Semiconductor Alert!
Commentary & analysis of week's chip news, April 17-21
By Robert Henkel
Semiconductor Business News
(04/21/00, 06:39:46 PM EDT)
Greetings from Down-East Maine -- where even though
spring has arrived we're still burning $1.50-a-gallon fuel oil
to stay warm. No mud and black flies though. This new
weekly column, successor to a weekly newsletter I wrote
during the 1990s, analyzes and comments on the important
developments of the past week in the chip world.
Don't sell your semiconductor stocks yet
Biggest news this week came in the flood of
first-quarter results. While you still might be
sweating the stock market and its roller coaster ride, stop and consider the
outstanding results being reported this quarter by semiconductor companies and
their production gear and services suppliers.
In a strictly non-scientific sample, the SBN Web site by mid-afternoon Friday had
reported on the results of 37 companies. And the average increase in quarterly
revenues reported by these companies was an incredible 68% over the first
quarter last year. An amazing feat indeed. Of those 37 companies, six of them
recorded a sales increase of more than 100% and another 18 reported a hike of
between 50% and 100%! Only two of the 37 companies -- or a minuscule 5% --
showed a drop in revenues for the quarter. I'm impressed. (See earnings summary
from the week.)
Hooray -- here comes higher data transfer rates
Good news! It now looks like PCs sporting data transfer rates up to 40
times faster will hit retail stores in time for the Christmas selling season.
EE Times has learned the final Universal Serial Bus 2.0 specification will become
available next week. This should kick off a wave of chips that support USB 2.0,
which extends the full-speed transfer rate of USB from 12 megabits per second up
to 480 Mbits/sec. A number of chip makers are expected to show 2.0 silicon at
the USB Developers Conference in May.
The higher bandwidth will make possible such applications as interactive games
and digital image creation, and will be used in scanners, printers, external storage
devices, and broadband Internet connections. For example, a gigabyte of data can
be backed up in less than a minute to an external drive with USB 2.0. Also, a
high-density flash card containing dozens of high-resolution images can be
downloaded from a digital still camera to a computer in a matter of seconds.
Emerging Internet appliances also will lean heavily on the USB interface.
A network appliance being developed by IBM reportedly has seven USB ports.
USB is one of the true success stories in making PCs easier to use, because it
makes connecting peripherals to PCs far simpler than it was to do the job with the
older serial ports or SCSI links. (See April 21 story.)
Global chip gear orders exploding -- trouble ahead?
Is the semiconductor production equipment market overheating? Seems
like it. Remember earlier in April when the SEMI trade group couldn't
decide whether this year's business would ramp up slowly or fast? If you picked a
fast ramp, then you may have won the cigar.
The March numbers show that orders written by North American-based tools
suppliers are shooting off the charts. New orders for chip production systems
climbed to a fifth-straight monthly record, pushing the monthly book-to-bill ratio for
North American-based tool suppliers to 1.45 -- or nearly 50% more orders received
than production tools shipped [in revenues]. Not only are equipment bookings here
accelerating across all sectors, but SEMI says that related worldwide equipment
statistics show that all world regions are showing the same kind of growth.
Showing the most aggressive increases in business are Taiwan, Europe, and the
"rest-of-the world" region, the trade group reports. New tool orders written by North
American suppliers grew 95% to $2.45 billion in March from $1.26 billion in the
same month last year. And these orders even rose 7% from the month before.
Shipments jumped 79% in March from a year ago, and 6% over February, to
$1.69 billion. The fast-ramp forecast, by the way, called for 44% increase in
shipments this year to $36 billion, which could mean an earlier peak in the current
business cycle by 2002. (See April 21 story.)
Trying hard to get Rambus memory prices down
Intel keeps trying to make Rambus memory prices more competitive with
SDRAM. The chip giant relaxes a timing spec for in-line memory modules
(RIMMs) to reduce costs and qualify more companies to make Rambus DRAMs
and RIMMs.
