Global semiconductor and electronics sectors have been in a downturn since the onset of 2022. Companies in Taiwan's compound semiconductor sector, such as WIN Semiconductors and VPEC, have not met their performance expectations. Despite that, so-called wide band gap (WBG) compound semiconductors like GaN (gallium nitride) and SiC (silicon carbide) remain the center of attention as wireless communication moves towards 6G and electrical devices demand more power-efficient operation.
DIGITIMES recently sat down with Americo Lemos, CEO of IQE, the global leader in compound semiconductor epitaxy wafers headquartered in the UK, for an exclusive interview to talk about the future of compound semiconductors.
Mr. Lemos has many years of experience working at silicon-based semiconductor manufacturers. A semiconductor veteran of over 20 years, he has held executive-level positions for industry leaders like Intel, Qualcomm, GlobalFoundries (GF), and even Taiwan's Quanta.
Q: What's your view on the compound semiconductor sector's performance for 2022-2023? When will the market show signs of recovery?
A: The world has experienced a great deal of change and challenges over the last two years. We saw the smartphone business significantly impacted by the lockdown caused by the pandemic. We all know what China's lockdown policy has done in terms of affecting the consumer product market. We certainly felt the downturn in the semiconductor industry.
2022 was certainly very challenging for our industry. And the next year (2023) is still going to be a challenging year for the industry, as demand hasn't quite recovered yet. At IQE, we have continued to transform our business and work with clients so that we can continue to perform strongly when the economy turns around, while diversifying our product portfolio and customer base.
We believe the inventory adjustments will complete towards the second half of 2023. We also hope that China will ease up its lockdown policies. For the short term, we will still have to deal with some inventory correction, but the long-term megatrend of the semiconductor industry is still very strong
Q: Regarding WBG emiconductors, what are IQE's existing products, business strategy, and production capacity? Are there any plans for expansion or the introduction of new products?
A: It is important to understand the key strategic assets of IQE. There are really three of them.
Firstly, we have the industry's broadest portfolio of compound semiconductor material technologies as well as all key epitaxial wafer manufacturing platforms: MOCVD, CVD, and MBE. I would say we have by far the best product, process, and technology roadmaps in the industry. This is a huge asset for a technology company. Secondly, IQE has a global footprint which in today's world is a critical strategic advantage as we reshape the supply chain from a global basis to a regional supply chain. We have manufacturing infrastructure in place across three continents: Taiwan, the United States, and Europe which deliver to every regional market. Thirdly, we have scale. We have large factories that allow us to scale very quickly with our customers and give them the supply security needed to expand their businesses without having to worry about supply shortages. We can do all of this for our customers in volume without the need to build new factories.
IQE's compound semiconductor strategy focuses on a few major applications. Moving forward, our focus will be on high-growth markets. I'm going to highlight a few of them.
The first is the Smart Connected Device market. IoT devices have become smarter with 5G connectivity, and that opens up a whole new set of markets such as power amplifiers for high-speed wireless connectivity and sensing capabilities.
The second is the power electronics market. The requirement for energy efficiency in the energy crisis we face today means that wide band gap semiconductors such as GaN and SiC have a fantastic market penetration.
The third is the automotive market. There are two vectors in this market. The first is LiDAR for sensing. The other is GaN, SiC power electronics used in power conversion and charging.
The fourth is the display market. IQE is investing in creating partnerships to develop microLED technologies. This is important because we believe that we're going to see a revolution in the display market with high-performance and high-efficiency microLEDs displacing incumbent LCD and OLED panel technologies.
IQE is very well-positioned to leverage these megatrends with our global footprint, our existing technology roadmap, and our large-scale manufacturing capability. We are really the only pure-play epitaxy provider that has a presence in Taiwan, the US, and Europe.
In terms of new products, historically, our business has been focused on two major sectors: wireless communication and photonics, which can then be further divided into the aforementioned four markets. We believe that the smart connected device will grow but at a very reasonable pace. The biggest growth is in the power electronics market, mainly spesrheaded by the electric vehicles and industrial sectors.
IQE's objective is to take compound semiconductors from the niche market to the mainstream market like silicon. We have a roadmap that will see our wafer portfolio transition from 4 to 6-inch and from 6 to 8-inch. Right now, IQE's 8-inch epitaxy wafers are already in mass production. And whilst we see slower growth in the smartphone sector, power electronics, and microLEDs are presenting major growth opportunities for IQE.
