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Second Interim Report
Clair Brown, Editor

11.2 The Development Process

The development team has to simultaneously fulfill several management goals, including the development of a new product that satisfies customers and is designed for low-cost, high-quality manufacturing. Often management will use specific rules to help guide the development process, such as a ceiling on the number of new fabrication steps and new types of equipment (or conversely, the process must use certain equipment). These types of specific rules governing constraints on process steps or equipment are much easier to identify and implement (as well as negotiate) than management of the creative process itself. Here we will focus on the tension between encouraging individual autonomy and creativity and controlling the direction of the development process, including the use of teamwork for encouraging, evaluating, and controlling individual ideas in the development process.

Planning for the Future while Building on the Past.

A company’s technology strategy is encompassed in what is commonly called a technology "roadmap," which identifies the key decision points of the design, development, and production of new technologies over time. In general, the Japanese companies have been more aware than American companies of the need for this type of long range planning in the use of equipment and technology over generations. However, USTech plans long-term use of their fabs with three generations of technology per wafer size before converting the wafer.

Strategy decisions proceed from the process chosen to the products that can be manufactured with the process available. A single process has to serve a broad range of products over the life of the process, and this determines the depreciation period and the rate of return to the investment made in the process. For example, a logic chip may need low voltage for a computer and high voltage for an automobile, and the engineers must be able early in the process to create design rules that will accommodate both types of products. A new process is developed every two to three years.

The roadmap covers the three major steps of the decision-making process; new technology choice, development of the new technology, and use of the new technology in high volume manufacturing of a product. However, these steps are interrelated and must be thought of in terms of function rather than organization. For example, a product such as 16-meg DRAM is first defined, and then the engineers ask what are the details of the process flow available in order to decide on the general features and the design rules for the DRAM.

At both JapanTech and USTech, step one (technology choice) is made at the highest management level, and the required research is done by the central research lab. The development team is then given the definition of the new process characteristics and the extent to which the new process must adhere to the design rules of existing technology. In step two, the key development changes that need to be made to the existing technology, both to minimize costs and risks of the new technology and to maximize the overlap of the new technology with the subsequent technology, must be identified. The new process flow will be comprised of modules that are modified to varying degrees--some already exist with little modification; others are new but use existing equipment; and others are new and require new equipment and materials. The development stage focuses on the characterization, optimization, and integration of new modules. The new or modified modules are developed and are integrated into a single process flow. In steps one and two, equipment is chosen. In step three, the new process flow is transferred to manufacturing, and high volume production is begun. The level of characterization of the process and the volume of manufacturing achieved before transfer to manufacturing can vary a great deal. A critical decision is to determine when the transfer from development to manufacturing begins. This boils down to a decision of where it is most effective in terms of time and costs to do many of the development activities. Sufficient lead time is necessary to allow purchase and installation of the equipment and provide the fab space needed for production. Later in the fabrication process, the decision must also be made when to transfer the ownership of the technology to manufacturing. During steps two and three, exchange of engineers occurs between the manufacturing and development facilities.

Encouraging, Evaluating, and Controlling Ideas

Issues of creativity and control arise throughout the development process. Some of the relevant decisions include:

  • how well-defined the characteristics of the process are and how well-defined the constraints are (e.g., equipment that can be used) in the assignment made to the development team;

  • how the "winning" technologies are chosen and assigned to team members;

  • how the ideas generated by the team members are trimmed down to a manageable number and the members rewarded for their contributions;

  • how work assignments are made over time as development proceeds, and how much autonomy the members and the team have in making decisions;

  • what sources the engineers use for generating and developing ideas, such as referring back to previous processes, reading theoretical literature, brainstorming in team meetings;

  • what sources the engineers use for information and feedback, including scientists at the central research labs, team members, engineers at the receiving fab, marketing experts or customers, engineers at other companies, or publicly-available technical information.

The team leader has to foster ideas that conform to the development guidelines and has to choose among the many ideas put forth by the team members, while ensuring that the members feel their contributions are valued (even if not adopted) and rewarded.

We now turn to how USTech and JapanTech manage innovation in the development process.

11.3 The Development Process at USTech

At USTech a strategic planning committee defines new lead products by marketing segment. A strategic capabilities committee ensures that capabilities cut across business segments and lays out process capability over time, which defines the technology roadmap. The goals of the development team are set by the strategic planning committee, which annually updates the technology roadmap and the lead product for each new technology. Since any process change involves a lot of time and resources, a process change must be big enough to make a significant difference in the products manufactured. The planning committee makes the selection of architecture and gives only one option with design rules to the development team. The design of circuit and block architecture with layout is done at the research lab.

