This Week, Industry Snapshot Looks at
GaAs Valley

Anadigics, Inc. Kopin Corporation Motorola, Inc. RF Micro Devices, Inc. TriQuint Semiconductor, Inc. Vitesse Semiconductor Corporation Subscribers Online Discuss Industry Snapshot

ALEXANDRIA, VA (October 3, 1997) -- The following is anabbreviated version of the Motley Fool's "Industry Snapshot," an educational subscription product available for delivery via e-mail or fax. We feel that it is the best tool available for learning how to invest in stocks.

A sample of the full length subscription product is available for download, as well as details surounding its genesis. To the right subscribers and non-subscribers alike are invited to peruse the companies that are featured in this week's Industry Snapshot. In addition, we urge existing subscribers to take advantage of "Subscribers Online," it's chock full of helpful research and follow-up information on the industries and companies featured in previous Snapshots.  

Every week we will offer up a taste of what is available to Industry Snapshot subscribers by providing a short summation of the industry and the companies that appear in the most curent issue.

This Week's Industry Snapshot

Gallium arsenide (GaAs) is a semiconductive material that can be used to make semiconductors in place of silicon. Right now a vanguard of semiconductor manufacturers are using gallium arsenide because the substance produces substantially faster chips that generate less heat. Although in the past working with gallium arsenide has been more difficult and consequently cost prohibitive, new manufacturing techniques have made the use of gallium arsenide in consumer applications possible. This Industry Snapshot provides an overview of this emerging market and the key players.

A simple compound of the metallic element gallium, GaAs offers the promise of higher-performance chips. The electron mobility of GaAs is four to five times higher than that of silicon. This means that at high frequencies GaAs generates less heat, making it a much more efficient material. Even operating at "normal" frequencies, a GaAs chip is simply much faster than the same chip made of silicon. So why don't we have Gallium Arsenide Valley instead of Silicon Valley? Silicon's price is ridiculously low compared to GaAs and it is much easier to work with -- the reason why 99.9% of the "chips" sold globally are still made of the stuff. To borrow from the popular real estate mantra, GaAs is all about "performance, performance, performance."

Manufacturing Problems Solved

Because of the cost, demand for high-frequency GaAs chips has been confined to the military radar and satellite applications. As sales to the military didn't exactly spawn a high-volume market, building chips for very specific functions that cost $1000 to $2000 a pop prevented anyone from seriously considering commercial markets. The problem was that yields from GaAs wafers fluctuated quite a bit. Yield refers to the amount of commercially viable chips that are completed by the end of the manufacturing day after all the complex process steps have been performed on the wafer. This variability in yields was one the factors that contributed to GaAs manufacturer shakeouts throughout the 1980s.

The GaAs companies utilize essentially the same process technology as the silicon chip makers. In fact, the majority of their initial manufacturing facilities were acquired from silicon fabs. The manufacturing process starts with a pure crystal of GaAs that is typically grown from seed crystal, which is then sliced into ultra-thin "wafers" with a diamond saw. The wafers are then polished to a flat mirror finish in anticipation of the deposition of hundreds of circuit layers. In the early stages of GaAs development, operators couldn't count on getting wafers that were of uniform shape or size, which made forecasting for high-volume manufacturing extremely difficult. Yield crash is still a problem for some manufacturers. This is when yields decline, for instance, from 50% to 10%, all in a matter of days due to chemical contamination or a whole host of other problems that have largely been eliminated when working with silicon.

Over the past decade Gallium Arsenide integrated circuit technology has overcome many of these performance barriers that hampered its initial development. It is only recently that the manufacturing process has matured to the point where high-volume commercially viable products have been churned out. Today the GaAs industy is undergoing a conversion from 4 to 6 inch wafers, which will boost yields, but still lags behind in comparison to their well-endowed brethren in the silicon wafer arena that use current wafer sizes of 8 inches and moving to 12 inches in the future. It is estimated that under current conditions 80 silicon chips can be produced with the same fab resources required to produce one gallium arsenide device, meaning that GaAs is still limited to high-performance applications where the performance justifies the cost.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.