Q: We observed that at the end of 2021, IQE partnered with Global Foundries (GF) to focus on GaN-on-Si technology. At the end of 2022, IQE also formed a strategic partnership with Korea's SK Siltron that includes GaN-on-Si and GaN-on-SiC. What is IQE's 'Asia strategy'?
A: First of all, IQE is a 32-year-old company. We are at the core of the compound semiconductor ecosystem. IQE's strategic partners include the major substrate suppliers, foundries, fabless companies, tool vendors, and more. These long-term relationships are very crucial for building an ecosystem. But now, we are experiencing a world where it is becoming more and more challenging to do business in the way that we used to. We see geopolitical tensions, rising inflation, and supply chain disruptions. These are all factors that have prevented people, technology, and products from moving between borders freely.
There are two streams to IQE's strategy: diversification and partnership. As I previously mentioned, IQE's global footprint spans Asia, the US, and Europe. Through our partnership with GF and SK Siltron, IQE is building an ecosystem that can serve clients all across the world.
IQE has served Asia for over 20 years. We have a factory in Taiwan that's equipped with both MOCVD (metal-organic chemical vapor deposition) and Molecular Beam Epitaxy (MBE) capabilities. This fab is our Asia hub and is very important to what we do. We plan to continue to build our team in Taiwan and dedicate resources to it as we see the Asian region as presenting the most significant opportunities for growth. IQE is now accelerating its work to serve this market more deeply.
For instance, recently we transferred MBE equipment to Taiwan and one of our UK sites has recently become our R&D Innovation Center. The MBE equipment is already installed and operating at our Taiwan site. It's important for our customers to know that IQE has scaling capabilities. By simply adding additional equipment, we can expand our output by three times within the existing footprint of our fabs.
In addition, we are also strengthening our team in Asia by developing a commercial engine to better understand the need of our customers and deliver compelling solutions to enable them to succeed.
Q: What is your view on China's influence and tech gap on compound, especially WBG, semiconductors? How do you evaluate China's efforts to leapfrog in WBG semiconductors?
A: It's not just China. I think the industry is reinventing itself and different regions are reconstructing their own ecosystems. We saw China investing a lot of resources very early on. We saw the US reinvesting in domestic manufacturing, and we saw Europe do the same.
However, I believe it's very difficult for any country to totally dominate the market because the ecosystem is so complex. There is competition but there is also collaboration. There will be a hybrid model where countries will develop some level of capability themselves but also partner with their competitors to deliver complementary technology solutions.
As a pure-play epitaxy service provider, IQE is open to serving every client in every market where we can do business. The China market is obviously a very important one. As long as the existing legal frameworks allow, we will still provide products to Chinese clients.
Q: Taiwan has epitaxy suppliers like VPEC and IntelliEPI, as well as foundries like WIN Semiconductors and AWSC that are looking to crossover into compound semiconductors. How will IQE cooperate or compete with the Taiwanese supply chain?
A: There are high barriers to entry in the compound semiconductor sector. Today, IQE is a global leader in pure-play epitaxy with an industry-leading technology portfolio that has an unchallenged breadth and depth. With 30+ years of IP, know-how, and trade secrets, we have innovated and scaled our materials platforms which include Advanced Silicon, GaAs, GaN, InP, and GaSb, as well as embracing all core epitaxial wafer manufacturing technologies such as MOCVD, MBE, and CVD.
Regarding Taiwan, not only do we have our factory, teams, and technology here, but we also have many partners and customers located locally too. As I said earlier, IQE is the only epitaxy service provider that has both MBE and MOCVD capabilities, and the Taiwan site has equipment for both. We are very excited about the potential of the Taiwan and Asia markets and IQE will continue to be an integral part of Taiwan's semiconductor ecosystem.
Due to the megatrends of EVs, microLEDs, and power semiconductors, many new companies are looking at the semiconductor industry as a whole and more particularly, compound materials. IQE has indeed had conversations with many 'new players' who are previously not engaged in compound semiconductors. IQE has been and will continue to establish partnerships across the industry. The quantity and strength of these new engagements are a testament to IQE's technology leadership which has been established over 30+ years
Q: Silicon-based foundries like TSMC are also developing GaN-on-Si technology. Is there a possibility for IQE to cooperate with TSMC in the future?
