`
`semiconductor industry for most of its history. Since the early 1980s, roughly 85 per cent of
`
`packaging and testing capacity in the semiconductor industry has been concentrated in Southeast
`
`Asia (Leachman and Leachman 2001). The regional concentration of packaging and testing
`
`activities in Southeast Asia has been a source of significant volumes of international intra- and
`
`inter-company trade within the industry. Since the capital investment requirements for packaging
`
`and test activities are roughly one-tenth those of wafer fabrication, however, the networks
`
`developed around packaging and testing have involved much more modest flows of investment
`
`than has the more recent shift in the global distribution of fabrication capacity.
`
`Wafer fabrication capacity grew at an average rate of 36 per cent per year during the
`
`1980-2000 period (Leachman and Leachman 2001). This rapid growth in overall capacity was
`
`combined with the retirement of substantial amounts of "mature" capacity, reflecting the effects
`
`of rapid technological change. As a result, the regional distribution of semiconductor
`
`manufacturing capacity shifted significantly during these 20 years. Figure 2 depicts trends in the
`
`regional distribution of installed fabrication capacity, measured in terms of memory bits and
`
`6
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 9
`
`

`

`logic gates, 8 from 1980 to 2001. The North American and Japanese shares of fabrication capacity
`fell significantly during the period, while the share attributable to "Asia/Pacific" (mainly Taiwan,
`South Korea, and Singapore) increased.9
`
`Figure 2: Fabrication Capacity by Region of Location
`
`-~
`
`-
`
`';' 30% ,
`C)
`J!
`C:
`Q)
`~ 20% +--
`Q)
`D.
`
`-
`
`-
`
`-
`
`-
`
`'-------;;;;;;;;;;;;;;;;;;;;;;;;;~~;;;;;;;;;;;;;;;;;;;;;--(cid:173)
`
`-
`
`-
`
`- - - - -- - - -- -,,~- -- - --
`
`--=
`
`-
`
`southeast Asia
`Europe
`Japan
`-North America
`
`1980
`
`1985
`
`1990
`
`1995
`
`1998
`
`2001
`
`Year
`
`Source: Leachman and Leachman (2001 ); Henisz and Macher (2001)
`
`Figure 3 presents similar data on manufacturing capacity that are classified by region of
`
`ownership, rather than by location. Southeast Asian firms account for the largest share of
`
`fabrication-capacity ownership but are followed closely by North American firms. Figures 2 and
`
`3 indicate that North American, Japanese and European firms have expanded their capacity
`
`outside of their "home" regions since the mid-1990s, but Southeast Asian firms have tended to
`
`invest primarily within their home regions during the same period. The result has been a
`
`concentration of fabrication capacity ownership and location in the Southeast Asian region.
`
`There are many possible measures of fab capacity, including the number of wafers processed over a given time period, the
`total wafer surface area that can be processed. the amount of installed processing equipment, etc. Leachman and Leachman
`(200 I) measure fabrication capacity as the estimated number of electrical functions that are produced by chip manufacturers,
`where a function is a memory bit or logic gate.
`
`Taiwan and South Korea account for more than 80 per cent of the capacity located in this region.
`
`7
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 10
`
`

`

`Figure 2.3: Fabrication Capacity by Region of Ownership
`
`50% -.-----
`
`- - -- - -- - -- - - - - - -- - - -- -
`
`-
`
`Southeast Asia
`Europe
`Japan
`-North America
`
`10% + - - - -- - -
`
`0% -+--- - -~ - -- -- -----,------,--- -----,------,
`1980
`1985
`1990
`1995
`1998
`2001
`
`Year
`
`Source: Leachman and Leachman (2001 ); Henisz and Macher (2001)
`
`The concentration of manufacturing capacity in Southeast Asia, particularly in Taiwan, is
`
`attributable in part to the development and success of the foundry business model. Pure play
`
`foundries supply roughly 75 per cent of the worldwide foundry market, with IDMs accounting
`for the remaining 25 per cent. 1° Foundry sales represent a growing portion of overall industry
`sales and approached $10 billion in 2000 (McClean 2001). Pure-play foundries' manufacturing
`capabilities still lag those of the most advanced integrated manufacturers in Korea, Japan and the
`
`United States, but this gap continues to narrow (Macher et al. 1998).
`
`Although semiconductor manufacturing has become a global enterprise, semiconductor
`
`design activities remain heavily concentrated within the U.S. A number of factors help explain
`
`the continued U.S. dominance of semiconductor product design. Regional high-technology
`clusters in areas such as Silicon Valley, Boston's Route 128 and Austin, Texas attract large
`
`numbers of product designers and developers due to a density of jobs at established and
`
`developing design firms. These centers are often located near universities and other research
`
`'°
`
`IBM Microelectronics (U.S.), LG Semicon (Korea), Samsung (Korea) and Winbond (Taiwan) are notable examples of
`IDMs who offer contract foundry services.
`
`8
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 11
`
`

