Chip boom is set to thunder on

Electronics Times, July 17, 2000

The chip equipment industry is on course for 35% growth this year and revenues of $35bn are predicted, according to predictions made at the 2000 Semicon West trade show which began last week in San Francisco.

In his opening address, Stanley Myers, president of organiser and equipment association Semi, said sales could grow another $9bn in 2001 and reach $48bn in 2002.

"The current upturn is being driven by an unquenching thirst for more bandwidth,'' Myers said, referring to the growing demand for faster Internet servers and networking equipment as well as the potential in third generation phones and other handheld devices.

Semi's lofty prediction aimed to counter concerns that the equipment boom may be tapering off. Orders fell month-on-month over April and May but, Semi said, this followed three months when book-to-bill ratios had been 1.4 or higher. In this context, analysts had expected a correction.

With the orders already received since January, equipment companies will be backlogged for at least a year.

Rick Hill, Novellus Systems' CEO, was one of those unconcerned by the April and May data.

"Demand continues to look solid in the end-consumer game. As a result, our customers continue to flourish," he said. "No one is going to stop the technology train. I have not seen one indication of slowing demand.''

Growth is being driven by the ongoing investment in fabs and demand for tools that will let chipmakers shrink the size of their ICs or add more power to circuits. Also finally boosting equipment demand is the market for 300mm wafer equipment.

After three years of talk over action, most major chipmakers have announced plans for 300mm fabs or are building them, with Intel being one of the latest. In all, 26 300mm fabs are now under construction or in the pre-construction phase. Those plants alone will cost $40bn.

Jim Morgan, chairman of equipment sector leader Applied Materials and a sometime 300mm sceptic, said: "This, I think, is finally the beginning of the transition to 300mm."

Applied used the show to release a staggering 21 advanced 300mm tools. Together, they can perform 80 different production operations, representing 75% of the entire chip-making process.

Morgan's enthusiasm has been noted by others. Dan Hutcheson, president of analyst group VLSI Research, said: "For the longest time, the largest equipment company in the world has not said much about 300mm. It would be pretty hard for the industry to do 300mm without their support.''

Besides the trend towards 300mm production, a second, parallel transition is fundamentally changing chip production: the use of copper instead of aluminum for interconnections.

Hill introduced Novellus' latest copper tools with a threat to competitors: "As the market switches to copper and if in their wildest imagination, [my competitors] get half the market, they've still lost half the metal market," Hill said.