Category Archives: Electronic Chemicals

News, Events & Blog

What Drives Our Electronic Chemicals Business?

This is a great question and it’s one we hear regularly from the investment community. The simple answer is that our Electronic Chemicals business is directly influenced by global semiconductor production trends (excluding a small portion of our sales to other electronics markets). When production of semiconductor chips rises, demand for our high purity wet process chemicals typically increases. Conversely, when semiconductor production declines, demand for our chemicals typically decreases. In this blog post we’ll dive a little deeper to get a more comprehensive understanding of the growth drivers behind our Electronic Chemicals business.

Digital vs. Analog

In the semiconductor industry, there are two broad categories of semiconductors: digital and analog. (A third type, mixed-signal, combines digital and analog elements on the same chip.) In total, the global semiconductor market is estimated to grow 6.5% to US$325 billion in 2014, according to trade organization World Semiconductor Trade Statistics. Of that amount, approximately US$223 billion, or 69%, will be spent on digital chips, such as microprocessor, memory and logic integrated circuits (ICs). Digital ICs are used in numerous end markets, including computers, servers, tablets, mobile phones, consumer electronics and automobiles.

Although KMG supplies chemicals to the global semiconductor industry, including both digital and analog semiconductor manufacturers, our Electronic Chemicals business is influenced to a greater extent by production of digital ICs. That’s primarily because the manufacture of digital ICs tends to be more complex than that of analog ICs, requiring higher chemical purity and greater chemical usage throughout the production process.

Advances in Semiconductor Processing Technology

Within the digital IC market, semiconductor manufacturers continue to strive to increase the number of transistors on a single chip. To do this cost-effectively, they must reduce the size of the transistors on the chip, enabling one chip to contain millions, or even billions, of transistors. Generally speaking, higher transistor counts lead to increased microchip performance, enabling greater functionality while reducing overall manufacturing costs.

Many complex digital ICs are fabricated in layers, with each layer of the chip requiring wet chemical processing, including both etching and cleaning chemistries. From our perspective, the growth of advanced digital ICs is a distinctly positive trend, as growing semiconductor complexity demands the use of ever purer etching and cleaning chemicals. It is here that KMG’s expertise in chemical purification and blending, packaging, sourcing and quality control provide important manufacturing advantages for our semiconductor customers.

New Fabs and Fab Expansions

The expansion of production capacity in existing semiconductor fabrication facilities (often simply referred to as fabs), or the construction of new fabs, are important sources of growth for KMG. When manufacturers expand existing fab capacity or start-up new fabs, their demand for high-purity process chemicals rises. As the world’s leading supplier of these critical products, KMG is well positioned to benefit from expanding industry fab capacity. Our global reach and commitment to ensuring reliable supply make KMG a trusted partner to many of the world’s leading semiconductor manufacturers.

Global Leadership

Following our UPC acquisition in May 2013, KMG became the world’s largest and only global supplier of high purity process chemicals to the semiconductor industry, operating Electronic Chemicals manufacturing and distribution facilities in North America (USA), Europe (UK, France and Italy) and Asia (Singapore).

Our global leadership in the high purity process chemicals market expands our business opportunities, allowing us to grow with our customers wherever their global manufacturing facilities may be. Increasingly, semiconductor makers are looking for material suppliers who have the global capabilities to reliably and consistently supply materials anywhere in the world. KMG can do just that, thanks to our global distribution network and our unwavering commitment to providing the industry’s highest purity chemicals on time, every time.

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News, Events & Blog

Expanding Semiconductor Foundry Business in U.S. Offers Growth Opportunity

The semiconductor foundry business is often associated with major pure-play manufacturers based in Asia, like Taiwan Semiconductor Manufacturing Corp. (TSMC), United Microelectronics Corp. (UMC) and Semiconductor Manufacturing International Corp. (SMIC). Collectively, these three foundries — which are solely dedicated to manufacturing semiconductor components for other semiconductor companies – last year generated 57% of all sales made by the world’s semiconductor foundries, according to data published by IC Insights. Impressively, TSMC alone represented 44% of total global foundry sales in 2012.

Although Asia will remain an important region for semiconductor foundries, the U.S. is poised to gain significant new foundry business as major semiconductor manufacturers invest heavily in wafer fab capacity here. The most notable example of this trend is GlobalFoundries, which generated 2012 sales of $4.56 billion and is the world’s second-largest pure-play foundry. GlobalFoundries recently completed construction of its Fab 8 in Malta, New York, which has a maximum capacity of 60,000 300mm silicon wafers per month and cost $6.9 billion to construct, including tools and equipment. Volume production from the facility is expected in 2013. And that may just be the start: GlobalFoundries is reportedly eyeing a $10 billion expansion to the Fab 8 complex, presumably to produce 450mm wafers.