`

`centers that produce new design techniques as well as new engineering talent. Indeed, U.S.
`
`universities' role in the development of new design architectures and new design software for
`
`semiconductor components has long outstripped their role as a source of new manufacturing
`
`methods, because the cost of constantly re-equipping the necessary facilities exceeds the
`
`resources of most academic institutions.
`
`Although its precise effects remain difficult to forecast, growth in vertically specialized
`
`fabless/foundry semiconductor production could have significant implications for the geographic
`
`location and mix of industry employment. Fabless design firms are likely to remain concentrated
`
`in North America, but the most advanced foundries are located primarily in the Southeast Asian
`countries of Singapore and Taiwan. 11 If Taiwan remains the leading site for pure-play foundries,
`
`continued expansion of the fabless/foundry model could result in the some migration of
`
`semiconductor manufacturing employment from the United States to Taiwan, even as U.S.
`
`design specialists remain fully employed. Nevertheless, a few Taiwanese firms have opened
`
`foundries in the United States, and Taiwan's dominant position in the foundry industry faces
`
`competition from lower-cost production sites in other areas of Southeast Asia and elsewhere.
`
`Indeed, Malaysia and the People's Republic of China are widely cited as important future sites
`for foundries. 12
`The long-term effects of expansion in the fabless/foundry model on the geographic
`
`location of manufacturing capacity and employment thus are uncertain, but on balance, growth in
`
`foundries is likely to result in the movement of more capacity and employment from the United
`
`States, Japan, and Europe to Taiwan, Singapore, and mainland China. Even more uncertain are
`
`the effects of shifts in the regional distribution of production activity on the global distribution of
`
`semiconductor design and technology development. At present, the strong agglomeration
`
`economies that have supported the regional concentration of these activities in a few areas
`
`I I
`
`12
`
`Major pure play foundries include TSMC and UMC (both Taiwan) and Chartered Semiconductor (Singapore). Other pure
`play foundries include Tower Semiconductor (Israel), Anam (Korea), and WSMC (Taiwan), which was recently bought by
`TSMC.
`
`I st Silicon is a Malaysian pure-play foundry startup with a partnership in technology and wafer supply with SHARP
`Corporation of Japan. Silterra is also a Malaysian foundry startup with a similar technology partnership with LSI Logic.
`Both 1st Silicon and Silterra have received funding from the Malaysian government. Advanced Semiconductor
`Manufacturing Corporation (ASMC) is a Chinese foundry startup. and was previously Philips Semiconductor Corporation of
`Shanghai. It has long-term technology transfer agreements with Philips and Nortel. Central Semiconductor Manufacturing
`Corporation (CSMC) represents the first pure-play foundry in China and has a joint venture relationship with Huajing
`Electronics Group Corporation.
`
`9
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 12
`
`

`

`around the globe remain strong. But these agglomeration effects may weaken, as more and more
`
`semiconductor manufacturing activity is geographically distant.
`
`3. eBusiness In Semiconductor Design And Production
`
`One of the most important effects of the Internet on the global semiconductor industry has
`
`been indirect-
`
`the Internet has supported the growth of new product segments ( e.g., digital
`
`signal processing chips, DSPs) that have accounted for a significantly increasing share of total
`industry output. 13 As the Internet matures, however, it will also affect the coordination and
`
`management of design and manufacturing processes. The impact of the Internet and eBusiness
`
`on the design and production of semiconductors and on the organization of these activities is the
`
`subject of this section. Since many firms are in the early stages of implementing and evaluating
`
`eBusiness applications, much of this discussion is necessarily speculative.
`
`3.1. eBusiness and Semiconductor Manufacturing
`
`Some applications of the Internet have already occurred in the fabless/foundry
`
`relationship, where fabless firms and foundries rely on Internet links to exchange information
`
`about the timing and content of product designs and the manufacturing process. Applications that
`
`link the Internet to more complex business processes have been slower to appear. Many
`
`companies are using the Internet to integrate sales information with the order tracking, inventory
`
`and production management systems utilized in the fab. Some semiconductor manufacturers are
`
`also evaluating the use of eBusiness applications for automated procurement, remote diagnostics,
`
`and equipment maintenance and repair.
`
`One of the central challenges in managing the "arms-length" interface between a fabless
`
`design firm and foundry is coordinating the flow of knowledge to facilitate a smooth and
`
`efficient transfer of new designs into production. The transfer of complex design information
`
`into production typically relies on the design firm's adherence to the "design rules" laid out by
`
`the foundry. A foundry's "design rules" establish a set of parameters and constraints within
`which the design engineers and architects must work. 14 These rules are incorporated into the
`
`13 DSPs are used in high growth communications markets such as wireless phones and computer networking gear, and are
`expected to grow from $6.1 billion in revenue in 2000 to $20 billion in 2005. an average annual growth rate of27 per cent
`(ForwardConcepts 200 I).
`
`14 Design rules also place restrictions on the types of designs that will be manufactured in a foundry or on specific delivery
`schedules.
`
`10
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 13
`
`

