Report Group 4 -Silterra

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BJMP 3053 OPERATIONS STRATEGY

COLLEGE OF BUSINESS

SCHOOL OF TECHNOLOGY MANAGEMENT AND

LOGISTICS


GROUP A

FISRT SEMESTER SESSION 2013/2014

Topic: SilTerra Malaysia Sdn Bhd - Capacity Strategy

Prepared for: Dr Adam bin Mohd Saifudin

Prepared by: Group 4

Siti Nur Azilah binti Ahmad Nasir 205508

Phoon Jia Voon 205594

Fauzi bin Ab Rashid 205624

Ong Sok Ying 205776Lee Yun Hui 207186

Muhamad Amirul bin Mohd Zainudin 207187

Submission Date:


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I

Assignment Cover Sheet

Name: (Refer to list)

Student ID Number: (Refer to list) Group Name: Group 4

College:College of Business

E-mail Address: (Refer to list)

Phone Number: (Refer to list)

Assignment Name:SilTerra Malaysia Sdn Bhd

Subject Name:BJMP3053 Operation Strategy

Name of Senior Lecturer:Dr.Adam bin Mohd Saifudin

Due Date:19thNovember 2013Please tick the following and sign below:

I certify that I have read and understood the plagiarism policy of the Faculty of BusinessManagement, UUM.

I certify that this assignment is my own work; based on personal study and research, and that Ihave acknowledged all material and sources in the preparation of this assignment.

I certify that myself or another person has not previously submitted the assignment, forassessment in any other unit or at any other time.

I have not copied in part or whole or otherwise plagiarized the work of other students orpersons.

Signed Date 19thNovember 2013

IMPORTANT:


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Please note that assignments will not be accepted without a completed cover sheet attached.

Assignment Cover Sheet

Signature of Group Members

No Name Signature

1. 205508 Siti Nur Azilah binti Ahmad Nasir

2. 205594 Phoon Jia Voon

3. 205624 Fauzi bin Ab Rashid

4. 205776 Ong Sok Ying

5. 207186 Lee Yun Hui

6. 207187 Muhamad Amirul bin Mohd Zainudin


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III

Group Members Profile

Lee Yun HuiMatrix Number: s207186Phone Number: 016- 4424023

Siti Nur Azilah binti Ahmad Nasir

Matrix Number: 205508Phone Number: 013-4021772

Email:[email protected]

Phoon Jia Voon

Matrix Number: s205594

Phone Number: 017- 9133200


Fauzi bin Ab Rashid


Phone Number: 019-4514524


Ong Sok Ying


Phone Number: 012- 4694810


Lee Yun Hui

Matrix Number: s207186Phone Number: 016- 4424023


Muhamad Amirul bin Mohd ZainudinMatrix Number: s207187

Phone Number: 013-3078186

mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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IV

Acknowledgement

First and foremost, we are from group 4 would like to express our special thanks to our Senior

Lecturer, Dr. Adam bin Mohd Saifudin who coaches us Operation Strategy in this semester. Wewould like to express our sincere thanks to him for his guidance, monitoring, invaluable advice

and encouragement throughout the entire duration for completion of this research.

Secondly, we wish to gratefully acknowledge SilTerra (M) Sdn Bhd which allows us

conducted our research at their wafer fabrication. We would like to thank the staff in SilTerra(M) Sdn Bhd for their dedicated help and support throughout the study and their useful insights.

Thanks a lot to Mr. Ismail (Officer of Corporate Development and External Affair Department),

Mr. Mohd Hazmuni (Senior Manager of Industrial Engineering), Mr. Mohd Azizi (Senior

Member of Technical Staff Industrial Engineering and Mr. Ong Boon Teong (Manager ofManufacturingTraining and Enhancement) for their valuable information provided by them in

their respectively fields.

At the same time, we would not forget to take this opportunity to express our appreciation

to the all group members who contributed for completion of this project. This project would not

be successful without the tremendous contribution, cooperation and commitment from all group

members. This project is the greatest result for our group.

Lastly, we would like to thank our lovely families for their love and moral support which

gave us the strength to complete this project successfully. Furthermore, we would also like to

thank all friends and people who help us directly and indirectly to complete this project. Withouthelps of the people we mentioned above, we would not complete this project on time. We are

extremely appreciated for their helps.

Group 4, Operation Strategy


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V

Executive Summary

For this report, our group has chosen SilTerra (M) Sdn Bhd to investigate. We based on the

Chapter 4 of Capacity Strategy(Slack & Lewis, 2011)to investigate and explore this company. Amanufacturing strategy can be determined to be a set of related objectives and implementation

programs applied in a companys manufacturing functional. The aim of any manufacturingstrategies is to develop long-term and maintain competitive advantages in the marketplace. Themanufacturing should be ensure the companys management matches the markets demand, and

address supplier and customer requirements.

SilTerra (M) Sdn Bhd is located at Kulim Hi-Tech industrial park, Malaysias first high

technology industrial park in northern Malaysia, and about 25 km from the Penang Port. Kulim

Hi-Tech Park (KHTP) officially opened in 1996 and the first Hi-Tech Park in Malaysia. TheKHTP is situated in the district of Kulim, in the state of Kedah. Currently, the development of

KHTP covers an area of approximately 1,700 hectares approximately 4,000 acres. The site was

master planned so that in the future SilTerra (M) Sdn Bhd will be able to double the

manufacturing capabilities.

SilTerra (M) Sdn Bhd is a premier semiconductor manufacturing service provider thatoffers customers with leading-edge CMOS process technologies. Nowadays, the wafer fab

facility is able to manufacture LOGIC and ASIC devices on 200 mm wafers. The CMOS High

Voltage Technology being used in the design and fabrication of Display Driver ICs (DDI) , it iswidely used in the mobile devices market segment. This includes display drivers for mobile

phones, GPS equipment, MP3, MP4 and Personal Media Players (PMP), Digital Cameras and

other similar applications.

The aim of SilTerra (M) Sdn Bhd is to deliver silky-smooth to the chip manufacturing

business. The Silicon Foundry Company is to provide contract manufacturing wafers. SilTerra

(M) Sdn Bhd produces world-class performance to its customers seeking flexible capacity. WhenCustomers send their own designs for SilTerra (M) Sdn Bhd, it will be according customer

requirement to produce chips. Almost half of the products are shipped to the United States,Taiwan and South Korea each receives 25%. SilTerra (M) Sdn Bhds investors including two

investment arm of the Malaysian Ministry of Finance, which owns about two-thirds of SilTerra

(M) Sdn Bhd such as LSI Corp., Bank Industry Malaysia, and Walden Holdings.

Although the company SilTerra (M) Sdn Bhd is one of the well- known manufacturers of

semiconductor products in Malaysia, but weaknesses are in exist in this company. From theresult of SWOT and Tows matrix, we had found some weaknesses in this company but that is not

very affected to this company. If SilTerra as early as possible can overcome those weaknesses

then it will become a very successful in the Industry of Semiconductor. Besides that, we haveseen that the company's success in improving the development and increase production and

become a successful semiconductor company in the future.


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CONTENTS

Assignment Cover Sheet ................................................................................................................................ I

Assignment Cover Sheet ............................................................................................................................... II

Group Members Profile ............................................................................................................................... III

Acknowledgement ....................................................................................................................................... IV

Executive Summary ...................................................................................................................................... V

1.0 INTRODUCTION ............................................................................................................................ 1

2.0 COMPANY BACKGROUND ......................................................................................................... 2

2.1 COMPANY PROFILE ....................................................................................................................... 3

2.2 ORGANIZATION STRUCTURE ...................................................................................................... 7

2.3 COMPANY LOCATION ................................................................................................................... 8

2.4 AWARD ........................................................................................................................................... 10

2.5 FINANCIAL STATUS ..................................................................................................................... 12

3.0 INDUSTRIAL PROFILE: PORTERS COMPETITIVE ADVANTAGES................................... 12

3.1 THREAT OF NEW ENTRANTS ..................................................................................................... 13

3.2 THREAT OF SUBSTITUTE PRODUCTS...................................................................................... 14

3.3 BARGAINING POWER OF BUYERS ........................................................................................... 14

3.4 BARGAINING POWER OF SUPPLIERS....................................................................................... 15

3.5 COMPETITIVE RIVALRY EXISTING WITHIN AN INDUSTRY .............................................. 16

4.0 PESTAL ANALYSIS ........................................................................................................................... 18

4.1 POLITICS FACTOR ........................................................................................................................ 18

4.2 ECONOMIC FACTOR .................................................................................................................... 19

4.3 SOCIAL FACTOR ........................................................................................................................... 20

