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THE COMPETITIVE SEMICONDUCTOR MANUFACTURING HUMAN RESOURCES PROJECT:

Second Interim Report
CSM-32
Clair Brown, Editor

11.5 Engineering Innovations on the Shop Floor

Management of innovation on the shop floor includes ensuring that shopfloor improvements are controlled and, with approval, become part of the organization’s knowledge base. In semiconductors, the consequences of employee modifications that are not standardized or approved can be serious, since the characteristics of the chip may be affected inadvertently. Making unauthorized modifications is often referred to as "tweaking" the process. However, JapanTech and USTech differ in their approaches to controlling replication, which reflects their timing of and their procedures governing the transfer of the new product to manufacturing.

Exact Replication and Problem Solving at USTech

USTech wants to tie short-run activities to long-run planning as they move process technology across fabs. USTech takes extreme measures to ensure that the fabrication process is replicated exactly and that any potential employee improvement goes through appropriate channels before being implemented. USTech instituted the rule of exact replication of the given specifications in order to minimize portability problems and eliminate declines in yields over time. In the past when the technology was transferred to high volume, the fab initially had high yield; but since many manufacturing problems had not been solved, the manufacturing engineers modified the process and caused a fall in yield. As one manager said, "We had to crush creativity in manufacturing fabs (no tweaking). We start with top down control, and fabs need approval for any changes." However, engineering still occurs in manufacturing (e.g., projects to reduce variations in the process or to reduce maintenance problems on loading procedures).

Exact replication has reduced complexity in manufacturing, but other problems arise. Exact replication is a relative concept and makes the transfer process tricky and expensive. One manager said, "Exact replication needs common sense: how to measure, and who decides. We want the fab to copy exactly and then get help with problems. This requires a lot of training for engineers in the manufacturing fab." The formal methodology for the hand-off includes using and updating a "rule book," which gives process development and characterization, information on running modules, and baseline performance. The rule book is not comprehensive, but interpretive. It should be "a living document" with engineers adding information as the volume increases. Although, as one manager explained, "Engineers do not like to document, and so updates are hard to get done. They don’t have a customer, so the incentive is gone." Besides discouraging tweaking, managers often must encourage more mundane activities. For example, manufacturing engineers may resist doing the mundane but necessary tasks of writing up the documentation for process changes. Instead, engineers would rather be doing the more challenging tasks of solving process problems, which may not be part of their assignment.

The equipment engineers, who are assigned to oversee daily operations of specific equipment, are responsible for reaching specified equipment performance goals. They are also responsible for calibration of tools across the factory, which is another job that engineers do not want to do and often hand off to technicians. In hiring and recruiting manufacturing engineers, USTech looks for the "good, hands on" engineer. By the time of hand-off, manufacturing engineers have taken ownership. As one USTech manager said, "We are trying to combine the development skills of the development engineer with problem-solving skills of the manufacturing engineer." A trade-off exists between fostering individual creativity and controlling innovations, especially for engineers involved in transfer of new technology to the fab.

Making Improvements and Solving Problems at JapanTech

JapanTech is a conglomeration of many fabs that operate as separate companies with different cultures. The parent R&D center must decide how much power to give the fabs in order to motivate and encourage creativity while the parent company still maintains control. The manufacturing engineers at the fabs must be made to feel like they are part of the parent company while at the same time they strive to make their fab outstanding. At JapanTech, the development lab does not undertake activities involved in developing the commercial sample. These activities (e.g., improve process and equipment to get reasonable yield, confirm device reliability, and complete qualification samples) are done at the mass production fab. Generally, JapanTech purchases only 20% new equipment for volume production at the receiving fab. For the rest of the equipment, the development fab issues specifications and the manufacturing engineers "tune" the existing equipment. JapanTech’s strategy is to make many products on the same line, which adds depth of knowledge since there are many different variations for a particular product line.

JapanTech brings high-volume fab engineers to the development center so that they understand the process and feel some ownership. They eventually do the work of the development engineers, who are on loan to the fab for the transfer from the parent company. There are also formal meetings with engineers and managers, meetings with only engineers, and informal meetings, phone calls, and the exchange of data between the development engineers and the manufacturing engineers. The engineers at the manufacturing fab may suggest changes and send information about suggested refinements to the R&D center.

