The semiconductor industry boasts of building the most complex products on the planet. If you have never toured a facility you may be interested in viewing this video. The investment to build a new facility with the latest technology costs several billion dollars. Clayton M. Christensen, Steven King, Matt Verlinden, and Woodward Yang describe the environment:
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.
If you are a regular on this blog, pick your jaw off the floor and continue reading about why this inventory buildup occurs:
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.
Anyone that has worked in a facility with high equipment costs has heard this argument from the cost accountants. But read on to see how Lean impacted this organization:
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.
That’s what we’re used to hearing when people talk about Lean. That means cheaper electronics for you and higher stock prices for those of us invested in the semis.
This article describes the Lean philosophy that was followed by the consultants. It should look familiar if you have ever read the article by Spears and Bowen entitled The DNA of the Toyota Production System.
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.
Read the article. There are several other salient points that might interest you. I’ll try to blog about a few of them and share additional insights into what Lean looks like in the semiconductor industry.