What's this? Applied is shopping for test business, say sources
By Mark LaPedus
Semiconductor Business News
(07/23/01 16:19 p.m. EST)
SAN JOSE -- The surprising buzz at the packaging and test-equipment portion of last week's Semicon West trade show did not revolve around flip-chip packaging, systems-on-a-chip testing, or other hot backend assembly technologies. Instead, rumors were flying around a possible new and surprising entry into the automatic test equipment (ATE) business--Applied Materials Inc.
Applied--the world's largest supplier of chip-manufacturing equipment--has reportedly been talking to several ATE vendors about a possible acquisition, according to several automatic test equipment suppliers at the Semicon West event in San Jose last week.
Sources believe that Applied Materials has shown the most interest in two major ATE vendors, reportedly Credence Systems Corp. of Fremont, Calif., and Schlumberger Semiconductor Solutions of San Jose. But Applied has reportedly looked at other ATE vendors as well, according to sources.
It's unclear which direction Applied is looking to go in the ATE field. Several calls to the Santa Clara, Calif.-based chip-equipment giant were not returned.
But still, the rumors of Applied Material's interest in ATE is a shocker. The company--which has no presence in ATE or the enter backend assembly segment--is a total solutions supplier in frontend wafer fabs. It offers nearly everything needed to fabricate wafers--from chemical vapor deposition (CVD), copper electroplating, chemical mechanical planarization (CMP), ion implantation, rapid thermal processing (RTP), photomask generation, metrology, and many others process steps.
But ATE is a totally different capital equipment business, in terms of mindset, and to some degree, customer base. Moreover, few if any ATE vendors are making any money these days because of the severe downturn in IC markets.
However, Applied, which had revenues of $10.5 billion last year, is certainly willing to make major acquisitions to bolster its product portfolio and enter into new markets. In fact, some believe that the timing may be ripe for the company's entry into the ATE fray: The low stock prices among some ATE vendors have created some interesting opportunities in the merger and acquisition front, analysts said.
In fact, several ATE vendors are already on the block, including Schlumberger Ltd.'s test business. Earlier this year, the French company announced it attempting to sell Schlumberger Semiconductor Solutions so that it could focus on its core oil field service business (see June 20 story). Schlumberger is now looking to sell test business in pieces after it was unable to find a buyer for the entire subsidiary.
In fact last week, Schlumberger took the first steps in divesting the semiconductor test business by selling the assets of a division that makes IC thermal conditioning systems, pick-and-place handlers and other automated systems to Cohu Inc. for $14.2 million in cash (see July 17 story).
At present, Schlumberger is still attempting to sell the other six units within its test operation,including its prized ATE product line, according to a spokeswoman for the company at Semicon West. The company happens to be one of the key ATE vendors for the world's largest chip maker--Intel Corp.
Several ATE companies have looked at the Schlumberger test business. Those interested parties reportedly included Advantest, Agilent, Credence, Eagle, LTX, and Teradyne. But so far, none of these companies have announced deals.
"We've looked at [Schlumberger Test]," said John Scruggs, senior vice president and general manager of the Automated Test Group at Aglient Technologies Inc. of Palo Alto, Calif. "We're always evaluating other companies," Scruggs added, "but we have nothing to announce about Schlumberger."
A source with Teradyne, based in Boston, said the company has checked "under the hood" of Schlumberger Semiconductor Solutions, "but we're not interested."
Japanese ATE giant Advantest Corp. has also looked at the Schlumberger test operation, but it decided it wasn't interested in growing through acquisition--at least for now, according to Nicholas Konidaris, president and CEO of Santa Clara-based Advantest America Inc., during a press event at Semicon West.
Other potential lookers reportedly included Credence and Eagle. "We're not interested," said a spokesman for Eagle Test Systems Inc., a Mundelein, Ill.-based supplier of low-cost ATE equipment. "It would be like a minnow swallowing a whale," the spokesman said.
Credence has also shown interest in Schlumberger Semiconductor Solutions and for good reason. Fremont, Calif.-based Credence has takened the acquisition route for growth. Currently, it is in the process of acquiring Integrated Measurement Systems Inc. (IMS) in Beaverton, Ore., for $170 million in stock. IMS is the world's leader in the engineering and characterization ATE market.
But company insiders at Credence indicated that the company has been approached by Applied Materials about a possible takeover bid. It's unclear if Credence is interested in Applied's overtures.
But one thing is for sure: equipment giant Applied wants to be the premier "one-stop shop" of chip production systems. But it remains unclear whether Applied will step beyond the wafer fab frontend manufacturing steps to grow its business. The company has set a goal to double itself and become a $20 billion company by the middle of this decade.
If Applied Materials should enter the chip-testing fray, don't expect Advantest, Agilent, LXT, Teradyne, or other ATE rivals to lay down and die. If anything, the already-competitive business could turn into a bloodbath, say long-time ATE observers. |