This is one of several cost-cutting moves that Intel, Rambus, and DRAM vendors
are making to drive down RIMM costs, which are now as much as three times the
price of SDRAM modules. But the still-high costs of Rambus memories won't
impact the launch of Willamette, Intel's next-generation 32-bit Pentium processor,
slated for rollout this fall. But Rambus prices could determine how rapidly Intel
moves Willamette--which will support Rambus DRAMs and RIMMs--into
mainstream markets, an Intel executive says. Technical problems with Rambus
DRAMs and a lack of Rambus parts forced Intel to delay the launch of systems
last year tied to Camino, the chip maker's first core logic to support Rambus.
Other cost-cutting measures are now in the works. Intel, Rambus, and some
memory suppliers are trying to figure out ways to reduce the cost of the PC-board
itself. Currently, RIMM PC-boards must use either six or eight layers that cost
about $8 apiece, but observers say they want to introduce lower-cost, four-layer
boards. And at least four companies have shown new testers for high-speed
DRAMs that can test up to 64 chips in parallel. But to move prices down
significantly, Rambus DRAMs will have to be cranked out in high volume to
generate competition. (See April 20 story.)
Building new fabs still running behind average rate
Believe it or not, the global semiconductor industry is not building as
many wafer fabs from the ground up this year as it usually does--that
despite the surge in capital spending this year. The industry usually averages
about 30 new plants a year, according to Germany's M+W Zander Facility
Engineering.
Data from the Jenoptik subsidiary show that only 20 "greenfield" plants will be
built this year while only 13 were put up last year. The industry should get back to
its normal construction rate in the next two years--28 are expected by the German
firm in 2001 and 32 more in 2002.
In other interesting industry stats, M+W Zander says that spending on cleanroom
facilities and buildings is expected to shoot up from $3.7 billion last year to $5.9
billion in 2000. Even though the industry is beginning to start construction of fabs
to handle the next-generation 300-mm wafer, it is still in the midst of its move to
200-mm wafers. Currently, 187 eight-inch wafer fabs are running, while 450 fabs
are still running five- and six-inch wafers. And surprising, 244 fabs are equipped to
handle four-inch wafers and 114 plants are still running wafers less than
four-inches in diameter. Well, at least they're completely amortized. (See April 17
story.)
Mentor gives ASIC placement-tool market another try
Mentor Graphics will try again to enter the ASIC placement-tool market.
Five years ago, the company marketed a placement offering called Micro
Route. But that technology failed to penetrate the physical-design market then
dominated by Cadence Design Systems. Two years ago Mentor stopped selling
this package.
Mentor marketing manager Jeff Wilson admitted that "we fell behind the
placement market and needed to come back with a tool that solved timing." So
this week Mentor will reenter the ASIC physical-design tool arena with its
TeraPlace tool. Wilson claimed that "TeraPlace is virtually a new tool that takes
an economical approach to timing closure because users can drop the tool into
their current design flow." But critics said that Mentor is entering the
timing-closure market too late and with a dated approach to a complex problem.
Said Gary Smith, Dataquest's chief EDA analyst: "It's kind of sad because
Mentor's new product is really only a faster placement tool." (See April 17 story.)
TI, Atmel join Intel in upping capital spending plans
One of the big worries of U.S. chip makers in the early 1980s was the
Japanese were outspending them significantly on capital expansion. They
should have worried. The Japanese took over the lead in global chip sales, as a
result. Not for long though. In recent years, the Japanese companies have lagged
American chip makers in capital spending.
Could they turn this trend around now? I don't think so--not the way U.S.
companies are expanding their capacity now. Last week it was Intel that poured
on the coal, this week it was Atmel and Texas Instruments. Atmel now plans to
double its capital spending to $1 billion this year (see April 19 story), while the TI
board decided to boost their capital spending plans from the $2 billion set earlier
this year to $2.5 billion. That would be a whopping 79% increase over the $1.4
billion TI spent last year (see April 17 story).