4.4 TECHNOLOGY FACTOR............................................................................................................... 21

4.5 ENVIRONMENT FACTOR............................................................................................................. 22

4.6 LEGAL FACTOR ............................................................................................................................. 23

5.0 ORGANIZATION STRATEGIES ....................................................................................................... 24

5.1 CORPORATE STRATEGY ............................................................................................................. 24

5.1.1 ECONOMIC SCALE AND BETTER COST STRUCTURE.................................................... 24

5.1.2 INVEST LARGER AMOUNT INTO R & D............................................................................ 25

5.2 BUSINESS STRATEGY .................................................................................................................. 25


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5.2.1 COST LEADERSHIP ................................................................................................................ 25

5.2.2 RAPID RESPONSE (NEW PRODUCT DEVELOPMENT).................................................... 26

5.3 FUNCTIONAL STRATEGY ........................................................................................................... 28

5.3.1 FINANCE .................................................................................................................................. 28

5.3.2 HUMAN RESOURCE ............................................................................................................... 28

5.3.3 RESEARCH AND DEVELOPMENT (R&D) .......................................................................... 29

5.3.4 OPERATION ............................................................................................................................. 30

6.0 STRATEGY ANALYSIS ..................................................................................................................... 39

6.1 SWOT ANALYSIS .......................................................................................................................... 39

6.2 TOWS ANALYSIS .......................................................................................................................... 54

7.0 STRATEGIES COMMENTS AND RECOMMENDATIONS............................................................ 55

8.0 CONCLUSION ..................................................................................................................................... 62

REFERENCES ........................................................................................................................................... 64

APPENDIX .....................................................................................................................................................


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1.0INTRODUCTION

We are study about Chapter 4 Capacity Strategy (Slack & Lewis, 2011).To complete this

assignment, we choose SilTerra (M) Sdn Bhd as the company for site visit. SilTerra (M) Sdn

Bhd is a semiconductor manufacturing which produce wafer and supplies contract manufacturing

service. The customers can send their own design to SilTerra (M) Sdn Bhd which then the

finished chips will produce in the wafer fabrication.

Before go for SilTerra (M) Sdn Bhd, we gather information and study about this

company. Our main resource is from the web page of SilTerra (M) Sdn Bhd (www.silterra.com,

2013). When the interview session, we try get the information which is cannot get from internet

and other resources. Due to the SilTerra (M) Sdn Bhd not a publish company, the annual reports

for this company are not published in the bursa saham and not allow show to us.

After go for SilTerra (M) Sdn Bhd, all information are collected and we able to start to

prepare our report. Firstly, we use Porters Five Force approach to analyze opportunities and

overall competitive advantage of the organization. Next, PESTAL analysis is used to analyze the

external marketing environment factors which have impact on the organization. The result of this

analysis will be used to identify the threats and weakness in SWOT analysis. When both of these

analyses are done, we look into the organization strategies which include cooperate, business and

functional strategies.

Based on all the analysis had done, a SWOT analysis was carried out and TOWS matrix

was conducted. At the last, we give some comments and recommendations based on the TOWS

analysis for Silterra (M) Sdn Bhd.


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2.0COMPANY BACKGROUND

SilTerra (M) Sdn Bhd is manufactures semiconductor wafers and catalyst for high technology

investments in Malaysia. It was founded in November 1995 as Wafer Technology Malaysia Sdn

Bhd. In December 1999, it was renamed as Silterra (M) Sdn Bhd.

SilTerra (M) Sdn Bhd broke ground on first manufacturing facility in Kulim Hi-Tech

Park (KHTP), Malaysia in June 1999. In 2000, it starts produced working silicon. Since it was

established, SilTerra (M) Sdn Bhd has served many top-tier global fables design and product

companies covering the consumer electronics, communications & computing, and mobile device

market segments.

SilTerra (M) Sdn Bhd offers CMOS design and a broad range of fabrication processes for

Integrated Chips (IC) in Advanced Logic, Mixed Signal & Radio Frequency and High Voltage

applications. The CMOS High Voltage Technology being used in the design and fabrication of

Display Driver ICs (DDI), is widely used in the mobi le devices market segment. This includes

display drivers for mobile phones, GPS equipment, MP3/4 Personal Media Players (PMP),

Digital Cameras and other similar applications (www.silterra.com, 2013).

Start from 2001 to 2012, SilTerra (M) Sdn Bhd achieved ISO 9002, ISO 140001, ISO

9001:2008, and OHSAS 180001: 2007 Certification. Besides ISO certification, SilTerra (M) Sdn

Bhd also awarded honourable Prime Ministers Hibiscus Award for Notable Achievement in

Environmental Performance for year 2002/2003, 2004/2005, and 2006/2007.


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2.1 COMPANY PROFILE

Vision Make SilTerra (M) Sdn Bhd the cornerstone for expanding the MalaysianSemiconductor Industry.

Mission Deliver world-class semiconductor manufacturing services to ourcustomers.

Provide our customers with outstanding customer service, logistics, andIP support.

Make SilTerra (M) Sdn Bhd a profitable enterprise that is continuouslygrowing with innovation and knowledge and maximize the return on

investment for our shareholders.

Headquaters Silterra Malaysia Sdn.Bhd.(368948-D)Lot 8, Phase II

Kulim Hi-Tech Park

09000 Kulim

Kedah Darul Aman,

Malaysia


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Email www.silterra.com

Fax +604-401 5005

Contact Number +604-401 5111Milestones 19952000

1995 Company founded known as Wafer Technology Malaysia Sdn.

Bhd.

1997 Opened USA Office at San Jose, California

1999 Construction Commenced at KHTP

1999 Rename as Silterra Malaysia Sdn. Bhd.

200120052001 180nm production started

2001 ISO 9002 Certified

2002 Semiconductor International Top Fab Award

2002 ISO 14001 Certified

2003 Opened Taiwan Office at Hsin-Chu City

2003 ISO 9001 Certified Best High-Technology Manufacturing Facility

Award

2003 130nm Pilot Production Ready PRIME MINISTERS HIBISCUS

AWARDNotable Achievement

2004 Opened Sales office at Kuala Lumpur
http://www.silterra.com/http://www.silterra.com/


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200620102007 Jointly developed 90nm and 65nm with IMEC

2007 160nm High Voltage Production Ready Achieve Sony Green

Partner Award

2008 130nm High Voltage Production Ready OHSAS 18001: 2007

Certified

2009 110nm Pilot Production Ready

2009 Frost & Sullivan Technology Implementation Award Power

MOSFET Production Ready HR Award - Silver Recognition for

HR Excellence Category

2010 LG Electric Supplier Appreciation Award Prime Ministers

Product Excellence Award 2009

201020122011 Named as one of the Best Employers in Malaysia according to

Aon Hewitt Consulting - Asia Pacific. 1Q2011 Acknowledged in

the Export Excellence Category as part of the Prime Minister's

Industry's Excellence Award 2010, organized byMinistry of

International Trade and Industry (MITI).

2011 Finalist of the Prime Minister's Quality Management Excellence

Award (QMEA) 2011.

2012 Conferred an award by the Malaysian Scientific


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Table 1:Overview of SilTerra (M) Sdn Bhd (www.silterra.com,2013)

Association(MSA) in recognition of SilTerra's outstanding

contribution to Science & Technology.

2012 Winner of the "Employee's Safety & Health Award2012"(Electric & Electronic Category) conferred by Ministry of

Human Resource.

2012 Conferred the "Competitive Employer Award" at the 2012Labour Day Celebration - by the Prime Minister.


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2.2 ORGANIZATION STRUCTURE

Diagram 1:Organization Chart of SilTerra (M) Sdn Bhd

Chief Executive Officer

Senior Vice Presidentof Operating &

Engineering

ManagementSenior DirectorDeputy Director

Senior ManagerManager

Vice President ofTechnology

Development

DirectorSenior ManagerManager

Vice President of

Finance & LogisticSenior DirectorSenior ManagerManager

Vice President ofWorldwide Sales &

MarketingDirector

Deputy DirectorSenior Manager

Manager

Vice President of

Coperate Development

& External AffairsSenior Director

Vice President of

Human ResourceSenior Manager

Manager


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2.3 COMPANY LOCATION

Headquarter of SilTerra (M) Sdn Bhd is located at Kulim Hi-Tech Park (KHTP), Kedah. KHTP

is a high technology science park in the northern part of Peninsular Malaysia and only 36km

away from Penang Island. This park has the world-class high quality infrastructure in term of

reliable power supply, high capacity fiber optic network and sufficient water supply. Presently,

there are many multinational companies already setup their operations in this high technology

science park. Besides that, SilTerra (M) Sdn Bhd also has regional offices located in high

technology centers around the world to provide local support for their customers.

