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IC industry looks to upswing at Semicon Europa

Posted: 08 Apr 2003 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? ic? semicon europa? semiconductor equipment and materials international?

The mood at the annual Semicon Europa last week can be summed up as "The upswing is coming, but not just yet." The annual European exhibition for the semiconductor equipment and materials industry held in the U.K. on April 1 to 3 comes at the tail end of an unusually lengthy industry slump and continuing economic and political uncertainty.

"Is the market still in the correction phase or in an investment low?" wondered Stanley Myers, president and CEO of Semiconductor Equipment and Materials International (SEMI) the sponsoring organization.

Myers reported that in 2002 semiconductors worth $141 billion were sold worldwide; only slightly more than in the crisis year of 2001 when sales $138 billion dollars. Things have been even worse for the equipment industry. The industry's sales fell by 23 percent to $42 billion and were thus even lower than 1995.

Similarly, the capacity utilization of the chip factories has been declining for three quarters; in Q4 of 2002, it was barely over 80 percent. Although this is better than in 2H of 2001, when it was clearly below 70 percent for a while, it is a long way from the record capacity utilization of the year 2000, when the factories worked at more than 90 percent of their capacity. And Myers is convinced that the capacity utilization curve will still run flat for a while.

Bitter book-to-bill

The book-to-bill ratio in the market also gives little cause for hope. After a high-altitude flight in Q2 of 2002, this parameter again fell below 1 and has stayed there for two quarters. "We are still moving in the neighborhood of rock bottom," said Myers.

Semicon Europa show management expects attendance to be at about the same level this year as in 2002, when 7,400 visitors bought tickets. In 2001, there were almost twice as many visitors. And the number of primary exhibitors, 1,948, is lower than last year's 2,033, but many smaller companies that cannot afford their own booths are guests of larger companies. Myers found the number of these "piggyback" exhibitors of 986 over last year's 785 to be an encouraging sign.

"The demand for leading-edge chips has grown more than proportionally," said Myers. "The industry needs about 30 to 40 300mm factories, and at present only ten are prepared to buy their equipment."

That a demand push will come is beyond question for Myers. It will be fueled by a cycle of IT hardware replacement that will start soon, he said. Other drivers are handheld devices, automobile electronics, and mobile data devices. Myers hopes that in terms of equipment spending, technology for 300mm wafer processing can drive demand.

Migrate to 300mm

"Anyone who manufactures mass products must migrate to 300mm," said Johann Harter, senior vice president for technical development at Infineon Technologies AG, (Munich). The chipmaker pioneered the industry's transition to 300mm wafers through work at its facilities in Dresden, Germany.

Harter confirmed that tools in the 300mm segment are already showing a degree of maturity. "The learning curve is running in a manner similar to 200mm [wafer equipment]," Harter said.

"The uptime of the tools could still be better," complained Joel Monnier, corporate VP at STMicroelectronics. But he said the time for a conversion to 300mm wafer production has arrived. "From the point of view of maturity, it is reasonable to invest now," observed Monnier.

"The market recovery should have taken place last year already. That didn't happen. Instead, we have lived through several false starts," Monnier added.

Missing the mark

In fact, IC market researchers have continually been wrong in their predictions. This year, too, they are only consistent in their lack of agreement. The projected growth varies according to the research institution between 4 percent and 23 percent with uncertainty around events in Iraq causing many market watchers to re-assess. Dataquest has put in an estimate of 9 percent, Merrill Lynch offers 12 percent; but Future Horizons was most recently sticking with 18 percent.

"The recovery will be determined primarily by macroeconomic factors," said Infineon's Harter. "The Middle East could become a problem. I am therefore very cautious with estimates."

"The war is only an excuse," said Arthur Zafiropoulo, chairman of the board of directors of SEMI and also chief executive officer of Ultratech Stepper Inc. "The factor that determines market recovery is consumer confidence. As soon as consumers flash their credit cards, that will have an immediate effect on the semiconductor and equipment industry. The product pipeline is empty; in order to meet the demand, manufacturers must invest," he said.

Paul Boudre, European head of equipment company KLA Tencor, also expressed confidence and pointed out that in terms of units the recovery is well underway. "Today, more chips are being produced than two years ago. You really can't talk about a downturn in this sense," Boudre said. "We are in a weak period because the industry has invested so hesitantly."

This doesn't apply to technology. More and more semiconductor producers are running their 130nm processes, according to Boudre, and with the technology ready the chip customers and the foundries are only waiting for the starting gun.

Summing up the current situation Ultratech's Zafiropoulo stated: "The impulse must come from the U.S. Japan is stuck in a crisis, Taiwan and Korea are too small, and in China the people earn too little for their buying behavior to be able to have an effect. European consumers are too conservative."

- Christoph Hammerschmidt


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