How is Industry 4.0 Transforming the Semiconductor Industry: Applications and Benefits

Sep 21, 2021
High-Tech | 8 min READ
According to McKinsey study, manufacturing is the semiconductor industry’s largest cost driver, and AI/ML use cases will deliver the most value - about 40% of the total - here. They can reduce costs, improve yields, or increase a fab’s throughput. Over the long term, we estimate that they will decrease manufacturing costs (both cost of goods sold and depreciation) by up to 17%. This article further strengthens the scope of Industry 4.0 in semiconductor industry and how are manufacturing companies taking the leap of faith.
Madan Mewari
Madan Mewari

Global Head

Delivery & Operations, Manufacturing & Services


Industry 4.0 in the Semiconductor Industry
The State of the Global Semiconductor Industry
According to the Semiconductor Industry Association (SIA) data, the worldwide sales of semiconductors touched $41.8 billion in April 2021, an increase of 1.9% from the March 2021 total of $41.0 21.7% more than the April 2020 total of $34.4 billion. World Semiconductor Trade Statistics (WSTS) forecast projects that the annual global sales will increase 19.7% in 2021 and 8.8% in 2022.
Going by the forecasts, by 2025, there will be more than 75 billion installed IoT devices worldwide. The semiconductor industry is already cashing in on the opportunities, and the adoption trajectory is only moving upwards. The global IoT semiconductor component market is slated to grow at a CAGR of 19% from $33 billion in 2020 to $80 billion in 2025, the IoT Analytics report stated. The penetration of IoT semiconductor components is expected to grow from 7% in 2019 to 12% in the next four years.
Top Roadblocks in the Growth Path
If we track the entire manufacturing transformation journey, we find that the first three manufacturing disruptions were focused on the use of steam power, electricity, and the introduction of computers into the workplace, respectively. The fourth industrial revolution further expands its scope of proliferation in leveraging automation and data exchange to help companies drive new production efficiencies.
The logical question arises - why was there a need for Industry 4.0? Well, Industry 4.0 is all about Cyber-Physical Systems (CPS)… Today the semiconductor industry is no longer dominated by cyclical sales of PCs and smartphones. With more and more advanced products making their way into the market, the need for innovative chipsets demands faster lead times with higher throughput, and the evolution of Industry 4.0 was an organic step in the right direction.
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The Way Out with Industry 4.0
As global manufacturing is fast moving towards a smart factory, there is an increasing demand for intelligent and power-saving products or completely autonomous systems that can be integrated into the existing production structure simply (like plug & play). This is where Industry 4.0 plays an enabling role. The entire value chain looks like this: the sensors gather data from the real, physical world and then transform & process the data within the digital realm.
Industry 4.0 brings with it superior automation and automated decision making, which result in faster responses to production needs and enhanced efficiency. The key lies in adopting the changes and moving on!
Use Cases of Industry 4.0 in Semiconductor Manufacturing
Product Development
Access to smart operations and advanced analytics within Industry 4.0 enable smarter decision-making and enhance processes. It facilitates new products to be created, tested, and introduced faster with assured quality, consistency, and reliability.
According to a report in IEEE, chip production processing time contributes to testing and yield losses amounting up to 30% of production costs. There is a way to optimize operating processes, though. Manufacturers can systematically analyze losses through the production phases by using AI applications for monitoring the production cycles. When working with next-gen semiconductor materials, this ability assumes even more important as these materials are highly expensive and volatile than the traditional silicon.
Manufacturing Operations
To remain competitive & efficient, chipmakers are fast digitizing their manufacturing operations. This process encompasses vertically integrating manufacturing systems and horizontally integrating IoT across the enterprise and value chains, ably supported by next-gen technologies.
Industry 4.0 tools substantially reduce cycle times, improve productivity without expanding the fab footprint or adding capacity, increase automation, and decrease energy costs. While customer also benefits by gaining cost & time savings. Hardware is the core driver of Industry 4.0 technology.
Supply Chain
The COVID-19 pandemic disrupted the global semiconductor supply chains. Even after having witnessed the most tumultuous time due to supply disruptions, the industry posted revenue to the tune of US$442 billion in 2020, up by 5.4% from 2019. In 2021, it is expected to touch US$476 billion. While there have been evident supply interruptions during the pandemic, the semiconductor industry needs to embrace cognitive sensing and digital planning with advanced analytics to overcome any demand-supply imbalance in the future.
Such technologies replace the predominant spreadsheet-based practices for NPI and SFGI (semi-finished goods) across the global value chain. They also assist the industry in quickly deciding the case of any foreseeable localized disruption.
How is Industry 4.0 Transforming the Semiconductor Industry: Applications and Benefits
Use Cases of Industry 4.0 in Semiconductor
How is Industry 4.0 Transforming the Semiconductor Industry: Applications and Benefits
Field Servicing