Figure 1: Location Map of SilTerra (M) Sdn Bhd (www.silterra.com,2013)


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Figure 2: Wafer Fabrication of SilTerra (M) Sdn Bhd (www.silterra.com,2013)

Figure 3: Wafer Fabrication of SilTerra (M) Sdn Bhd (www.silterra.com,2013)

.
http://www.silterra.com/http://www.silterra.com/http://www.silterra.com/http://www.silterra.com/


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2.4 AWARD

Diagram 2: IECQ Certificate of Conformity Diagram 3: Certificate of Green Partner

Diagram 4: Prime Ministers Hibiscus Award

for Notable Achievement in

Environmental Performance for

year 2004/2005.

Diagram 5: Prime Ministers Hibiscus Award

for Notable Achievement in

Environment Performance for year

2006/2007


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Diagram 6: National Fire Certification. Diagram 7: MS ISO 140001:2004

Certification.

Diagram 8: OHSAS 18001: 2007 Certification

Table 2:Award of SilTerra (M) Sdn Bhd (www.silterra.com,2013)


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2.5 FINANCIAL STATUS

SilTerra (M) Sdn Bhd which under Government Linked Company is control by Khazanah

Nasional Berhad. SilTerra (M) Sdn Bhd which is not a publish company does not allow to show

annual report because scare be prototypes. Annual report of SilTerra (M) Sdn Bhd is difficult to

find for information uses. The annual report of SilTerra (M) Sdn Bhd cannot be finding on bursa

saham and through internet. But through article on internet, revenues can be known that earning

RM 500 million last year by SilTerra (M) Sdn Bhd. So, without annual report, analysis on

financial status on SilTerra (M) Sdn Bhd cannot be done.

3.0INDUSTRIAL PROFILE: PORTERS COMPETITIVE ADVANTAGES

Competitive Rivalrywithin an Industry

Low

Less high technologycompare to competitiors

Bargaining Power of Buyers

High

Focus on customers

Threat of NewEntrances

Low

High Investments

Bargaining Power of Suppliers

High

Less suppliers on main rawmaterials

Threat of SubstituteProducts

No

Always keep up tolastest technologies


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3.1 THREAT OF NEW ENTRANTS

For the semiconductor industry, the new entrants are quite difficult to enter this field. The threat

of new entrants for SilTerra (M) Sdn Bhd is low even semiconductor manufacturing is absolutely

one of the most noticeable high-technology industries today because of applications of

semiconductor products is wide spread (Chen, 2012). The companies need higher investment to

start production. For example, SilTerra (M) Sdn Bhd used 1.5 billion in investment and explores

wafer technology. Besides that, they also need to buy all the facilities, land, raw material, pays

salary to all labor and others. For example, the price of machine in Silterra (M) Sdn Bhd can up

to RM10 million for each machines according to Manager of Manufacturing-Training and

Enhancement, Ong Boon Teong (Interview 2, 2013).

In Malaysia, less company interest to explore this field it is because the process to

produce a wafer is very complicated. Based on Senior Member of Technical Staff Industrial

Engineering, Mohd Azizi Bin Chik (Interview 1, 2013), the process of production wafer is

between 300 steps to 900 steps it is because the company had produced different size of the

wafer. Therefore, the new entrant is not easy to copy the wafer. In Malaysia, SilTerra (M) Sdn

Bhd is a first manufacturing company to produce high quality of wafer and the customers include

local and oversea.

Furthermore, competitors are not easy to copy their products. At the company

implementing their first design, there is much difficulty balancing the limited funds, changing

requirement, and limited resources to make thorough evaluation of required changes (Kumar,

2008). SilTerra (M) Sdn Bhd is very being careful to protect their production line. Although they

are allowed visitor walk around the production line but they are not allow visitor take photos. It


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is because SilTerra (M) Sdn Bhd had invested a lot of modal to their production line and R&D so

that they cannot let competitors to know their technology. These prove that the new entrants are

not easier to enter in this field.

3.2 THREAT OF SUBSTITUTE PRODUCTS

The main product produce by SilTerra (M) Sdn Bhd is wafer for application Integrated Chips

(IC). Customers can send their own designs to SilTerra (M) Sdn Bhd, which then produces

finished chips in its wafer fabrication facilities. The products are used in computation, consumer,

and communication electronics applications. For example, the IC used for mobile phones, GPS

equipment, MP3/4 Personal Media Players (PMP), Digital Camera and other similar

applications.

The wafers are available in sizes from 150mm to 300mm based on old revolution stages

while SilTerra (M) Sdn Bhd already update to 450mm based on new revolution stages (Interview

1, 2013). Besides that, there are many types of wafer that produced by different metal which are

silicon, aluminum and copper. SilTerra (M) Sdn Bhd is the first semiconductor wafer fab in

Malaysia. For now, the products produce by Silterra (M) Sdn Bhd still does not have any

substitute products.

3.3 BARGAINING POWER OF BUYERS

Bargaining power of customers represents that force affecting intensity to compete with others

company within an industry when customers have focused or high in sale price or buy in huge

volume. Most of the products of SilTerra (M) Sdn Bhd are shipped to the US, Taiwan and South


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Korea with each 25% be received even they also had local customers but in a least of number

(Interview 1, 2013). This is because the products of SilTerra (M) Sdn Bhd that meet demanding

customers by serves them from fables to IDM in highly dynamic consumer electronics and

communication application have high demand in foreign market compare to the local market.

Besides that, SilTerra (M) Sdn Bhd also supplies contract manufacturing services which

mean that customers can send their own design to SilTerra (M) Sdn Bhd then they will produce

finished chips in its wafer fabrication facilities. After producing finished chips, SilTerra (M) Sdn

Bhd will ship to their customers for producing their products. So, customer requirements can be

satisfy which can provide SilTerra (M) Sdn Bhd to gain trust of customers and earned profits.

Furthermore, loyalty of customers makes the SilTerra (M) Sdn Bhd products survive and

the main customer is from China. Nowadays, China has a lot of assembly factories so that it

needs a lot of semiconductor products to their production line. SilTerra (M) Sdn Bhd is also able

to compete in competitive global. Total production wafer of SilTerra (M) Sdn Bhd is at rank 15

within global (www.silterra.com,2013).

SilTerra (M) Sdn Bhd has higher bargaining power of buyers, this is because customers

of SilTerra (M) Sdn Bhd be focused by them (Interview 1, 2013). Besides that, customers that

involved with them are buying in huge volume on high sale price.

3.4 BARGAINING POWER OF SUPPLIERS

Market of input for SilTerra (M) Sdn Bhd is equal to the bargaining power of suppliers. This

mean that availability input that received has to depend on the relationship between suppliers.

So, SilTerra (M) Sdn Bhd has to maintain good relationship with their suppliers. SilTerra (M)
http://www.silterra.com/http://www.silterra.com/http://www.silterra.com/http://www.silterra.com/


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Sdn Bhd has more than one hundred suppliers which are local and foreign suppliers (Interview 1,

2013). Within the suppliers, Singapore and Japan is supplier that provided the main raw material

to produce a wafer which is silicon, aluminum and copper.

Customers where increasingly demanding had caused for search supplier who can supply

quality products and excellent service to improve profitability and competitiveness(Yeh, 2011).

Mostly, the main raw materials are imported from foreign countries. Since that our country

difficult to get the supplier that provides this kind of main raw materials (Interview 1, 2013). So,

the bargaining power of suppliers is high. Besides that, SilTerra (M) Sdn Bhd has to order the

main raw materials in high quantities. This is because the market requirement on product

SilTerra (M) Sdn Bhd is high.

Moreover, times that need to take main raw materials from Singapore and Japan to

SilTerra (M) Sdn Bhd are being long. Lead time for SilTerra (M) Sdn Bhd to receive the main

raw materials from their suppliers is around one month (Interview 1, 2013).SilTerra (M) Sdn Bhd

will harden to deliver on time to the customers if out of expectation lead time with supplies raw

material. Furthermore, SilTerra (M) Sdn Bhd need to pay high monetary to import main raw

material from Singapore and Japan. SilTerra (M) Sdn Bhd has high bargaining power of

supplier(Interview 1, 2013). This is because the main supplier of SilTerra (M) Sdn Bhd is located

in Singapore and Japan. So, SilTerra (M) Sdn Bhd has to more concentrate on them.

