Clayton Christensen describes The New Economics of Semiconductor Manufacturing:
Never have so many smart people worked so hard for so little money.Walk into a multibillion-dollar chip-fabrication plant — a fab — and you may very well get the impression that the industry is headed for a spectacular meltdown. One of the first things you’ll see is a bay the size of two basketball courts packed with equipment for projecting a lithographic design onto wafers. Nearby, you’ll find a towering bin, called a stocker, filled with wafers waiting to be processed by this equipment. The wafers are worth from US $10 million to $100 million — all of it idle inventory.
Why? To amortize the $5 billion investment in a fab over a five-year schedule costs more than $3 million a day. Conventional wisdom holds that to generate that much money you must keep all the equipment running all the time, even if that means creating large unused queues of wafers. What’s more, to justify that scale, you have to produce a semiconductor product in volumes of at least 5000 to 10 000 wafers per month.
More than anything else, Moore’s Law has been responsible for the gigantic costs. It takes huge amounts of capital to support the incessant cycles of investment and obsolescence that keep Moore’s Law on the march. That rapid cycling explains why a company’s shining jewels can turn into white elephants in just five years.
Idle inventory? This sound like a job for … Just-In-Time! Or Goldratt’s Theory of Contraints! Or Lean Manufacturing! Yes, lean manufacturing — also known as the Toyota Production System:
In early 2007, we had the opportunity not merely to emulate Toyota’s system but to apply its principles to a logic fab belonging to an integrated device manufacturer (IDM). As consultants, we are not at liberty to divulge the company’s name; however, it’s safe to say that the company is highly competitive — that is, it has survived and prospered by pursuing Moore’s Law, always remaining at the forefront in technology and operational excellence. But Moore’s Law was turning this jewel of a fab into a white elephant while the equipment was still relatively new.In just seven months, the organization was able to reduce the manufacturing cost per wafer by 12 percent and the cycle time — the time it takes to turn a blank silicon wafer into a finished wafer, full of logic chips — by 67 percent. It did all this without investing in new equipment or changing the product design or technical specifications. And this short experiment has exposed only the tip of the iceberg. We believe that these early results point to what we call the new economics of semiconductor manufacturing and that this will have a profound and lasting effect on the industry and create new opportunities for growth.
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Spear and Bowen distilled TPS into four rules, which in summary are (1) highly specify activities, (2) clearly define the transfer of material and information, (3) keep the pathway for every product and service simple and direct, and (4) detect and solve problems where and when they happen, using the scientific method. When we present these rules, even in their fully detailed form, clients generally protest that they “do it that way already.” But on closer examination — while auditing their fabs — we often find something quite different [see sidebar, “The Toyota Production System Sanity Check”
I suspect the most important change initiative was the switch to a new TPS report cover sheet.