`

`tools used by designers and have a significant impact on the final product configuration. It is
`
`critical that design firms have current, reliable and accurate information on the design rules that a
`
`foundry will support as they approach the completion of a design. In response to this
`
`requirement, leading foundries such as Taiwan Semiconductor Manufacturing Company (TSMC)
`
`and UMC Group have developed Internet-enabled software products that link designers with
`
`information on design rules and new process technologies in the foundry. TSMC has launched
`
`two such products. The first is a web-enabled viewer that allows real-time collaboration between
`
`geographically separated teams of design engineers and TSMC engineers to reduce the length of
`
`design layout reviews and improve design layout efficiency. The second application integrates
`
`software from two leading EDA vendors (Synopsis and Avanti) with TSMC's process
`
`technologies, providing up-to-date and TSMC-specific design library files and design flow
`information. 15
`
`The Internet and eBusiness promise to facilitate collaboration between fabless design
`
`firms and foundries by increasing the volume and speed of information transfer and by
`
`simplifying the tasks of knowledge management and exchange. Foundries collaborate with the
`
`vendors of software tools used by design engineers to embed their design rules into patches that
`
`designers can download in order to quickly update the rules that they are using. For example,
`
`Mentor Graphics' Calibre software is used to verify that a semiconductor design conforms to
`
`physical design and layout rules established by foundries. "Rule Files" for dozens of foundry(cid:173)
`
`specific manufacturing processes at various partner firms including Chartered, IBM, TSMC and
`
`UMC can be downloaded through either Mentor Graphics' website or the websites of various
`foundries. 16 The Internet also aids foundries in the distribution of information about projected
`
`changes in design rules and manufacturing processes, making it easier for design firms to plan
`
`new designs and conform with future foundry requirements. Each of the major foundries '
`
`websites provides a technology "road map" that provides a detailed timeline for the introduction
`
`of introduction of new manufacturing processes in each of a variety of design classes such as
`
`15 UMC offers a remote layout viewer similar to TSMC that speeds and simplifies the ··design rule check" signoffby the
`customer (EBA ON 05/17/200 I). UMC offers other web-based tools it calls "'i-Designer," which allows for on-line chip size
`and cost estimations of various feature sets.
`
`16
`
`See www.mentor.com/dsm/dfm partners.html for more information.
`
`11
`
`Petitioner STMICROELECTRONICS, INC.,
`Ex. 1029, IPR2022-00681, Pg. 14
`
`

`

`logic, memory or sensors. 17 This roadmap allows device designers to adapt to future changes in
`process technologies that affect design rules and specifications.
`
`In addition to facilitating faster transmission of larger amounts of information, the
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`Internet can provide information to foundry customers (fabless firms or systems firms) on the
`
`status of orders in real time. TSMC has developed eFoundry, an internet-enabled customer
`
`service program that the company hopes will enhance the efficiency of customer booking
`procedures and service and result in shorter delivery times and improved service (Norris 1997). 18
`
`UMC has similarly implemented a web-based supply chain management system it calls eProject.
`
`This system covers the entire semiconductor life cycle, from on-line purchasing through work(cid:173)
`
`in-process and quality reports.
`
`The integration and automation of the entire order-to-delivery process through eBusiness
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`applications can provide information for transactions between foundries and fabless firms that is
`
`similar to that obtained by integrated manufacturers from their in-house Enterprise Resource
`
`Planning (ERP) software packages. Such information improves the flexibility of production
`
`scheduling, reduces inve