3.5 COMPETITIVE RIVALRY EXISTING WITHIN AN INDUSTRY

SilTerra (M) Sdn Bhd has competitor in an industry but their most of competitors are located in

foreign countries and fewer competitors in local. SilTerra (M) Sdn Bhd has to compete with


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South Korean and Taiwanese wafer fabs to win customers (Interview 1, 2013). To compete with

their competitors, SilTerra (M) Sdn Bhd apply strategies that provided high-quality products and

top-notch service with very quick turnaround time which deliver leading-edge products to

customers in record time. SilTerra (M) Sdn Bhd has to achieve short cycle times, keep low levels

of inventory, achieve high throughput under lowest investment and maintain flexibility of

production line to keep high competitive advantage (Tu & Chen, 2010).

Moreover, SilTerra (M) Sdn Bhd also has to compete with Chartered Semiconductor of

Singapore, Taiwan Semiconductor Manufacturing Co. (TSMC) which is the overall industry

leader on Taiwan (Byrne, Kovak & Micheals, 2013), and United Microelectronics Corp., both of

Taiwan on technology. The capacity of SilTerra (M) Sdn Bhd is cannot fully satisfy the demand

of customers compare to competitor in foreign countries due to less competitive advantages. This

is because of late behind rival on new technology application being applied in SilTerra (M) Sdn

Bhd. To solve the problem, SilTerra (M) Sdn Bhd expands their factory and installs

equipment(Interview 1, 2013).Compete wafer technology with competitor had make executed

manufacturing become more and more complex (Kader& Azizi, 2010).

In addition, equipment had been used by SilTerra (M) Sdn Bhd to produce products is

expensive which affecting manufacturing cost became very high. This is because to produce a

wafer needs high-technology machines and engineer to control the process. According to CEO,

Dr Kamarulzaman Mohamed (Interview 4, 2013), he has seen that economies of scale and has a

good cost structure are suitable to apply.If successfully apply, they are able to compete with

rivals within an industry.As a conclusion, SilTerra (M) Sdn Bhd has low competitive rivalry

existing within an industry because SilTerra (M) Sdn Bhd has lack of capacity to meet demand

of customers (Interview 1, 2013).


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4.0 PESTAL ANALYSIS

4.1 POLITICS FACTOR

SilTerra (M) Sdn Bhd is a factory fully controlled by the Malaysian government. Stock

ownership also is 98% owned by Khazanah Nasional Sdn. SilTerra (M) Sdn Bhd is one of the

companies that responded to the minimum wage adjustment of RM900 to their employees. Wage

adjustment is implemented due to the cost of living is increasing year by year. In addition,

currency exchange reduced in Malaysia was less influenced SilTerra (M) Sdn Bhd because all

employees are Malaysian. Besides that, production hours of SilTerra (M) Sdn Bhd has changed

from 8hours per day into 24hours per day and divided into 3 shifts. It is operating7 days in a

week. This is because they are striving to increase the capacity to meet the demand(Interview 1,

2013)

In SilTerra (M) Sdn Bhd, it would not affect the sales of wafers if there have a change on

political at Malaysia. This is because demand of the wafer for global market is high. For

example, wafer produced by SilTerra (M) Sdn Bhd issued to produce mobile phones and

computers. At present, production of the products is on large quantity and consist variety of

models. Thus, the capacity of wafer generated by SilTerra (M) Sdn Bhd is high. In the event of

political change in others countries, it will lead them to become major customers of SilTerra (M)

Sdn Bhd. So, politics changed in other countries will affect the production of wafer on SilTerra

(M) Sdn Bhd.

In terms of government taxes, SilTerra (M) Sdn Bhd is ordinary taxable. It is same with

other manufacturers. Customers of wafer issued by Silterra (M) Sdn Bhd area broad, for example


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countries China, United States, Taiwan, Korea, and Singapore(Interview 1, 2013). The export

taxis different for each country.

4.2 ECONOMIC FACTOR

In the economic element, SilTerra (M) Sdn Bhd is looking the current global economic to ensure

they are always in running well and growing rapidly in the Wafer Fabrication Industry. SilTerra

(M) Sdn Bhd has always observing raw material prices, currency exchange rate, and observes the

effects of inflation or economic recession.

SilTerra (M) Sdn Bhd is facing shortage of raw materials and prices of raw materials

supply (Interview 1, 2013). Due to economic conditions and fuel prices at uncertain world,

SilTerra (M) Sdn Bhd had to face with rising prices of raw materials such as silicon, aluminum

and copper. The raw materials are mostly imported from Singapore and Japan (Interview 1,

2013).In addition, SilTerra (M) Sdn Bhd is always concerning in global exchange rate. For

example, if the price of the U.S. dollar is lower, SilTerra (M) Sdn Bhd will buy raw materials in

large quantities. This is because the price is cheaper compare with normally. Thus, it is able to

increase the revenue.

Total sales of SilTerra (M) Sdn Bhd are also increasing due to their wafers are used to

produce high-tech products. For example, hand phone, television, camera and USB. China and

Taiwan have a high demand on the product of SilTerra (M) Sdn Bhd. This is because their

products are able to produce hi-tech products, such as mobile phones and computers. As we all

know, China is a manufacturer to produce a variety of mobile phone and they are using IC or

micro-chip to produce mobile phones. Therefore, it made SilTerra (M) Sdn Bhd becomes a

micro-chip supplier for some industries in China (Interview 1, 2013).


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4.3 SOCIAL FACTOR

For the social element in SilTerra (M) Sdn Bhd, it is emphasized their responsibility to their

employees. The responsibilities of SilTerra (M) Sdn Bhd can be seen through several aspects

which are in relation to the payment of wages, workers compensation and panel clinic for

employees and their employees family members.

Reasonable salary and benefits for workers which is under social responsibility need to

be implemented by SilTerra (M) Sdn Bhd. So, SilTerra (M) Sdn Bhd has given reasonable salary

and benefits to their employees to let them satisfied with the management. An example of

compensation prepared by SilTerra (M) Sdn Bhd is covering compensation end of work services

such as retirement of employees.

Besides that, SilTerra (M) Sdn Bhd also has served on several panels clinics around the

working area and residential hall areasworkers for them when accidents had happened on them

surrounding those areas(Interview 1, 2013). Panel clinic services are essential to maintaining the

quality of services provided by SilTerra (M) Sdn Bhd. It is to facilitate their dealings with their

own employees in the event of any accident or for specific treatments. Services provided by the

clinic panels to SilTerra (M) Sdn Bhd for employees is free of charge.

Moreover, SilTerra (M) Sdn Bhd also has organized several society activities such as

futsal tournament and annual dinner for their workers (Interview 1, 2013). This method will

further strengthen the relationship between the employee and the employer. Furthermore,

employees will feel more fun and they will release their stress where come from their job.


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In addition, SilTerra (M) Sdn Bhd also does corporate social responsibility activities. For

example, they provided several visits to other parties. SilTerra (M) Sdn Bhd provided visit for

various parties such as lectures and students from the USM, UUM and others (Interview 1,

2013). Silterra(M) Sdn Bhd also collaborates with local residents to boost social activities for

keeping green environment in surrounding SilTerra (M) Sdn Bhd.

4.4 TECHNOLOGY FACTOR

SilTerra (M) Sdn Bhd has use CMOS Logic technology which is match to process on the leading

foundry, these processes covering from 180nm node to 110nm node. Besides that, it is also

running on high volume production. CMOS logic technology provides an optimal combination

of performance in terms of power, speed and gate density to meet stringent product requirements

on consumer, communications and computing applications. More than 35% of the process was

reentrance at the same equipment while CMOS process usually consists of hundreds of

processing equipment (Ridzuan et al., 2013).

Low Power or High Voltage CMOS Logic technology that used by SilTerra (M) Sdn Bhd

is for digital processors used in portable consumer applications (www.silterra.com, 2013).High

Voltage technology which used by SilTerra (M) Sdn Bhd is unique developed to ultra-low

leakage devices with process design rules that more stringent process which specifically target

for AMOLED or TFT Display Driver application used on display panels in portable consumer

applications (www.silterra.com, 2013).

SilTerra (M) Sdn Bhd has 180nm, 160nm and 130nm of Mixed Signal and RFCMOS

technology platform that built from proven CMOS Logic platform with additional active and

passive RF or analog components. This RF or analog components have high precision MIM


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(Metal-Insulation-Metal), Finger Capacitor, Varactor, Diode, Thick Metal Inductors, Deep

Nwell, Multi-Voltage and High precision resistors with up to 20GHz range characteristics. This

technology is suitable for applications of RF or analog which used in WLAN, Bluetooth, RFID,

Zig Bee applications (www.silterra.com,2013).