Since the new technology is not compatible with the available process, the development team’s goal is to build a prototype of the product that is commercially feasible. In order to differentiate between problems caused by modifications of the process versus the product, a new design is brought up on the old process in small volume, and then the first shrink is usually made on the new process. This minimizes debugging problems since it decouples the new design from new technology (process). The development manager issues design rules based on algorithms (e.g., 70% of former size), and the design of the first shrink of the product is done in the development fab. Next, the product is brought up on a new process at high volume. The development rules issued provide very simple "rules of thumb"; for example, 30% of the steps are new (70% are old), and the equipment associated with any given module lasts two generations (i.e., through two different recipes).

Learning across development teams is facilitated by keeping archival records of project decisions throughout a program, and performing a "postmortem" after a project is completed to see what can be done better next time.

This structure of development activities reflects the company’s strategy of remaining the product market leader. Time to market is an important consideration and short-run financial considerations are not dominant, so much of the work traditionally done at the manufacturing fab, including the ramping to volume production, is done at the development fab at USTech. The transfer rule is to freeze the technology and transfer it to the manufacturing fab when the development fab has no fundamental yield or manufacturing problems at 2000 wafers per week. This level of ramping to volume is undertaken in the development fab since it reinforces USTech’s rule that manufacturing engineers must copy the process exactly and not make changes. If the development fab can produce 2000 wafers per week rather than the more traditional 300 wafers, then volume-related problems will have already been solved and fab engineers become "believers" in the process. At the time of transfer, the yield goal is to be within 1% of the development fab yield as the manufacturing fab ramps up to 6000 to 7000 wafer starts per week.

By ramping to volume at the development fab, the development engineer is forced to learn and use manufacturing skills. This encourages "developing for manufacturing" (i.e., developing in a way that minimizes manufacturing problems and costs) since the development engineer experiences the problems at high volume and does volume-related problem solving.

In order for the manufacturing engineers to have ownership of the new process and to make use of their manufacturing skills, they are transferred to the development fab up to eighteen months before the transfer. Their role is to set manufacturing goals, define optimized recipes, set up maintenance procedures, transfer deliverables (documentation, knowledge), undergo training, and help characterize the process. Although they help in the qualification of the product and the transfer process, their primary tasks are to be trained to run the new process and to manufacture the chips at the development fab.

Work Assignments and Knowledge Creation

The management style at USTech is distinguished by the cultivation of peer pressure, aggressive discussion of ideas, delegation of responsibility to young engineers, and job assignment along with stock options as rewards. In general, job assignment reflects the degree of complexity of the task and the experience of the person. A junior engineer is assigned an open-ended but less complex problem. A senior engineer has a more detailed assignment with a complex problem. USTech believes that lack of experience is beneficial in research and development, since an inexperienced engineer does not have preconceived notions of what works or doesn’t work. For this reason, young engineers are given major responsibilities in developing new processes or technologies. Managers described new graduates as providing a role model for older workers, since they are hard working and have are creative in their problem solving.

Assignment of the correct people to a project is critical. Engineers are rewarded for excellent performance by their next job assignment, and this provides a major incentive to do well. Job assignments determine compensation, which is strongly performance based. Those who do not do well are assigned tasks with a lower level of responsibility. Only in rare instances do engineers ask for more challenging work or projects, and, in response, they are told they need to perform well on simple tasks first. Engineers reported enormous peer pressure; "sitting back is not condoned." Some engineers, who cannot make the required breakthroughs, burn out and quit. However, USTech restructures assignments when projects are not going well. One example was given of a key engineer who "blew it" on a huge project, so the project was split into two parts, core and support, and he did support.

Conflicts about ideas are resolved through confrontation, or a process of "disagree and commit". If a technology being developed is dropped or not integrated, younger module engineers may be discouraged. However, in a conflict about which idea to use, the boss may ask the dissident to run the project. Engineers typically do not withhold their ideas in the development process, which is problem driven. This is more of a problem in research, which is idea driven.

USTech relies on decision-making through committees, and one’s influence in the company is determined by how many standing committees one is on. Everyone is part of a group, and engineers have a bi-weekly one-on-one meeting with their group leader at which they can bring up problems. In addition, focus teams meet weekly, and a coordination team of 20 people from integration and modules sets assignments and goals for focus teams.

USTech is typical of U.S. semiconductor companies in its reliance on teams making the decisions that structure work. The team decisions are supplemented by individual decisions and have limited managerial input (Chart 11.1A). Seven-tenths of the engineers reported their teams assign tasks, prioritize tasks and goals, set deadlines and schedules, and define technical problems or objectives. Six-tenths reported their teams write project specifications, and three in ten reported individuals write project specifications alone. All of the engineers reported that individuals by themselves or with the team prioritize tasks, and nine-tenths reported that individuals by themselves or with the team define technical problems. Managers’ greatest involvement, reported by two-tenths of the engineers, was setting deadlines and schedules.

USTech has a formal methodology for learning new knowledge:

1. Search the literature. Engineers think that papers from universities are better than company papers. However, Sematech has increased the quality and number of industry papers.

2. Compare methods used across equipment sets (e.g., read a report on defect mechanisms on thin film and see if it works on etch.)