A: We are open to that idea. When it comes to GaN, it is very versatile and can be used for Radio Frequency (RF) chips, power electronics as well as microLEDs. We are very confident of the enormous potential that GaN offers, being a key material within IQE's product portfolio that is a critical enabler of many new device technology trends.
Q: There have been rumors about II-VI taking some supply of Apple's 3D Sensor Face ID module away from Lumentum. How do you see IQE's market share changing in the future? What are some new applications to look forward to?
A: We will not openly comment on specific companies or supply chains. However, regarding 3D Sensing, we have a very strong market share and volume demand which has grown in size thanks to some significant design wins. Therefore, IQE remains positive about the market and the growth opportunities that it presents ahead.
Beyond traditional 3DS markets, we are growing our technology into the automotive sectors through new LiDAR qualification wins, a further key growth opportunity for IQE. Imagine if every consumer electronics device, whether it's your phone, your PC, or smart devices within your home, all have 3D Sensing functionality. That creates a large market with great diversity and growth potential, something we are seeing right now. Additionally, 3DS will appear in AR/VR devices, another growth market we are serving with our microLED epitaxy platforms.
As Vertical Cavity Surface Emitting Laser (VCSEL) epitaxy wafer steps into the 8-inch era, we are looking to maintain our competitive advantage. The four applications I previously mentioned all need compound semiconductors. I can even go as far as to say that without compounds, there is no 5G. There is also no EV without compounds.
Q: Price has been a bit of a concern for WBG compound semiconductors. How do you view the correlation between component cost and penetration rate?
A: I don't think it's about price, but the macro environment. The price I'm referring to here is future 'energy prices'. We need to think about, what problem are we solving in the future.
The energy crisis in Europe has caused energy prices to increase sevenfold. How can we solve this problem? The answer is by reducing power consumption which is made possible by GaN. This means that the GaN component now has added value and the price of the GaN component itself won't be an issue.
I believe it's about value and scale, not price. The main reason we have all these electronic devices now is because of Moore's Law. We can manufacture silicon at an affordable price. It's not cheap, but with scale, we can make it affordable. I believe that as WBG semiconductors enter the 8-inch era, the scale will increase, and the market will be more than just price-driven.
The cost for manufacturing compounds will change as we go from 2/4/6-inch to 8/12-inch. Therefore, managing this increased production is also a key for IQE. We need to standardize, centralize, and scale.
Recently, we've moved MBE equipment to North Carolina and Taiwan as part of our efforts to centralize our production to save costs. The silicon industry is very efficient due to it being highly automated. The compound semiconductor still has portions that require manual work. We hope to further improve our efficiency by adopting semi- or even full automation.
Q: The semiconductor sector always has a major talent issue. What are the differences between the talent required for compound semiconductors and silicon-based semiconductors?
A: The talent issue is indeed a global challenge. The future emphasizes diversity and inclusion. IQE has been working with universities to create a talent pipeline for new graduates. One example is Cardiff University in South Wales, UK, and we do the same in the US. In Taiwan, we've been gradually collaborating with professors and academia who are creating future talent pipelines for IQE, across all of the three continents in which we operate.
Q: You have plenty of experience with the silicon industry since you worked at Intel and Qualcomm. You're also familiar with OEMs/ODMs like Quanta. How have these experiences helped the compound semiconductor industry and IQE develop? Most importantly, there have been market rumors about IQE becoming a foundry as well. What do you think?
A: My personal experiences include working in different regions of the world, like the US, Europe, and Asia. I've also worked in different areas of the supply chain such as devices, wafers, design, silicon, and compounds. The companies I worked for include Nokia, Philips, Intel, Qualcomm, and more, in fields such as mobile telephones and data centers.
My diverse background really allows me to understand how important 'ecosystem' and 'partnership' is. In this industry, it's very difficult to do everything by ourselves, so our success depends on how good our partnerships are. My position at IQE is to put all this knowledge together and help grow the business. At the end of the day, we're in the same digital world. The silicon and compound technologies are going to fuse at some point.
Will IQE become a foundry? I say it's a question mark for now. However, if a client has demand, they will figure out a way to collaborate with IQE. This will be the trend and it will be important that IQE keeps an open mind on such opportunities.