JapanTech encourages competition among its plants on cost performance and on improvements or refinements to the system. Annually, JapanTech has targeted goals of price and costs and highlights the fab showing the best performance. Competition is more spiritual than monetary ("Japanese don’t want to lose"). Yet the development engineers from the parent company support new process introduction, and there is a need for cooperation between engineers at the plant, at headquarters, and among plants. Incentives for both competition and team work are present. For example, communication among engineers is an important part of coordination across divisions and plants. At the second high-volume fab to receive a device, with the transfer being made from the first high-volume fab, older equipment is expected to get the same yield. Since the fabs are in competition, this may affect their cooperation in making the transfer.

In our survey of engineers in Japan and the U.S. on the procedures they most recently used to solve a technical problem, four-tenths of the Japanese engineers reported they first approached a team member with similar expertise and three-tenths discussed the problem with the team as a whole. (Charts 11.3A and 11.3B.) One-third of U.S. engineers first consulted a team member with similar expertise, and one-fourth first consulted the team as a whole. Altogether, the American and Japanese engineers reported taking similar approaches to problem solving: eight out of ten of the U.S. and Japanese engineers reported approaching a team member with similar expertise, seven out of ten reported discussing the problem with the team as a whole, four out of ten reported approaching a co-worker with similar expertise on another team, and four out of ten reported approaching their supervisor in the first four steps taken. In addition, one-half of the Japanese engineers also reported consulting someone from manufacturing in the first four steps. Neither group of engineers reported heavy reliance on team or company documents, although team documents were consulted by one-fifth of U.S. engineers and two-fifths of Japanese engineers at some point in the problem solving process. Journals were consulted by four out of ten Japanese engineers and three out of ten U.S. engineers.


11.6 Conclusion

The tension between rewarding the individual or team to support the creative process versus maintaining control over the development of technology has been analyzed by comparing the Japanese and American employment or HR systems. Since product and process innovations in both R&D and manufacturing define a company's performance, the creation and management of knowledge and skills within this rapidly evolving industry emerges as a key to long-run success.

JapanTech and USTech use different employment systems to manage their development and transfer process. Both companies have HR systems made up of consistent and re-enforcing parts, which reflect both their product and labor market environments. As a producer of logic devices, USTech’s goal is to control the market for their devices by maintaining a lead over potential competitors in introducing the next generation. Time to market, but not price competition, is an important part of strategy. As a producer of memory, JapanTech’s goal is to keep up with their competitors in introducing the next generation. Since generations are now separated by only two years, the time to market and price competition are both important parts of their strategy. JapanTech’s labor market institutions include lifetime employment, annual national wage determination, a company union, and a higher education system that does not provide much research or graduate education. USTech’s labor market institutions include decentralized and individualized wage setting in a mostly nonunionized industry, a mobile labor force, employees use to a high degree of autonomy and input into the job assignment process, and a higher education system known for its research and graduate education.

The resulting HR systems have the important following characteristics:

Work Organization

  • Job assignment reflects past performance and expected future performance at USTech, while job assignment at JapanTech reflects project’s requirement for skills and knowledge already acquired, and the plan to develop the knowledge of junior engineers. USTech rewards development engineers for outstanding performance by assigning them more responsibility on their next project. JapanTech assigns development engineers to projects on the basis of company needs and requires more rotation among different types of tasks,including fabrication.

  • U.S. engineers were more likely to consult engineers outside the company for technical information (although not so at USTech), while Japanese engineers were more likely to use journals and patents.

  • USTech transfers a new process to a manufacturing fab after high volume has been accomplished at the development fab. JapanTech makes the transfer much earlier and develops the engineering sample at the manufacturing fab, which solves volume-related process problems. Therefore, JapanTech depends on process modifications and improvements by the manufacturing engineers, while USTech prohibits it.

  • Although engineers at both companies prefer to do the more challenging development work rather than the mundane tasks such as documenting modifications and calibrating equipment, this problem seems to be more widespread at JapanTech since most engineers do not specialize in development or manufacturing, and they begin work with a BS degree. At JapanTech, engineers (excluding the Central Research Labs) rotate among development and fabrication tasks. USTech’s engineers are more specialized, and their work reflects their education with the development and research engineers likely to have an advanced degree and the manufacturing engineers hired with BS degrees.

  • A confrontational style is practiced at USTech, but disagreements are put aside after a commitment to an idea is made. Autonomy and creativity are highly prized at USTech in development, but not in manufacturing. A consensus approach is practiced at JapanTech, and teamwork and stability are highly prized.