The Dallas chip maker is hiking its capital spending because of the "outlook for
strong continued demand for DSP and analog products." Its first-quarter sales
jumped 27% higher than a year ago and 4% higher than the previous quarter.
Revenues from DSPs, TI's pride and joy, were up 50% in the quarter.
Don't write off all the Japanese yet . . .
It also appears that Toshiba is also bumping up the money it will spend on
adding capacity this year. The Japanese company, which had said earlier
it would spend $1.2 billion in capital expenditures this year, now plans to invest
$219 million this year more to start building a new fab at its Oita works. The
0.18-micron fab, which will cost a total of $970 million and will begin volume
production next April of system-on-chip (SOC) devices such as MPEG-4 and
Bluetooth ICs.
By adding 5,000 eight-inch wafers a month initially to its capacity, Toshiba will
triple its SOC production potential. The new fab will continue Toshiba's shift away
from DRAMs. It expects SOC devices to account for 40% of its total LSI chip
output by fiscal 2002. (See April 18 story.)
. . . But Japan IC makers still lag in move to 12-inch wafers
The Japanese are still playing it supercautious in the move to the
next-generation wafer. While their competitors in Taiwan, Europe and the
U.S. are beginning to build 300-mm wafer lines, many Japanese vendors still have
the big platter on the back burner.
Top chip makers such as Fujitsu and NEC are still sitting on the fence, while
Toshiba is expected to hold back investing for several more years. Fujitsu--which
canceled its long-standing plans to build a 300-mm fab because of the Asian
financial crisis--could be close to deciding to go ahead again, this time in a
joint-venture with Advanced Micro Devices (see April 18 story).
NEC may be getting swept up in all the publicity now developing for the
next-generation wafer. As recently as last month, the Japanese chip maker had
said it had no definite timetable for launching two previously announced 300-mm
fabs. But this week it said that construction of shells will begin within 12 months.
It still has no firm plans, however, for when it will begin equipping these plants.
NEC reportedly is pondering how it will finance the costly new fabs. A full-scale
300-mm fab costs in the range of $2 billion, which may be too much for NEC to
handle alone (see April 21 story).
Is Motorola rethinking its plan to use foundries?
For two years now, Motorola Semiconductor has pursued a manufacturing
strategy that calls for outsourcing half of its chip making to third-party
foundries and joint ventures. Now the chip company has decided to set up a huge
new production site in Scotland, indicating it might be rethinking that bold plan.
But a spokesman claims Motorola is not reversing any manufacturing strategies.
It plans to continue increasing its own wafer processing capacity while using more
foundry service in the coming years, he explains. After a year of negotiating,
Motorola made a deal with Hyundai Electronics to acquire its 1-million sq.-ft. fab
shell at Dunfermline, Scotland. The site was put on hold by the South Korean chip
maker in the last market downturn. Motorola plans to spend $2.1 billion over the
next five years to equip the shell to process 8-inch wafers. Initial production most
likely will begin in late 2001 using 0.15-micron process technology. (See Jan. 21
story.)
Environmental problems could slow UMC
United Microelectronics (UMC), world's second-largest foundry, may not
be able to crank up its production as quickly as it would like to keep pace
with booming demand. This week Taiwan's Environment Protection Administration
asked UMC to shut down Fab 5 after the newly completed Hsinchu plant failed to
meet environmental regulations.
UMC, which had just started pilot production earlier in April, will have to submit an
environmental impact assessment since the new fab is near a water reservation
area, according to EPA officials. "Once the assessment is approved, the EPA will
issue a permit in about a month," the agency said. UMC sees only a limited effect
on its production plans. "Our revenues won't be hurt because Fab 5 is just in the
initial [production] stage," an UMC spokesman says. The plan now is to reach full
production by the first quarter of 2002--some 40,000 eight-inch wafers a month.
Other companies could be hit by the environmental regulations. They include
Macronix International, Promos Technology, and Worldwide Semiconductor. (See
April 21 story.) |
