Win Semiconductors was named the world's top pure-play gallium arsenide (GaAs) IC foundry in 2009, nine years after the company became the first Asia-based foundry capable of supplying HBT and pHEMT MMIC fabrication services to IC manufacturers. The Taiwan-based company grabbed an almost 40% share of the global GaAs foundry market in 2009, beating TriQuint Semiconductor for the first time.

Win Semi continues to move forward. In 2011, Win Semi entered the supply chain of Apple as its client Avago Technologies became a power amplifier (PA) supplier for the iPhone. Win Semi's share of the global GaAs foundry market expanded to 54% in 2011.

Win Semi's market share reached 62% in 2012, further extending its lead, as more of its PA clients became suppliers for Apple, Samsung Electronics, as well as a number of China-based brand and white-box companies.

As a dedicated foundry services provider, Win Semi does not compete with its customers and earns their trust, said company chairman Dennis Chen in an interview with Digitimes. Win Semi also needs to constantly improve its technology capabilities to satisfy customer needs.

The following is an excerpt of the interview.

Q: What are the growth opportunities for the GaAs PA market in 2013?

A: Smartphones have undoubtedly been playing an important role in spurring the GaAs PA sector's growth.

The transition to 4G/LTE has kicked off in many developed markets since the second half of 2013, which is expected to push up the penetration rate of the technology to 15% in all of the year. Amid a boom in LTE deployments worldwide, the global GaAs PA market will enjoy impressive growth over the next three years.

In 2012, the number of PAs in a handset arrived at 4.9 units on average. When it comes to 4G/LTE, the number will rise to 5.6 units in 2013. With the penetration of 4G/LTE increasing, more PAs will be required in a mobile phone to support multiple bands and frequencies.

Meanwhile, next-generation wireless network infrastructure is another growth driver for the GaAs semiconductor market this year. Samsung's Galaxy S4 is among devices that support 802.11ac. In the past, phones use only two bands - 2GHz and 2.5GHz. As 5.8GHz is included in the next-generation Wi-Fi standard, the amount of GaAs ICs used has jumped over 100%.

Q: As we move into the LTE generation, what requirements do you think RF components companies should have to be more competitive?

A: In the past 10 years, the global GaAs industry grew at a CAGR of about 8%, higher than the 4% that the silicon IC market had. The booming wireless communication market was the major driver of growth in the GaAs IC sector. More semiconductor companies have stepped into the wireless communication field, resulting in intense competition.

In recent years, demand for smartphones has risen robustly. Smartphones require highly-integrated and power-efficient parts and components. Thus, companies have turned their focus from discrete PAs to integrated, high-end components, such as switch ICs, bulk acoustic wave (BAW) filters and envelope-tracking PAs.

In addition to their technology capabilities, RF components suppliers should be able to provide solutions for multiple baseband IC vendors. Major baseband IC suppliers Qualcomm, Broadcom, MediaTek and Intel should all be considered equally for diversification reasons.

Q: As competition among the world's major RF components suppliers is growing, what impact do you see on the GaAs foundry industry?

A: Many IDMs have shifted their focus to the design of integrated devices rather than their manufacture capability, which will benefit foundry services providers.

Take TriQuint as an example. The company expanded its capacity between 2010 and 2011 as it failed to meet all orders due to strong demand from Apple. However, TriQuint in 2011 lost a portion of its Apple orders to rival Avago, and then encountered idle capacity during 2011-2012.

I see more IDMs take a more cautious approach to planning for capital expenditure, and increase focus on R&D. Most of the IDMs still have 70-80% of their output produced in-house. However, with no plans to expand production, IDMs will have to increase outsourcing in order to satisfy the growing demand for wireless communication products.

Output value for the global GaAs IC foundry rose at a CAGR of 21% over the past 10 years, and is approaching US$1 billion. The growth has outperformed the overall GaAs industry that experienced only 8% growth during the same period.

Q: Have you observed the rise of RF IC design houses? Are there potential customers Win Semi is targeting?

A: The GaAs IC industry has been led by Europe- and US-based IDM companies, including Anadigics, RFMD, Skyworks and TriQuint. In recent years, fabless firms such as Japan-based Murata and US-based Avago have been listed as first-tier RF components providers despite their late entry.

There are also a number of Asia-based startups specializing in the design of RF front-end components and modules, such as Taiwan-based Airoha Technology, and China-based RDA Microelectronics and Vanchip Technology, and several Korea-based companies.