Incentive or Compensation Systems

  • Both companies use a relative performance ranking system to evaluate their engineers, but the rewards for performance are different. Pay, especially for the first dozen or so years while the engineer is in the company union, is more rigidly set at JapanTech than USTech, which is more performance oriented. USTech focuses on rewarding an individual’s ideas and efforts. Although both companies pay bonuses, the bonus at JapanTech mainly reflects national wage setting while the bonus at USTech reflects performance at the unit, division, and company levels. Also, USTech engineers can be richly rewarded with stock options.

  • JapanTech is struggling with the aging of its work force and the declining demand for managers relative to those eligible. In a two-tier management system, JapanTech is exploring how to provide cost-effective incentives to older professionals who are specialists and do not supervisor employees. A younger and faster growing company, USTech only mentioned this as a potential problem. However, USTech’s performance oriented and flexible compensation system allows it to deal with changing company needs and employee demographics more easily than JapanTech’s compensation system, which is more dependent on rigid job grades and career ladders.

Knowledge and Communication Systems

  • USTech rarely makes public presentations, publishes papers, or shares information with outsiders (including vendors), since it believes there is nothing to learn from others through sharing knowledge. Patent applications are made only if the knowledge can be learned through reverse engineering. In contrast, JapanTech depends on public presentations to maintain its reputation and to announce the introduction of new devices. Knowledge sharing with suppliers is part of the equipment development process. Engineers are expected to submit 3-4 patents annually. The publication of papers, patent applications, and conference presentations are important for keeping up with the competition and for the advancement of an engineer’s career.

  • When research engineers with advanced degrees and manufacturing engineers with BS degrees are hired, often straight out of the university, to work for USTech, they are assumed to have the research skills necessary to undertake their own research projects or the manufacturing skills necessary to oversee the operation of specific equipment. Both research and manufacturing engineers go to work for JapanTech after graduating with a BS degree. They are expected to learn on the job through their team work, continual firm-based training, and job rotation that usually includes both development and fabrication activities. Some engineers earn advanced degrees while working, either from the company or from an affiliated university.

  • At USTech, junior development engineers are given major responsibility for developing new technologies. At JapanTech, major assignments are given to subteams within a team setting, and new ideas are evaluated by a test group. Junior engineers are assigned to work with senior engineers and are expected to learn through their work assignments.

  • Both companies exchange engineers between the development fab and the manufacturing fab and between manufacturing fabs in order to transfer knowledge and to encourage the ownership of the new technology. However, since USTech transfers the new technology at a much later stage of development, fewer engineers need to be exchanged between the development fab and the manufacturing fab compared to JapanTech.

The decision of when to transfer the new technology from the development fab to the volume manufacturing, along with the institutional environment of the labor market and the development demands imposed by the characteristics of the product or device, determine the requirements and constraints placed upon the HR system. A company’s strategy for innovation in development and in manufacturing is intertwined and reflects the relative importance in maintaining market control (i.e., remaining first to market for a particular product) versus the relative importance of keeping up with the competition in delivering new products at competitive prices. USTech is an example of the former situation and JapanTech is an example of the latter. USTech’s transfer of new technology occurs after high volume manufacturing has been accomplished. They manage the potential tension between encouraging new ideas and controlling the development process by having their development engineers highly specialized and by assigning major responsibilities for solving a specific problem to one or two engineers. In addition, the required design specifications constrain creativity in the development process. Engineers who are successful are highly rewarded both monetarily and by their next assignment; those who are not successful are likely to leave. At the manufacturing stage, USTech has a strict policy of copying the new technology exactly. Manufacturing engineers, who have only BS degrees, are involved in the last part of the development process in order to train them as well as to have them feel like they have ownership of the process.

JapanTech’s transfer of new technology occurs early in the process after only a few good dice are produced in the development fab. The group leader decides at an early stage among competing ideas, primarily based on the results from the test team. The junior engineers’ education continues within the company through working with senior engineers on projects and through formal classes. JapanTech also believes that job rotations that include fabrication as well as development assignments are an important part of the education process. Since an engineer’s career depends on the team’s presentations at conferences and patent applications, individual creativity is less important than team outcomes, and the individual is granted less autonomy and responsibility by the group leader.

In conclusion, a system emphasizing individual autonomy, responsibility, and reward for development engineers (but not for manufacturing engineers), along with no knowledge sharing with outsiders, characterizes USTech. A system of team work, explicit career ladders, and company-based education for engineers, who do not specialize in development or fabrication jobs, along with required sharing of knowledge through required patent applications and presentation of papers, characterizes JapanTech. Consistent with the external environments imposed by their product and labor markets, these approaches have resulted in USTech being a top performer in logic and JapanTech being a top performer in memory.

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