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Chip equipment execs say the worst is over

Posted: 22 Mar 2002 ?? ?Print Version ?Bookmark and Share

Keywords:SEMInvest? semiconductor? wafer? electronics? silicon?

An executive panel of semiconductor capital equipment vendors expressed cautious confidence at the SEMInvest conference here this week that the worst of the downturn is over, and said the industry needs to think about managing the next ramp.

"We believe it's real," Paul McLaughlin, chairman and CEO of Rudolph Technologies, said of the recovery. McLaughlin said that Randolph, a metrology company for semiconductor device manufacturers, is carefully watching tapeouts from foundries as an industry barometer. "The forecast of the FSA [Fabless Semiconductor Association] for wafers is rising from 2.5 million to 4.5 million wafers in 2002. Even if the rise is half as much, I will be happy," he said.

"We need to look two levels up the semiconductor food chain to get the sense that orders are being filled by the device manufacturers," said Mary Puma, president and chief executive officer of Axcelis Technologies, an ion implant equipment vendor. "We are paying the price of the last ramp, and we need to start paying attention to the basics underlying the driving factors of our industry, so we don't get caught short at the next downturn."

The speed at which information is exchanged about device supply and demand is affecting the entire semiconductor food chain, McLaughlin said. "Now I watch indicators I never watched before, such as the consumer price index, or the retail sales of electronic products slated for Christmas sales," McLaughlin said. "We used to be in a B2B business, but now with the speed at which information is passed along, we are affected by the success or failure of end products at a much faster clip."

"Unlike the snap-back return from previous downturns, this one is a technology-driven return," said Roger Blethen, chairman and chief executive officer of test equipment manufacturer LTX Corp. "As such, there will be big winners and many losers," Blethen said, referring to the sea change in moving to 300mm wafers and 0.135m linewidths and the R&D investments required to "stay in the game."

George Chamillard, president and chief executive officer of test equipment giant Teradyne Inc., echoed that sentiment. "Perhaps the clearest signal we received from device manufacturers that there is a compelling reason to go to 300mm was Intel's recent announcement that their shift from 0.185m technology on 8-inch wafers to 0.135m technology on 300mm wafers resulted in a 30 percent yield improvement." That bodes well for the suppliers of capital equipment needed for that transition, Chamillard said.

Alex Oscilowski, senior vice president and chief financial officer for Kulicke & Soffa, confirmed that his company's latest wire bonder started shipping in the first quarter, a sign that things are picking up. "It's not an aggressive slope on the recovery yet, but we believe it is there, and the challenge is to ramp more cost-effectively this time around," he said.

Panelists agreed that the industry is becoming product-oriented, even for multimillion dollar equipment. "There will be clear winners and losers in our industry because the landscape is changing and customers are fragmenting," said Robert J. Therrien, chief executive officer of Brooks Automation Inc., a provider of tool and factory automation solutions. "I believe that wireless and the Internet will drive the recovery, but there will be specific requirements from each device vendor for producing the devices, placing an extra burden on the tool vendors."

Therrien said he sees no reason why the electronics content of products cannot increase from the current worldwide average of 17 percent. "The foundries have transformed the model, silicon is available everywhere, and there is no inherent reason why the electronics content cannot reach beyond 17 percent," said Therrien.

"Semiconductors are like drugs," chimed in McLaughlin, "and the world is hooked."

Blessing in disguise

LTX's Blethen said he even sees a silver lining from the Sept. 2001 terrorist attacks: "Nine-eleven has created new opportunities for electronics content, specifically in the security and privacy industries," he said. "That is blessing in disguise for the us and for the industry as a whole."

Blethen said he is not worried about the laws of physics standing in the way of smaller and denser devices. Engineers will figure out the problems to be solved, he said, "as they always do."

More disturbing to the executives are the expected legislative repercussions from the Enron financial reporting debacle. "We are in a very simple business," said Teradyne's Chamillard. "We design, build and ship products. An 'Enron tax' will be devastating to our business," he said, referring to possible extra fiduciary responsibilities placed on industry by law. Panelists agreed that passing more restrictive legislation in the middle of a recession is tantamount to choking the semiconductor capital equipment industry in the middle of a fire.

Offering his outlook for the rest of the year, Chamillard struck a cautious but upbeat note, saying he would be happy if this year's sales remain even with last year's. He repeated his mantra several times in the course of the panel: "If we have a flat '02, I won't feel blue."

? Nicolas Mokhoff

EE Times

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