Semicon Europa gets ready for the upswing
By Christoph Hammerschmidt, EETimes.de
Apr 3, 2003 (6:29 AM)
URL: siliconstrategies.com
MUNICH --- “The upswing is coming, but not just yet.”
This message could be heard everywhere at Semicon Europa, the annual exhibition for the semiconductor equipment and materials industry, that took place here this week (April 1 through April 3).
After an unusually lengthy industry slump and continuing economic and political uncertainty, that things can only get better might appear obvious to many people. After all, the industry has been spreading this happy message for some time, without any improvement having occurred. But at long last there may be something to it, was the mood at Semicon Europa.
Not the least of those awakened by the breath of spring was Stanley Myers, president and chief executive officer of Semiconductor Equipment and Materials International (SEMI) the industry's trade association.
“Is the market still in the correction phase or in an investment low?” wondered Myers when the industry market figures were presented at the show. And at first sight they gave no overwhelming reason for optimism.
It was 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 the fourth quarter of 2002, it was barely over 80 percent. Although this is better than in the second half 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 the second quarter 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.
The Semicon Europa show management expects attendance to be at about the same level this year as last, when 7,400 visitors bought tickets. In the previous year, there were almost twice as many visitors. And the number of primary exhibitors, 1948, is lower than last year's 2033, but many smaller companies that cannot afford their own booths are guests of larger companies. The number of these “piggyback” exhibitors is 986 this year -- last year only 785. Myers said this increase is an encouraging sign.
There are also other indications of a recovery coming. “The demand for leading-edge chips has grown more than proportionally,” said Myers. “The industry needs about 30 to 40 300-mm 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. Because of fears over the so-called Y2K problem, computer clocks ticking over from 1999 to 2000, new PCs and servers were purchased in large numbers in 1999. This equipment is beginning to look tired and will be replaced over the next couple of years, Myers believes.
Other drivers are handheld devices, automobile electronics, and mobile data devices. Myers hopes that in terms of equipment spending, technology for 300-mm wafer processing can drive demand.
Migrate to 300-mm
“Anyone who manufactures mass products must migrate to 300-mm,” stated Johann Harter, senior vice president for technical development at Infineon Technologies AG, the Munich headquartered chipmaker that pioneered the industry's transition to 300-mm wafers, through work at its facilities in Dresden, Germany.
Harter confirmed that tools in the 300-mm segment are already showing a degree of maturity. “The learning curve is running in a manner similar to 200-mm [wafer equipment],” Harter said.
The competition doesn't quite see it this way. “The uptime of the tools could still be better,” complained Joel Monnier, corporate vice president at STMicroelectronics. But he said the time for a conversion to 300-mm wafer production has arrived. “From the point of view of maturity, it is reasonable to invest now,” Monnier observed.
Insiders can't help being a little skeptical. “The market recovery should have taken place last year already. That didn't happen. Instead, we have lived through several false starts,” Monnier said.
Missing the mark
In fact, chip 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 130-nm processes, according to Boudre, and with the technology ready the chip customers and the foundries are only waiting for the starting gun.
Boudre doesn't see a significant technological difference between the U.S. and Europe. In some areas, Europe may even be the leader, he said.
“Take the plants of Infineon plants in Dresden and of STMicroeclectronics in Crolles; good work is being done there.”
Boudre added that, in contrast, China cannot be taken seriously as a competitor from the viewpoint of technology --- not yet.
“In the next 24 months, they won't be able to hold any top position,” said Boudre.
And although China and Taiwan continue to post strong growth numbers they do so off relatively low bases.
“The impulse must come from the U.S.,” said Ultratech's Zafiropoulo. "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.”
The warnings issued regularly by analysts about a repeat of past boom-and-bust cycles in the chip industry and the inherent danger of rebuilding chip manufacturing overcapacity holds no significance for exhibitors at Semicon Europa at this time.
"What overcapacities?” asked Boudre rhetorically. “In the area of 130-nm technology, the industry is even headed for a delivery bottleneck.” |