In fact, IC design houses and pure-play foundries go hand-in-hand. Win Semi will continue to keep a close eye on the development of those IC design startups, and does not rule out the possibility of building a fab in China to provide local support.

Q: Do you see CMOS-based PAs a competing technology?

A: CMOS PAs will certainly not pose a threat to the GaAs PA sector, judging from its market share that already slipped to 5% from 10% a decade ago.

The performance of CMOS PAs in a high frequency environment cannot compete with that of GaAs PAs. In terms of prices, GaAs is not necessarily less attractive than CMOS. Many low-cost phones rolled out by China's white-box manufacturers in 2013 all adopt GaAs PAs. Nokia's cheapest offering priced at US$25 also uses GaAs PAs. These examples indicate that CMOS is not necessarily cheaper than GaAs.

CMOS offers much higher integration. However, in such integration, power consumption is an issue. CMOS PAs will have to incorporate power manageable components in order to achieve the same performance as GaAs, but the cost level will be pushed up.

For GaAs manufacturers, the purpose of acquiring CMOS PA specialists is either to develop hybrid CMOS/GaAs modules or to be ambitious in the 2G low-end market. I believe that such acquisition represents strategic value rather than substantive value to the buyers' market presence.

Before RFMD's acquisition of Amalfi Semiconductor and Avago's takeover of Javelin Semiconductor, Skyworks already obtained CMOS PA technology through an acquisition of Axiom Microdevices. For larger GaAs suppliers, having CMOS PA technology assets does help them stay in the entry-level and midrange market segments, where they think the transition to CMOS PAs might take off in the future.

For GaAs manufacturers, having the capability of producing CMOS PAs is not new. Renesas had been engaged in both the GaAs and CMOS PA technologies for a while, before selling the business to Murata. In fact, when we look back over the last 10 years, GaAs and CMOS have co-existed.

Q: Since 2008, Win Semi has enjoyed growth in market share, revenues and profits. How do you maintain your market leadership?

A: Win Semi's share of the global GaAs foundry market has topped 60%. The next challenge for us is how we can continue growing our business. Leading semiconductor foundry TSMC is the role model that Win Semi has been learning from.

Learning from TSMC's experience, we are encouraged to insist on our pure-play business model. In the past, there were IDMs approaching Win Semi about the possibility of acquiring a company stake in order to ensure a steady supply and technology support. However, Win Semi identifies itself as a pure-play foundry, and therefore we understand the importance of not being labeled "a supplier of a particular company."

We also learn that TSMC has been putting efforts into technology development, with advanced process technologies propelling the company far ahead of its rivals in market dominance. Win Semi understands that continuous improvement of technology is the foundry sector's fundamental task. We have been constantly improving our manufacturing technologies, and have seen more IDMs choose to cooperate with us.

Q: Can you tell us Win Semi's capex plans over the next 3-5 years?

A: As a pure-play foundry, we need to ensure sufficient capacity to satisfy all customers' needs. During 2007-2012, Win Semi's annual capex stayed at about NT$3 billion. Our monthly capacity climbed to 22,000 wafers in 2012 from only 4,000 units. In 2013, we expect the monthly capacity to reach 24,000 units.

More importantly, Win Semi continues to upgrade its manufacturing processes. We also help customers save costs through process advancement, such as shrinking die sizes.

Win Semi's manufacturing processes for GaAs semiconductors can now cover frequency requirements from 1GHz up to 100GHz. Win Semi continues to develop new technologies, such as gallium nitride (GaN) processes that we're currently developing jointly with customers. GaN can be used for base station applications in voltages of 60-100V, and will likely eat up the power transistor market in the future.

As for the transition from 6- to 8-inch wafer processing, I don't see the scenario happening over the next 3-5 years. Currently, expenses on 8-inch fab facilities are more than 300% higher than those on 6-inch fab equipment. If the economies of scale can grow at least 200%, investing in an 8-inch fab will be possible.

Q: IQE's recent acquisition of Kopin has further reduced the number of upstream epi-wafer suppliers. Will that affect Win Semi's procurement strategy?

A: Epi-wafers are an important material for the manufacture of GaAs ICs. Win Semi adopts a diversification strategy. In addition to IQE, we also source epi-wafers from VPEC and Japan-based suppliers.

Win Semi also has its own capacity for epi-wafers, which also helps fulfill our demand. However, we don't plan to step into the upstream field as we believe that only a division of labor between companies at different tiers of the supply chain can create the best outcome.

Win Semi chairman Dennis Chen
Photo: Michael Lee, Digitimes, July 2013

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