Meanwhile, Samsung Electronics continues to move forward with its $4 billion remodeling/expansion of its Austin, Texas fab. According to EE Times, “The remodeled facility will produce mobile application processors on 300-mm wafers at the 28-nm process node. The boost in production will occur during the second half of 2013 and is expected to alleviate the rapidly growing demand for application processors for mobile devices.”

Last but not least, Intel  announced in February that it had inked a foundry agreement with Altera, a leading supplier of semiconductor devices known as field programmable gate arrays (FPGAs). According to Intel, the company will manufacture next-generation 14nm FPGAs for Altera using its Tri-Gate transistor technology. EE Times reports that Intel’s volume production for Altera is expected in 2014. Then on May 1, 2013, Microsemi announced that Intel would manufacture some of its digital chips using Intel’s 22nm 3-D Tri-Gate transistor technology. Microsemi represents Intel’s fifth foundry customer, according to the Wall Street Journal.

At KMG, we are pleased to see several of the world’s leading semiconductor manufacturers significantly expand their businesses in the U.S. The growth of advanced semiconductor manufacturing here – particularly at the 28nm node and below – is a positive trend for KMG, as we specialize in providing process chemicals that meet the stringent purity specifications required to manufacture these devices. As semiconductor manufacturing technology continues to advance and chemical purity requirements increase even further, we are prepared to meet this challenge through advancements in our purification technologies, high purity packaging and analytics services. For more on KMG’s high purity process chemicals business and the breadth and quality of products we offer, please see the Electronic Chemicals section of our website.

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News, Events & Blog

Global Semiconductor Market Poised for Growth in 2013

Following a challenging year in 2012, the global semiconductor industry is poised for a recovery in 2013, according to several published forecasts. Industry analysts peg 2013 global semiconductor revenue growth in the 4%-6% range, representing a marked improvement from the flat-to-minus 3% year/year decline estimated for 2012.

Because the industry continues to work down the excess inventory in the supply chain that first appeared in the third quarter of 2012, the semiconductor market is likely to see relatively weak demand persist through the first quarter of 2013. Starting in the second quarter, however, the market is expected to show a rebound in growth, led by demand for chips used in smart phones, tablet computers and automotive applications, according to forecasts made by both IDC and Gartner.  While PC and server processor production may remain slow in the first half of 2013, production should rebound in the second half of 2013, according to IDC. IDC predicts worldwide unit shipments of PC microprocessors will grow 3.2% in 2013 to 384 million units.

In terms of wafer fab manufacturing capacity utilization – a key barometer of industry production —  Gartner sees “increased utilization in the back half of 2013” to a level of about 85% by the end of 2013, up from below 80% by the end of 2012. Importantly, Gartner anticipates that “leading-edge” wafer fab capacity utilization “will move into the low 90% range by the end of 2013, providing for a somewhat positive capital investment environment.”

One of the more interesting and insightful forecasts pertaining to the global semiconductor industry was published this past December by KPMG, the audit, tax and advisory firm. The KPMG report, entitled “Global Semiconductor Survey: A more optimistic outlook for 2013” is well worth reading in its entirety as its conclusions are based on responses from 152 senior executives in the global semiconductor industry. In summary, these executives “largely believe the industry is on the cusp of a recovery that they expect to begin most likely in the second half of 2013 before gaining momentum in the 2014 and 2015.”

With 2013 now under way, we remain optimistic that the semiconductor industry will experience improved growth this year. And from our position as a supplier of high purity process chemicals for the global semiconductor industry, we are especially encouraged by the continued advances in manufacturing process technology that necessitate the use of higher purity chemicals. We expect this trend to continue in 2013 and beyond.

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News, Events & Blog

Welcome to the official KMG Blog!

Today we’re pleased to announce the launch of our official KMG Chemicals blog. Here we’ll be discussing and commenting on notable news and industry developments related to our two main businesses: Electronic Chemicals and Wood Treating Chemicals. We hope our commentary will provide some additional color on events, news and trends that influence our businesses and the industries in which we participate.

To make our blog easier to navigate, we’ve provided links specifically for posts related to Electronic Chemicals and posts related to Wood Treating Chemicals. So if you’re only interested in Electronic Chemicals, you won’t have to sort through any Wood Treating Chemicals posts (or vice-versa).

We hope you enjoy the KMG Chemicals blog and encourage you to add your views in our comments section. You can follow us on Twitter (@KMG_Chemicals), too, where we’ll be sure to let you know a when new blog post has been published here. Thank you for your interest in KMG Chemicals!
Eric Glover
Investor Relations Manager

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