SilTerra (M) Sdn Bhd also has developed on 180nm of BCDMOS and 180nm of V-Tr

Power MOSFET technology for the application of energy-efficient power management to meet

the expectations on industry GREEN energy. This technology is suitable for applications used in

LED drivers, motor drivers, DC-DC converters and Lithium battery charger (www.silterra.com,

2013).With all technologies that apply on SilTerra (M) Sdn Bhd, we can see that high

technologies are used by SilTerra (M) Sdn Bhd. This can caused SilTerra (M) Sdn Bhd has

competitive advantages that enable them to compete with competitors.

4.5 ENVIRONMENT FACTOR

SilTerra (M) Sdn Bhd is committed to designing, manufacturing and distributing products and

processes which optimize resource utilization and minimize environmental impact. Silterra (M)

Sdn Bhd is always maintaining an environmental management system which continuously

strives to improve its environmental performance. For the certification of International

Organization Standardization (ISO), SilTerra (M) Sdn Bhd has ISO 9001, ISO 9002, and ISO

14001- Environmental Management System (EMS). SilTerra (M) Sdn Bhd was implementing an

EMS to improve their environmental performance in August 2012(www.silterra.com, 2013).

Besides that, the facilities of SilTerra (M) Sdn Bhd are equipped with wastewater

treatment and exhaust systems that ensure compliance with environmental, health and safety

regulations in the workplace (www.silterra.com, 2013). SilTerra (M) Sdn Bhd ensure compliance
http://www.silterra.com/http://www.silterra.com/technology.htmlhttp://www.silterra.com/technology.htmlhttp://www.silterra.com/


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with stringent international and local environmental protection regulations on industrial effluents

and air emissions through wastewater treatment systems to treat segregated waste streams from

manufacturing and support systems, Volatile Organic Compound (VOC) abatement systems and

high efficiency scrubber systems to remove acid and caustic chemical vapors. In addition,

scheduled (toxic) wastes are managed to comply with stringent regulatory requirements

(www.silterra.com, 2013).

4.6 LEGAL FACTOR

The raw materials that SilTerra (M) Sdn Bhd used for making wafer fabrication are silicon,

aluminum and copper. SilTerra (M) Sdn Bhd is continuously working on reducing the use of

banned substances in their final products. In line with SilTerra (M) Sdn Bhds Hazardous

Substance Process Management, SilTerra (M) Sdn Bhd is on regular basis sending their product

to accredited laboratory to be independently analyzed. This is because to ensure the products do

not contain or exceed the hazardous substance concentration limit as stated in Restriction of

Hazardous Substances (RoHS), Registration, Evaluation, Authorisation & restriction of

Chemical (REACH) and Sony Green Partner(www.silterra.com, 2013).

RoHS is a regulation that eliminating identified environmentally unfriendly compounds

from the manufacturing process. So, SilTerra (M) Sdn Bhd used RoSH regulation to restrict

certain dangerous substances commonly used in electronic and electronic equipment

(www.silterra.com, 2013). What is REACH? REACH is a European Union regulation

concerning the Registration, Evaluation, Authorization and restriction of Chemical to provide a

high level of protection of human health and the environment from the use of chemicals and


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make the people who place chemicals on SilTerra (M) Sdn Bhd manufacturing responsible for

understanding and managing the risks associated with their use.

5.0 ORGANIZATION STRATEGIES

5.1 CORPORATE STRATEGY

5.1.1 ECONOMIC SCALE AND BETTER COST STRUCTURE

Economic scale and a better cost structure wish to be implemented by SilTerra (M) Sdn Bhd to

reduced cost of manufacturing for produced wafers (Interview 4, 2013). According to Reid &

Sanders (2010), economies of scale are a condition in which the average cost of a unit produced

is reduced as the amount of output is increased. Cost of manufacturing will be in high amount

because of machine that used by SilTerra (M) Sdn Bhd is high on technology. To gain more

Economic scaleand a better coststructure.

Invest a largeamount into R&D.

Corporate Strategy

Cost Leadership Rapid Responde

( New ProductDevelopment)

Business Strategy

Finance

Human Resource R &D

Operation

Functional Strategy


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profits, SilTerra (M) Sdn Bhd tends to reduced cost of manufacturing and increased amount

output with do not have enough capacity on production. Besides that, SilTerra (M) Sdn Bhd

which needs to compete with competitors has to increase number of output so can fulfill

customer requirement based on unexpected extra order.

5.1.2 INVEST LARGER AMOUNT INTO R & D

The another corporate strategy of SilTerra (M) Sdn Bhd is invests into R&D which collaborate

with Research in Engineering, Science and Technology (CREST) that support some SilTerra (M)

Sdn Bhd program and sharing information related to academia to industry. Investment on R&D

can be make revenue of SilTerra (M) Sdn Bhd comes up to around 20% (Interview 4, 2013).

SilTerra (M) Sdn Bhd has to make invest on R&D to make new product because for meet

demand of different customers. So, SilTerra (M) Sdn Bhd can be continuous business and stable

on market. Product demand that very volatile and machine and process technologies that advance

on rapid pace are caused capacity planning and investment become challenging task (Chou,

Cheng & Liang, 2006).

5.2 BUSINESS STRATEGY

5.2.1 COST LEADERSHIP

According to Capon (2008), cost leadership is likely to be achieved by economics of scale,

extremely efficient production or very efficient distribution processes. SilTerra (M) Sdn Bhd

which is a company produce wafers for chips used that need many knowledge and expertise in

the process for wafer production. Besides that, SilTerra (M) Sdn Bhd also required costly and


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largely equipment to produce wafers (Interview 1, 2013). Moreover, more major raw materials

that SilTerra (M) Sdn Bhd used to produce wafer are coming from other countries which is need

high transportation cost. So, SilTerra (M) Sdn Bhd produces out products which on higher

prices. This is because of the cost of manufacturing wafer is very high.

Furthermore, SilTerra (M) Sdn Bhd produce products in low volume whatever SilTerra

(M) Sdn Bhd have fully utilized capacity until overcapacity which employee overtime. In

addition, to reduce increases volume of products, SilTerra (M) Sdn Bhd has to expanded new

factory to increase the production line for produce high volume of products (Interview 1, 2013).

With the new factory, SilTerra (M) Sdn Bhd is able to buy more equipment to increase their

manufacturing capacity. So, high volume of products can be produced by SilTerra (M) Sdn Bhd.

By this way, SilTerra (M) Sdn Bhd have increased volume of products with reduced much of

manufacturing costs by reduced employee overtime.

Besides that, Silterra (M) Sdn Bhd also can reduce manufacturing cost and increased

volume of product by having good relationship with partners. Partners which are same industry

with SilTerra (M) Sdn Bhd have provided some information about wafer technology that can

help SilTerra (M) Sdn Bhd to produce wafer with productivity. Besides that, SilTerra (M) Sdn

Bhd can also reduce manufacturing cost for produce wafer by taking one of part on produce

wafers with partners (Interview 1, 2013). So, SilTerra (M) Sdn Bhd can reduce time and

manufacturing costs to produce that part on produce wafer with direct go through other parts to

produce wafer.

5.2.2 RAPID RESPONSE (NEW PRODUCT DEVELOPMENT)


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Nowadays, the semiconductor industry is becoming more competitive. Since technology keeps

advancing, SilTerra (M) Sdn Bhd has to produce chips that smaller than before to applicant on

computation, consumer and communication electronics. So, SilTerra (M) Sdn Bhd has the

Research and Development (R&D) that develop their product to become smaller and quality.

Success in fables world requires a transformation of management methodologies used in the

development and implementation of ICs (Kumar, 2008).

Furthermore, R&D on SilTerra (M) Sdn Bhd has a good performance on development

their product to survival on the advanced technology. For example, SilTerra (M) Sdn Bhd has

produced chips that customers need on 0.25-micron in 2001 year. When in 2002 year,

SilTerra(M) Sdn Bhd has improved their ability to produce 0.22-micron chips. It can be seen that

the ability of SilTerra (M) Sdn Bhd to produce smaller chips has intended year by year. Until a

recent year, SilTerra (M) Sdn Bhd already has the ability to produce 0.13-micron chips

(www.silterra.com,2013).

SilTerra (M) Sdn Bhd has become not enough capacity to produce products for customers

based on the requirements and needs of customers are increasing day by day(Interview 1, 2013).

So, SilTerra (M) Sdn Bhd has to made investment to install more equipment and expand their

factory. With this solution, SilTerra (M) Sdn Bhd will have sufficient capacity to fulfill the needs

and requirements of customers.

Moreover, SilTerra (M) Sdn Bhd also has outsourcing from other companies in the same

industry. This is because SilTerra (M) Sdn Bhd needs to gain more information on new

technology from other companies. So, they will not lag behind their competitors. Since that


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SilTerra (M) Sdn Bhd always keeps up with the latest technology (www.digitalnewsasia.com,

2013).

