The Semiconductor Boondoggle – WSJ

You can’t just throw money at the problem. Yes, to process those wafers companies spend billions on fabrication facilities, or fabs, and expensive ultraprecise machines that stay state-of-the-art for maybe five years. They spend constantly on lithography, implanting, annealing, sputtering and polishing, with constant tinkering to improve yields. In semiconductor manufacturing, a tiny fleck of dust is like an asteroid hitting a city. One speck can ruin months of work. Intel founder

Andy Grove

once told me the story of someone who accidentally spilled ink into a fab’s distilled-water supply. Engineers freaked out, but bizarrely yields went up. Making chips is more art than science. It isn’t only sand plus capital; brains play a huge role.

I once visited a fabrication plant in Dayton, Ohio, where

General Motors

had decided to make its own chips. GM was shocked when the plant couldn’t produce any usable chips. Nothing worked. It turned out the tweezers that employees used to hold and move wafers were kicking up contaminants.

In the early 1990s in Taipei, I met with

Morris Chang,

founder of the new fab-for-hire

Taiwan Semiconductor Manufacturing Co.

He proudly showed me enclosed carriers for their wafers, no tweezers needed. That’s really how TSMC got its start.

A new “fabless” semiconductor model emerged. Rather than own fabs, companies could design chips in California and have them made in Taiwan and assembled in the Philippines or Indonesia. Of course, those with expensive facilities protested. Advanced Micro Devices founder

Jerry Sanders

declared “real men have fabs.” Yet today, AMD is fabless—its processors are made by TSMC in Taiwan—and AMD is worth more…