Owing to the increasing popularity of IoT and AI in semiconductor industry, the expanse of semiconductors has broadened significantly. Today, semiconductor companies need to respond to their customer's needs from the production line to inspection and evaluation systems. IoT in semiconductor companies has a considerable role to play in the field servicing for aspects such as condition-based maintenance. IoT data can also improve the customer experience, increase revenues by creating new aftermarket service offerings, and reduce the cost of service provision.
Connecting IoT data across the spectrum can deliver considerable advantages to the entire ecosystem, and field servicing is a critical component of the value chain.
Process Automation
Smart factories are self-organizing machines enhancing operational profitability and increasing process productivity. The evolution of embedded systems has given rise to a new era of cyber-physical systems (CPS). CPS merges the real and virtual worlds and possesses high flexibility, self-organization, self-adaptability, immense fault tolerance, and risk management capabilities. These attributes consistently improve real-time quality, resource, time-to-market, and cost advantages of the classic production.
Such intelligent systems optimize the in-house production process so that it is not confined to producing a single product but can produce more than one product through multiple remote operators.
Top Benefits of Applying Industry 4.0 to Semiconductor Manufacturing
Improved Product Quality
Digital technologies go one step further in enhancing product quality. For instance, machine-vision algorithms conduct an automatic quality inspection and quality control using predictive algorithms, relieving constraints in workforce availability while increasing the precision and threshold of quality checks at the semiconductor smart factory. As the SKU count increases for finished products and raw materials, capturing end-to-end traceability becomes the key to getting quality output.
Solutions such as barcode scanners, RFID tracking, and blockchain come in handy to achieve this objective. In the fab, machine learning provides faster and more accurate results in finding and classifying defects in chips.
High Agility and Responsiveness
The high cost of wafers in the semiconductor industry makes it practical to attach electronic components to each wafer carrier or Front Opening Unified Pod (FOUP), ultimately enhancing production efficiency. The data assimilated into the siloed models and analytical software used in Industry 4.0 makes it easier to account for the cost of each item, resulting in better intelligence for business strategy and product pricing.
To reduce production costs and produce more customized batches, automaker OEMs and their suppliers use machine-to-machine (M2M) communications and machine learning-based processes to upend production flexibility.
Use Cases of Industry 4.0 in Semiconductor
How is Industry 4.0 Transforming the Semiconductor Industry: Applications and Benefits
Improved Operational Efficiency
When deploying Industry 4.0, machines are equipped with sensors to record important events affecting OEE, including production slowdowns or equipment malfunctions. Operators then use a touchscreen interface to enter contextual information, which shortens the time spent on manual data input and provides engineers with in-depth detailing. In the future, Industry 4.0 solutions will take automation a step further by using problem-solving tools to examine machine-log data.
These tools first evaluate historical information and conduct automated data analysis to identify the root cause of problems and then suggest solutions or automatically execute them.
Cost Leadership
By implementing Industry 4.0, semiconductor manufacturing companies stand to gain in terms of cost leadership as well. As Industry 4.0 spreads its wings across the value chain, any significant cost optimization in the value chain directly impacts the overall cost of semiconductors. While it may seem a costly affair at the start, advanced semiconductor companies will have cost leadership going ahead with their value-added offerings of automated field servicing, improved operational efficiency, and a highly visible supply chain.
According to a McKinsey study, artificial intelligence in semiconductor manufacturing contributes between $5 billion and $8 billion annually to EBIT. This figure could potentially reach between $35 billion and $40 billion within two to three years. Over a longer timeframe of 4-5 years, this figure could rise to $85 billion to $95 billion per year. That amount is equivalent to about 20% of the industry's current annual revenue of $500 billion.
Total Experience
McKinsey's research on semiconductor companies highlighted that a more disciplined approach to lean, combined with the introduction of Industry 4.0 techniques, enables companies to improve labor costs, throughput, and quality.
Besides, through this powerful combination, factories can capture productivity gains of 30% to 50% for direct labor and 10% to 20% for maintenance productivity. There is an average improvement of 10-15 %in overall equipment effectiveness (OEE), increases of 1% to 3% in yield, and a 30% to 50% decrease in customer complaints. The total experience is enhanced multifold by implementing Industry 4.0 in the semiconductor industry.
Industry 4.0 offers enhanced connectivity, enabled by faster and more secure networking. This enhanced interconnectivity through IoT combined with access to real-time data offers manufacturers a holistic view of their value chain, including their customers, partners, and suppliers.
This ultimately results in greater collaboration among all stakeholders and a greater level of business intelligence, which can then help in optimizing production and better manage the business to improve the bottom line for existing products. Additionally, Industry 4.0 provides the ability to respond to new opportunities rapidly.
By working together, everyone in the value chain has higher chances of achieving higher standards, lower costs, and greater efficiencies.
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