5.3 FUNCTIONAL STRATEGY

5.3.1 FINANCE

Khazanah Nasional Berhad is a sovereign wealth fund of the Government of Malaysia

specializing in investments on finance, telecommunications, media and communications

services, utilities, information technology, healthcare, education, renewable energy, creative

economy, sustainable development and transportation sectors (www.khazanah.com, 2013).

Khazanah Nasional Berhad is the investor of SilTerra (M) Sdn Bhd. 98% of SilTerra (M) Sdn

Bhd is owned by Khazanah Nasional Berhad. To ensure the company operates smoothly,

SilTerra (M) Sdn Bhd needs a large number of capitals to continue the business. This is because

one of the machines in the fab is costly around RM 10 million (Interview 2, 2013).

5.3.2 HUMAN RESOURCE

SilTerra (M) Sdn Bhd has around 1200 employees. Due to the task in operation department need

specific skills, all the workers are trained before start working (Interview 1, 2013). Besides that,

human resource department on SilTerra (M) Sdn Bhd also provides a training program for the

fresh graduates. Training program that implemented by SilTerra (M) Sdn Bhd is (SGTP).

SilTerra (M) Sdn Bhd Graduate Trainee Program (SGTP) is a program designed for fresh

graduates to gain hands-on-training and expose to a full fledge semiconductor working

environment (http://foe.mmu.edu.my/, 2013). To recruit more employees on SilTerra (M) Sdn Bhd
http://www.digitalnewsasia.com/http://foe.mmu.edu.my/http://foe.mmu.edu.my/http://foe.mmu.edu.my/http://foe.mmu.edu.my/http://www.digitalnewsasia.com/


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for increase capacity for production, human resource department of SilTerra (M) Sdn Bhd has

apply jobstreet.com as their way to offer job vacancies.

5.3.3 RESEARCH AND DEVELOPMENT (R&D)

Functional strategy is the approach a functional area takes to achieve corporate and business unit

objectives and strategies by maximizing resource productivity. In the SilTerra (M) Sdn Bhd,

Research & Development (R&D) is the one of the strategy to make the organization on the

competitive advantage level to achieve their goal. The R&D strategies are feature and quality

driven, design for product performance, improve existing product in the market and cost driven

which design for cost reduction. Besides that, transformation strategy also is a part of R&D

strategy which is SilTerra (M) Sdn Bhd making their transformation due to capacity

improvement and efficiency expertise. For example, SilTerra (M) Sdn Bhd have their capacity to

produce average output of 30000 unit wafers per month, for average of 2500 mold per wafer,

more than 75 million chips produce every month and now SilTerra (M) Sdn Bhd expanded it into

full capacity and has consistent full utilization for their company production(Interview 1, 2013).

Besides that, the company currently has two fabs which are Silterra (M) Sdn Bhds Fab 1 and a

fab Infineon building on land adjacent to company.

For the technology advanced, SilTerra (M) Sdn Bhd and their collaboration partnership,

ProMOS Technologies has offered High-Voltage (HV) technology for smartphone market. The

first joint technology development project bring SilTerra (M) Sdn Bhd's 0.13-micron and 0.11-

micron High-Voltage (HV) process technology for small-panel LCD driver IC applications to

ProMOS's 12-inch fabrication facilities in Taichung, Taiwan. Moreover, this project marks the

first step of the long-term strategic partnership between ProMOS and Silterra (M) Sdn Bhd to


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leverage on each other's strength to bring together ProMOS's 12-inch production scaleand

advanced manufacturing capabilities and SilTerra (M) Sdn Bhds advanced HV technology to

enable the fast growing smart phone market. So, this project is a significant breakthrough for

SilTerra (M) Sdn Bhdas it enables us to continue to deliver new innovations and capacities to

their customers to win in the market (www.silterra.com,2013).

5.3.4 OPERATION

SilTerra (M) Sdn Bhd which is produced wafer needs high technology machines and expertise

employees. This is because process flow of wafer is very complexity which consists step range

from 300 to 900 steps and needed more than 500 equipments within cycle time varies from 30 to

100 days (Azizi & Hazmuni, 2010). To make sure that operation of SilTerra (M) Sdn Bhd is

running on efficiency, employees on SilTerra (M) Sdn Bhd had to have knowledge on process

flow of wafer.


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Process Flow to produce Wafer

Diffusion

Photolithography

Etching

Implant

CMP

Chemical-mechanical

planarization

Thin Film

Raw

Material

IC


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Raw Materials

1. According to Senior Manager ofIndustrial Engineering, Mohd

Hazmuni bin Saidin (Interview 3,

2013) wafers are producing from raw

materials. The raw materials used by

SilTerra (M) Sdn Bhd are aluminum,

copper and silicon.

2. The aluminums derived from suppliersare cut according to the size desired by

SilTerra (M) Sdn Bhd.

3. Most of the raw materials used toproduce wafer are import from other

country such as Korea and Singapore.


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Step 1 : Diffusion

1. A layer of material is grown ordeposited on the surface of a cleaned

wafer (Monch, Fowler & Mason,

2013).

2. Diffusion is a high temperatureprocess that disperses material on the

wafer surface (Monch, Fowler &

Mason, 2013).

3. In this process, wafers will place inthe oven, the contents of the atoms

and ions act to produce electrical

characteristic in the wafer.

4. Diffusion is similar to oxidation; thedifference between these two

processes is diffusion uses different

gases while oxidation just uses

oxygen.


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Step 2: Photolithography

1. Photolithography can be known asoptical lithography or violet

lithography. It uses light to transfer a

geometrix pattern from a photomask to

a light-sensitive chemical photo resist

on the substrate (www.wikipedia.com,

2013).

2. Coating, exposure, developing, andprocess control are the main steps of

the photolithography process (Monch,

Fowler & Mason, 2013).

3. First, the wafer is coated with a thinfilm of a photosensitive polymer, called

photoresist strip (Monch, Fowler &

Mason, 2013). Coating is applied

while the wafer is spinning.

4. Exposure tools, which called steppers,transfer the pattern onto the wafer by

projecting projecting light through the

reticle to expose the wafer using

ultraviolet light (Monch, Fowler


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&Mason, 2013).

Step 3: Etching

1. This step is responsible for removingmaterial from the wafer surface. Areas

on the wafer that are not covered by

photoresist strip are then removed from

the wafer.

2. There are two methods of etching: wetetching and dry etching.

3. For wet etching, chemicals are used toremove the top layer of the wafer.

4. Usually wet itching required in microelectromechanical where the structure

should be free from lying layer.

5. Dry itching refers to any of the methodsof etching that use gas instead of

chemical etchants. Dry itching is

capable of producing critical

geometries that are very small ( Bates,

2000)


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Step 4: Implant

1. In implantation process, the ion implantis very important to produce a wafer or

Integrated Circuit (IC).

2. The implantation process needs arsenic,phosphorus, boron, boron, indium,

antimony, germanium, silicon,

nitrogen, hydrogen, and helium to

produce the wafer implant.

3. It is a method performs dopingimpurities into wafer. The ion particles

are through a high electrical field to

implant into wafer.

4. It must be perform with electric field.Because electric field can accelerate

ions and its let ions having kinetic

energy. Besides that, the penetration

depth is depends on kinetic energy.

5. This process is used to change thephysical, chemical, or electrical

properties of the solid.


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Step 5: Chemical- mechanical polishing

(CMP)

1. This step cleans and levels the wafersurface. Chemical slurry is applied to a

wafer and the surface is equalized. This

result in the thickness of the wafers

being diminished before adding a new

layer (Monch, Fowler & Mason, 2013).

2. Processes such as etching, deposition oroxidation which changes the surface of

wafer lead to non-planar surfaces.

CMP used for plain wafer surface by

using the chemical slurry (Interview 3,

2013).

3. CMP allows pattering indirectly,because removal of material always

starts at the top wafer surface. Along

with non-planar layer deposition, CMP

is an effective method to construct the

IC structure.


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Step 6: Thin Film

1. Thin film is a layer of material rangingfrom fractions of a nanometer to several

micrometer in thickness

(www.wikipedia.com,2013)

2. Thin films are used in wafer because itcan be resistors, conductors, insulators

or semiconductors.

3. The use of thin films will be installedon the wafer with the same chemical

composition.

