2001 Ad

Electronic News, July 23, 2001 by Jeff Chappell

Like the industry, Semicon West attendees are in a bind about the state of the economy in 2001

SAN FRANCISCO AND SAN JOSE -- The consensus among tool OEMs and analysts here at Semicon West seems to be that the industry has hit bottom and technology buys are heating up as chipmakers position themselves for the next industry ramp.

When that ramp will come still seems to be open for debate. Predictions range from a chip recovery beginning in either the third or fourth quarter this year to sometime in the first half of 2002. But for both back-end test equipment makers and front-end process tool suppliers, it doesn't look like capacity buys will return until mid-2002 or perhaps even 2003.

Semiconductor Equipment and Materials International's (SEMI) latest market statistics and forecasts illustrate that 2001 is predictably ugly. SEMI predicts a 35 percent decline in total equipment revenues for 200l, a fall from $47.7 billion last year to $31 billion this year, said Elizabeth Schumann, director of industry research and statistics. However, SEMI's latest book-to-bill data may provide a tiny glimmer of hope.

The Worldwide Semiconductor Equipment Market Statistics report, which SEMI complies with the Semiconductor Equipment Association of Japan, reflects a slight uptick in orders. The worldwide figure for May for the ratio of equipment bookings to shipments came in at 0.52, a slight increase from the previous month. However, it is too soon to draw any conclusions of recovery, Schumann cautioned.

"IT is just one data point ...I can't call it a trend," Schumann said. It may even be misleading as shipments lag considerably behind orders. All the anecdotal evidence SEMI has gathered from its members indicate the order bottom has yet to arrive. "We're not saying it is (a trend). We're not saying it isn't. We're being very, very cautious," she said. SEMI will release the latest book-to-bill figures for North American suppliers, which reflect June orders and shipments, late today.

The uptick may merely indicate that shipments still lag behind orders, or it may indicate some technology buys in such areas as lithography and deposition equipment, which also show a slight uptick when broken out from equipment orders ash whole, according to SEMI.

SEMI's consensus forecast predicts a return to growth next year with the industry growing 11.6 percent in 2002 to reach $34.6 billion and 22.5 percent in 2003 to $42.4 billion.

San Jose-based Gartner Data quest statistics and forecasts are also predictably grim, and the market researcher is being even more cautious than most. Dataquest said chipmakers shouldn't look for significant recovery in end-demand until 2002, with equipment orders not seeing an upturn until the second half of 2002. Significant capacity buys won't resume until 2003, Dataquest said.

Macroeconomic factors preclude a significant recovery in consumer chip demand any time in the immediate future, according to Dataquest. The outlook for a strong recovery of the U.S. economy in the second half of 2002 is pretty murky, said Klaus Rinnen, Dataquest chief analyst and director.

"There is still considerable uncertainty about when it will start and how strong it will be," Rinnen said. "The strength of the U.S. recovery is a wild card," he added.

It appears as if the chipmakers realize this, too. "You can make your plans to the best of your ability, but it is what the consumer thinks that determines end-demand," said Bob Bruck, Intel Corp.'s director of equipment procurement.

Partnering and Positioning for the Upturn

It is obvious from Semicon West that many chipmakers are preparing to make 0.13- and 0.10-micron devices during the next upturn with copper wires on 300mm wafers. It's also evident that as chipmakers look to these technology nodes and the 300mm conversion, integrated metrology, e-diagnostics and advanced process control are playing increasingly critical roles in these cost-conscious times.

"The (materials) integration problem we face is the most difficult one," said Advanced Micro Devices Inc.'s Dick Deininger, director of strategic equipment technology planning. The application and integration of low-k dielectric films is of particular importance. "That is a problem we need to work on, all of us," he said. "It's teamwork that's going to get us where we want to go."

That teamwork seems to be emerging during this downturn, if Semicon West is any indication. This Semicon West was also marked by a number of technology alliances and partnerships as tool suppliers looked to offer their customers more value without assuming additional costs.

Among the many partnerships announced at the show was that of Chaska, Minn.-based wafer-processing equipment maker FSI International Inc. with San Jose-based KLA-Tencor Corp. The two plan to develop integrated metrology capabilities for FSI's (nasdaq: FSII) Polaris 3500 microlithography cluster platform.

Deininger praised the idea, saying it would take people out of the metrology process and make it a closed loop. "That's a phenomenal step forward," he added.