However, USTech engineers reported that the technical literature is not very helpful "because if anyone is doing (a solution to the problem under consideration), they are not sharing it; if they are sharing it, they are doing it poorly." The engineers often find industry papers misleading since a paper may show only the best picture and not report other cases. The partial reporting is hard to evaluate, and the process usually doesn’t work as well as reported. Normally, USTech engineers do not publish anything outside the company, since publishing is not important for career advancement within the company or for professional reputation. USTech engineers are very proud to be working for a technology leader, and they share in the cachet of the company’s name.

The engineers at USTech are very clear that any information sharing with outsiders has to be done on a quid pro quo basis. Employees are aware of the risk of information transfer because they have taken classes on internal document control and are familiar with past cases where intellectual property was transferred illegally. Even within USTech, engineers need to have a reason to request company papers. In general, they do not rely upon the exchange of knowledge with outsiders because "outsiders have nothing to share." The company policy is not to answer questions from outsiders, since USTech receives nothing in return. However, some engineers indicated that customers and colleagues at other semiconductor and equipment companies are important sources of technical information.

USTech reported that the biggest challenge in knowledge creation relates to equipment since the machines needed for the new process do not exist. USTech engineers do not normally share knowledge with vendors, who want to know USTech’s recipes, because there is not the possibility of reciprocity. The need to protect their technology requires USTech to use their own resources to develop equipment specifications and modifications. On selected machine modifications that improve the process or die yields, USTech will protect the knowledge by signing non-disclosure agreements with the vendor and excluding the vendor from the development process. Other equipment improvements are not protected, however, since USTech wants them to become part of the standard machine.

Control over ideas is further ensured by using the patent process defensively. There has been a renewed emphasis on patenting at USTech over the past two years, especially in the process architecture area. Engineers are paid $2000 for filing a patent. The rule of thumb is to keep knowledge a trade secret, but to patent whatever can be reverse engineered. For this reason, process integration does not need to patented.

USTech is typical of U.S. semiconductor companies in its engineers relying on company colleagues and on journals and not relying on patents for technical information (Chart 11.2A). Unlike at USTech, however, engineers at other U.S. semiconductor companies report knowledge sharing with outsiders through conferences or personal contacts. Seven-tenths of the engineers reported conferences, six-tenths reported colleagues at other companies, and one out of two reported equipment vendors or material suppliers as very important information sources (i.e., 6 or 7 on a scale of 1-7). USTech engineers seem to feel rewarded for their creative achievements through their national reputation of working for USTech without engaging in the process of presenting papers at conferences.

Evaluation and Incentive Systems

USTech pays their engineers based on individual performance. Usefulness of ideas is the main factor in the annual performance review, which includes a qualitative summary of accomplishments and the employee’s strengths and weaknesses. Performance is evaluated on a relative basis by ranking engineers on an equity curve by quartiles. An engineer is ranked within a group of 10 to 20 engineers in his or her own grade range. They are told their relative ranking (e.g., top one-third) and given a rating of superior/outstanding (15%), successful (80%), or needs improvement (0-5%). Each person is also told if their performance trend is greater or less than their peers. The evaluation can affect pay within the rank group up to 10% (e.g., those with superior receiving a 6% pay increase, with good receiving 4%, etc.) plus promotions and responsibility on the next job. Everyone is considered well paid, and they do not know each others’ rankings.

Compensation can include profit-sharing and stock options as well as salary. Exempt and nonexempt employees have the same cash bonus system, which is based on six month company profits (e.g., 5 to 7 days of pay). Higher grade levels (i.e., beginning with the grade level at which PhDs enter) receive an executive bonus (percent of base pay), which varies by position and payoff rate. Stock options are paid for future potential and are an important incentive mechanism. Some engineers earn more from their stock options than from their salary. All grades are eligible for stock options but with different participation percentages. For engineers, the bottom 10-15% do not receive stock options; the middle 70-75% receive some options; the top 15% are identified as key players and receive more options.

USTech is typical of U.S. semiconductor companies by including profit-sharing (reported by seven-tenths of the engineers in the larger sample), and stock options (reported by six-tenths). However, performance-based pay was less prevalent in other companies; only half of the engineers reported individual performance pay and two-fifths reported team performance pay.

Promotion is also used to reward outstanding performance at USTech. Like the large Japanese electronics companies, USTech develops its engineers and many rise within the company. Engineers can be promoted to group leader, whose job is still highly technical with supervision of approximately six engineers and a few techs. The group leader must have been at USTech at least four years. Competition for group leader is keen, and those passed over are miffed and ask "Why him and not me?" The group leader reports to an area manager, who has been at USTech 10 to 19 years and supervises 50 to 150 people. The area manager is the big step into management, since the job is less technical and requires more leadership and administration. Senior engineers who do not go into management have a parallel path and report directly to an area manager. Less than 20% of engineers are on this track. So far, USTech’s growth rate has allowed a satisfactory rate of promotion, but this might become more difficult to achieve as the company matures.

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