Final Product

1. Final products of Silterra (M) Sdn Bhdare available in three type of size: 6, 8

and 10 inches.
http://www.wikipedia.com/http://www.wikipedia.com/


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6.0 STRATEGY ANALYSIS

6.1 SWOT ANALYSIS

Strengths (S) Weaknesses (W)

S1. High technologyS2. Multi skill workersS3. Good maintenanceS4. Just- In- TimeS5. Strategic location

W1. High operating costW2. Lack of financial investmentW3. Lead time of raw materialW4. Lack of production lineW5. Do not have diversity product

Opportunities (O) Threats (T)

O1. Good relationship with partnerO2. Expansion of new factoryO3. Technology advancedO4. Technology innovationO5. Future market volume demand

T1. Rapid technology changeT2. Unfavorable lawT3. Exchange rateT4. Geographical DistributionT5. Sustainability of major raw material


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Strength

S1. High technology

SilTerra (M) Sdn Bhd used high technology to produce high quality product to the customer.

CMOS Logic technology, High Voltage technology and Analog technology is the examples for

high technologies that SilTerra (M) Sdn Bhd used when process wafer (Interview 1, 2013).

SilTerra (M) Sdn Bhd also has around 400 machines in high technology to produce quality

wafers (Interview 1, 2013). SilTerra (M) Sdn Bhds CMOS Logic technologies are process-

matched to the leading foundry to provide optimal combination of performance in term of power,

speed and gate density, to meet the stringent product requirement in Consumer, Communication

and Computing applications while High Voltage technology is able to support high memory

density requirement with low leakage current. This technology is supported by complete

standard cell library, configurable SRAM macro block, I/O and One-Time-Programmable IP


SilTerra (M) Sdn Bhd also known as logic technology leadership and CMOS technology

leadership that leading foundry compatible processes which have high volume production, high

performance and provide high quality design kits.

S2. Multi skills workers

SilTerra (M) Sdn Bhd has educated and multi skill workers that graduated in certain fields such

as Industrial Engineering (IE), Computer Science and IT Engineering, Electric and Electronic

(EE), Micro Electronic Engineering and more (Interview 1, 2013). There are two categories

around 1200 employees in SilTerra (M) Sdn Bhd which is 83 % of technical worker and 17% of

non-technical worker. The definition of multi skill is broad on SilTerra (M) Sdn Bhd because it


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is not focused on technical skills only but its also including emotional control with environment

around company (Interview 1, 2013).

Training development workers is one of continuously improvement of efficiency. SilTerra (M)

Sdn Bhd will give training to their worker in one to three years to know the process, how to use

tools and equipment and how about expertise in the area discovery method such as identification

of problem, how to solve and improve it and that training will develop workers skills. For

example, from operator, worker will be a senior engineer which has supervision skills to conduct

people (Interview 1, 2013).

S3. Good maintenance

SilTerra (M) Sdn Bhd has a good maintenance to keep their machines full operating and

functioning all the time. This company has their own preventive maintenance where the worker

will monitor the state of machines every weekly as purpose to prevent machine from getting

breakdown during operating time. For example, SilTerra (M) Sdn Bhd has weekly serves

maintenance on every Sunday to make sure the condition of machine well and on control. When

SilTerra (M) Sdn Bhd faced machine breakdown or equipment interruption problem, the

machine will be improved as soon as possible within half a day using manual as a guideline that

known as Failure Defect Analysis (Interview 1,2013).

S4. Just-In-Time (JIT)

Just-in-time manufacturing is the one of advantage to the SilTerra (M) Sdn Bhd because the

purpose of JIT is to meet customer demand as well as avoid the waste associated with

overproduction or excess inventory. SilTerra (M) Sdn Bhd only making what is needed, when


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wafer is needed and how much amount that wafers is needed based on customer demand to

eliminated waste and improves productivity (Interview 1, 2013).Because of JIT, request of

customers to meet time-to-market many need to be update through production plan which

constructed by production planning department with negotiation with sales department (Chung et

al., 2008). So far SilTerra (M) Sdn Bhd does not have adequate capacity because their customer

demand is more than production capacity.

S5. Strategic location

Strategic decision for location is the most important for any company as well as SilTerra (M)

Sdn Bhd that corporate headquarters and manufacturing facilities are strategically located at

Kulim High-Tech Park KHTP). SilTerra (M) Sdn Bhd located in an industrial area with other

current tenant at Kulim High-Tech Park such as Infineon, First Solar, Toyo Memory and more.

The reason why SilTerra (M) Sdn Bhd has a strategic location for semiconductor manufacturing

because at KHTP has high quality infrastructure including reliable power supply, Malaysian

Cybercity status, high capacity fiber optic network and abundant water supply from three

dedicated reservoirs.

Besides that, according to the Malaysias map, SilTerra(M) Sdn Bhd is located at the centre of

the Northern Region in Kedah Darul Aman that very close to the North Butterworth Container

Terminal and Bayan Lepas International Airport. It means that Silterra (M) Sdn Bhd can runs

activities import and export with their suppliers and customers in an easy way while reducing

cost for long distance transportation.


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Weakness

W1 High operating cost

Silterra (M) Sdn Bhd which is a high tech company that produces wafer as their products. To

produced wafers, high knowledge and expertise employees is needed to hire by SilTerra (M) Sdn

Bhd. So, salary those give for who high knowledge and expertise employee is high. Besides that,

machine that used by Silterra (M) Sdn Bhd also need to be high tech technology. To buy

machines for production, SilTerra (M) Sdn Bhd need huge amount of money. This is because

one of 400 unit machines for produced wafers in SilTerra (M) Sdn Bhd is around and more than

RM 10 million (Interview 1, 2013).

Moreover, more of raw materials that used by SilTerra (M) Sdn Bhd is import from

foreign country (Interview 1, 2013). So, price of raw materials which purchased by SilTerra (M)

Sdn Bhd is high. This because of raw materials that from foreign country need high

transportation cost. With high transportation cost, price of raw materials become high. Based on

salary of employees are high, machines that used in high cost and price of raw materials are high,

operating cost for SilTerra (M) Sdn Bhd produced wafers are high.

W2 Lack financial investment

SilTerra (M) Sdn Bhd which is a government linked company that action and capital is under

control of government (Interview 1, 2013). Khazanah Nasional Bhd has investment 98% on

SilTerra (M) Sdn Bhd. So, Khazanah Nasional Bhd has high control on financial of SilTerra (M)

Sdn Bhd (Interview 1, 2013). To because of high control on financial, SilTerra (M) Sdn Bhd had

been limited to low capacity where capacity is lower than market demand. SilTerra (M) Sdn Bhd

which financial be control caused they cannot invest high and new machine for increased


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capacity.

Besides that, SilTerra (M) Sdn Bhd which control by Khazanah Nasional Bhd on financial has

low percentage on profit. This is because profit which earned by SilTerra (M) Sdn Bhd had to

divide with their investor who is Khazanah Nasional Bhd based on percentages that invest on

them (Interview 1, 2013). By this way, process of improvement on SilTerra (M) Sdn Bhd will be

slowdown within capital that limited.

W3 Lead time raw material

SilTerra (M) Sdn Bhd had faced on problem that suppliers who delivery their raw materials do

not on time which they needed for production (Interview 1, 2013). Suppliers of SilTerra (M) Sdn

Bhd who supplier raw materials for them have to take a period of time on delivery from suppliers

there to SilTerra (M) Sdn Bhd. This is because more of major raw materials are getting from

foreign country. Besides that, delay delivery time of raw materials arrived on SilTerra (M) Sdn

Bhd can be caused by natural disaster when on the way that delivery to SilTerra (M) Sdn Bhd

with transportation.

SilTerra (M) Sdn Bhd needed to make order with their suppliers one week before needed with

quantities which had been confirmed (Interview 1, 2013). So, SilTerra (M) Sdn Bhd will be faced

difficult to get raw materials for produced products as extra order is occur unexpectedly. SilTerra

(M) Sdn Bhd will outsource others company for produced products that need by extra orders

which unexpectedly as SilTerra (M) Sdn Bhd do not have raw materials to produce which extra

orders (Interview 1, 2013).


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W4 Lack of production line

SilTerra (M) Sdn Bhd which produced wafer has high demand on their product. This is because

market demand on mobile phone, computer, USB, camera and others technology products are

high. With high market demand on those technology products, demand on application chips that

produced by wafer on those technology products also increased. So, demand on wafer of SilTerra

(M) Sdn Bhd also increasing. SilTerra (M) Sdn Bhd has production line that do not enough for

they to produce wafers which high market demand (Interview 1, 2013).

Because of lack of production line, SilTerra (M) Sdn Bhd which capacity for produce products

are under demand caused SilTerra (M) Sdn Bhd loss on their profits (Interview 1, 2013). SilTerra

(M) Sdn Bhd will also outsource others company to produce products that out of their capacity

for produced with the lack of production line. So, SilTerra (M) Sdn Bhd needs to pay for which

product that they have outsourced from others company.

