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IC gear vendors urged to lower costs

Posted: 14 Sep 2005 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor equipment? tsmc?

As the semiconductor industry transitions to cost-sensitive, finicky consumers as a new growth driver, semiconductor equipment and materials suppliers must do a better job of lowering costs and increasing flexibility, cautioned the chief executive of foundry Taiwan Semiconductor Mfg Co. (TSMC).

Rick Tsai, who recently stepped into the leadership role at the world's largest foundry, told a gathering of equipment makers on Monday (Sept. 12) that they must improve productivity to meet the new reality of consumer electronics sales driving future chip industry growth, rather than PC sales to corporate clients.

"The digital consumer market is a very competitive, very dynamic, very volatile market," Tsai said, speaking at the annual SEMI-Taiwan trade show sponsored by Semiconductor Equipment and Materials International. "I'm always shocked when someone from the U.S. tells me they can get a DVD player for $30 at Fry's or Wal-Mart. I almost have a heart attack. But this is a reality that we have to live with and manage."

Tsai cited numerous examples of increasing pricing pressure throughout the downstream supply chain, slowly driving home his point that foundries and IDMs will be putting more pressure than ever on equipment and materials suppliers to lower their costs.

To meet the demands of price sensitive markets, Tsai suggested "local customization" of equipment in Asia, a trend that has been underway since Japan first entered the equipment business, followed by South Korea. Taiwan has also tried, and China is the latest country to make a run at being a low-cost provider.

Except for Japan, however, there have been few Asian success stories on the equipment front, especially for leading-edge technologies. With labor becoming less important in the cost equation, there need be little fear of a pick-up in the migration of equipment manufacturing in Asia, said Jerry Cutini, president and CEO of Aviza Technology, Inc.

"If you go back 25 years, everybody said you had to build machines in Japan or you won't be successful. Now we're saying that if you don't build machines in China, you're not going to be successful," Cutini said.

He doesn't believe that. There will be subassembly in Asia to lower some costs, but not much beyond that in the near term, he said. That will not significantly contribute to lowering costs for the consumer electronics markets. For that, he said, the equipment industry will need to look for sources of disruptive innovation.

- Mike Clendenin

EE Times

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