W5 Do not product diversification

SilTerra (M) Sdn Bhd under investment of Khazanah Nasional Bhd only provided different

thinness of wafer and types of wafer that used to produce chip for mobile phones, computers,

USBs and cameras aimed at fulfill customer demands (Interview 1, 2013). SilTerra (M) Sdn Bhd

does not provide others kind of products beside wafers which are main kind of products and only

one kind of products.

All 400 unit machines that consist on SilTerra (M) Sdn Bhd are used to produce wafer because

they only produce one kind of products which are wafer (Interview 1, 2013). If one of a day,

many companies are occurs in industry that same with SilTerra (M) Sdn Bhd. SilTerra (M) Sdn

Bhd will not be able to compete to others company which at same industry. This is because of


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SilTerra (M) Sdn Bhd does not have diversity products. Without provided diversity products by

SilTerra (M) Sdn Bhd, they will not be able to continuous business when wafers has be replaced

by new innovation products which occur on next revolution of technology in future.

Opportunities

O1. Good relationship with partner

SilTerra (M) Sdn Bhd needs to always upgrade their products to fulfill customer needs. If

SilTerra (M) Sdn Bhd without any partner then they will be hard to survive in this industry.

Wafer technology is an industry that continuously improves the product. Compare in the past,

nowadays the IC is becoming smaller than smaller. SilTerra (M) Sdn Bhd has built a network of

highly qualify Design Service with companies to provide good design to meet the outsourcing

needs of their customers.

SilTerra (M) Sdn Bhd has 8 design partners such as Symmid Corporation Sdn. Bhd.,

IPGoal Microelectronics (Sichuan) Co.,Ltd., UNIVE, Key ASIC, DS, Silicon Artist Technology

Corporation, ESSEENSIUM and Think Silicon Ltd. Company Management. Through these 8

partners, they are able to exchange information to intend their own wafer technology. This is

because wafer technology is a technology that needed to always improve and up with the times


O2. Expansion of new factory

Demand of the wafer in the market is increasing year by year. Nowadays is moving to

technological era, so that wafer technology will become more important in the future. A lot of


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products needs wafer. For example, hand phone, camera, and television and so on. Besides that,

Wafer technology is a less competitive market so that they should be expanded before the market

become market saturation. Furthermore, industry needs a lot of modal and should understand

those kind of technology before enter this field.

SilTerra (M) Sdn Bhd plans to expand their manufacturing plant in the future. This is

because nowadays they facing low capacity compare with global markets. Low capacity causes

they needed to sub-contract to X-Fab Sarawak. This method is to retention customer if not it will

let customers feel an inability to produce enough wafer. But this method is a good method to

solve the short-term low capacity. So that, their plans to expand new factory to solve low

capacity problems (Interview 1, 2013).

O3. Technology advances

User friendly website is a website which easy to use for users by providing full information

through the internet. This can give pleasant and satisfying to the user. By this way, the company

can improve their sales when visitors have a good experience will be inquiries for more

information and finally make a decision to order the products.

SilTerra (M) Sdn Bhd has own website and Facebook. This method is able to help them

provide information, latest news and a list of products. So that, the customers are easier to

understand products and operate of SilTerra (M) Sdn Bhd. Besides that, Silterra (M) Sdn Bhd

has divide two e-mail to inquiries such as inquiries in the United States and European Union is

[email protected] and inquiries in Asia, Japan, Taiwan is

[email protected](www.silterra.com,2013).
mailto:[email protected]:[email protected]://www.silterra.com/http://www.silterra.com/mailto:[email protected]:[email protected]


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O4. Technology innovation

SilTerra (M) Sdn Bhd has R&D and outsourcing to maintain their wafer technology. Although

SilTerra (M) Sdn Bhd has a high wafer technology but they always continuously improve their

products. Compare in the past, more competitors had entered into this industry.

SilTerra (M) Sdn Bhd had continued to invest heavily in R&D to stay highly competitive

global industry (www.silterra.com,2013). R& D department of SilTerra (M) Sdn Bhd is trying to

improve their wafer products. Moreover, they also had outsourced and the outsource company is

X-Fab Kuching. This is because the products of wafer are becoming smaller than smaller. So

that, they need to continuously improve their products to compete with competitors (Interview1,

2013).

O5. Future market volume demand

Demand of the wafer in the market is increasing year by year. Nowadays is moving to

technological era, so that wafer technology will become more important in the future. A lot of

products using wafer to produce. For example, hand phone, camera, and television and so on.

Foundries must structure capacities in their supply chain so that overtime it is possible to

response to demand surge (Kader & Azizi, 2010).

In the future, demand of the wafer will become very high. Besides that, Silterra (M) Sdn

Bhd should increase their capacity because in the future is more focus on electronic products.

Nowadays, the capacity of SilTerra (M) Sdn Bhd is lower than actual demand of market. So that,

they had sub-contract for X- Fab Sarawak to solve the low capacity problems. This situation

shows that the demand of the wafer in the market is higher than SilTerra (M) Sdn Bhd

capacity(Interview 1, 2013).


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Threat

T1. Rapid technology change

Technologies that change with rapid day by day are affected many industries. For example, hand

phones that on past few years ago be replaced by smartphones on nowadays. So, industries that

produce hand phones and elements of hand phones had faced on problem to response on all rapid

technology change. If industries do not have ability to response on all rapid technology change,

they will have problem to stay on market. This is because they will not have ability to compete

with competitors who able to response on rapid technology change.

SilTerra (M) SdnBhd which is a high tech company need to able response on rapid

technology change. Silterra (M) Sdn Bhd that produce wafer for chips needs to meet requirement

market. It means that SilTerra (M) Sdn Bhd need to have ability for response on rapid market

change which caused by technology change. Because of people that pursue improve constantly,

technology also advance constantly to fulfill market requirement.

SilTerra (M) Sdn Bhd has faced a lot of problem with rapid technology change. To

response on technology changing, SilTerra (M) Sdn Bhd has to take in new machine for them to

able produce more thinness wafer for chips used. SilTerra (M) Sdn Bhd has faced on capital

problem to invest new machine that can produce more thinness wafer to compare with

competitor for response technology changing. This is because of one new machine to produce

The demand of the wafer in the market is increasing so that this is an opportunity to let

SilTerra (M) Sdn Bhd make profit. Since in the future the market has needed higher demand of

the wafer.


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wafer need more than RM 10 million on investment (Interview 1, 2013).

Besides that, SilTerra (M) Sdn Bhd also faced problem to place on their new machine if

theyinvest more new machines. This is because of Silterra (M) Sdn Bhd does not have any extra

occur place for their new investment machine. They need to expand new factory for their

changing layout (Interview 1, 2013).

T2. Unfavorable law

SilTerra (M) Sdn Bhd which is a government linked company is given salary based on amount

that decided by government. Each of employees that work on SilTerra (M) Sdn Bhd also has

wages which minimum RM 900 or 3high than RM 900 per month. The total amount of salary

that decided by SilTerra (M) Sdn Bhd for give to each of employees is consider on employee

qualification. Employee qualification that consider by SilTerra (M) Sdn Bhd when they decided

wages to give is determined by their education.

Employees that undergraduate on SPM, STPM and Diploma work on SilTerra (M) Sdn

Bhd can get amount of salary that around RM 900 and RM 1400 per month. While employees

that undergraduate on degree work on SilTerra (M) Sdn Bhd can get amount of salary that

around RM 1400 and RM 2000 per month. The unfavorable law that has happened on SilTerra

(M) Sdn Bhd is employees that with salary around RM 900 and RM 1400 per month have to

work on workload that same with employees that with salary around RM 1400 and RM 2000 per

month even their salary is low(Interview 1, 2013).

Because of SilTerra (M) Sdn Bhd is a company that produce wafer which consists a lot of

complex process and faced technology change, employees need to always improve their

knowledge on process of produce wafer. So, unfair is happened which employees that


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undergraduate on SPM, STPM and Diploma has to catch up employees that undergraduate on

degree by learning more compare to who undergraduate on degree. More of employees on

SilTerra (M) Sdn Bhd that undergraduate on SPM, STPM and Diploma cannot be stay because

they have to improve themselves with heavy workload (Interview 1, 2013).

T3. Exchange rate

SilTerra (M) Sdn Bhd that produce wafer need main raw material from others country where are

Singapore and Japan(Interview 1, 2013). Exchange rate from cash of Malaysia to cash of

Singapore is low. This means that cash flow of Malaysia can only be changed with less value of

Singa

Documents

Report Group 4 -Silterra