Good times....woo hoo!
Estimated 20-40% of IC-equipment makers will fold, says Gartner
By Mark LaPedus
Silicon Strategies
11/19/2004, 11:43 AM ET
SAN JOSE, Calif. #&151 Consolidation in the semiconductor-equipment industry is projected to accelerate, as between 20-to-40 percent of all vendors could disappear over the next decade, warned an analyst from Gartner Inc. on Thursday (Oct. 18). The predication raised concerns among experts about the health of the IC-equipment industry, in which a massive shakeout could stifle competition and hurt innovation.
During a presentation at International Sematech's Global Economic Symposium here, Dean Freeman, an analyst at Gartner/Dataquest, indicated that less than 10 equipment suppliers in total could satisfy most of the IC industry's requirements within the next decade.
Freeman also said the chip-equipment and materials industry is quickly moving towards what he called the "rule of three", in which only three vendors would dominate a particular segment.
These trends, coupled with the current and anticipated IC downturns, could accelerate the ongoing consolidation in the industry. Analysts, in fact, predict a major shakeout in several fab-tool segments, such as atomic layer deposition (ALD), automatic test equipment, electron beam, dry strip, mask repair, nano-imprint lithography, among others.
When asked how many equipment vendors would fold or disappear over the next decade, Freeman said, "I think there could be a huge fallout in the market. I would say that it could be in the 20-to-40 percent range."
Freeman's prediction raises more concerns about the health of the fab-tool industry, which has never fully recovered from the past downturn and appears to be heading towards another slowdown.
Gartner's predication raised some red flags among experts at chip-making consortium Sematech (Austin, Texas). "What happens if 40 percent is too optimistic?" asked Walt Trybula, a senior fellow at Sematech.
Trybula believes that a shakeout in some segments is inevitable and could make for a healthier industry. For example, there are too many e-beam providers in the market, he said. Some five or so e-beam vendors are chasing after 15-to-20 orders per year. Each tool sells for about $15 million, but it costs a total of $100 million to develop a machine, he added.
On the other hand, a massive shakeout could stifle competition and innovation, he said. "We can't have a 'rule of one or two,' " he said. "We need a 'rule of three.' There needs to be competition."
In any case, the prediction mirrors Gartner's grim outlook for ICs. The semiconductor industry has turned into an inflated market with hundreds of vendors competing in an overcrowded arena. This will result in as many as 40 percent of today's semiconductor vendors folding over the next decade, according to an analyst from Gartner in September (see September 13 story).
Mixed views
In response, many chip executives disagreed. Forecasts that 40 percent of semiconductor vendors will vanish in the next decade are greatly exaggerated and don't take into account the entrepreneurial startup culture that pervades the industry, executives said (see September 14 story).
At Sematech's event on Thursday, the response was mixed about Gartner's fab-tool shakeout prediction. Muljadi Tantra, director of corporate marketing at Lam Research Corp. (Fremont, Calif.), said that Gartner's prediction is somewhat exaggerated, saying that he could see 20 percent of all vendors disappearing over time.
Risto Puhakka, an analyst with VLSI Research Inc. (Santa Clara, Calif.), indicated that many segments in the chip-equipment industry have already experienced considerable consolidation or the "rule of three."
Instead, Puhakka believes the industry is heading towards another direction. "I believe you might see a mega merger in the industry," he said. For example, over the years, the industry has talked about the possible mega merger between Lam and Novellus Systems Inc., he added.
In an interview, Freeman said that the industry has already moved towards consolidation -- or the "rule of three" -- in several segments, such as lithography. The ALD market has also seen considerable consolidation in recent times, where Applied, ASMI, Novellus, and Tegal have separately acquired ALD startups.
Another area of possible consolidation is the dry-strip equipment market, which consists of eight or nine players. "Etch is in a 'rule of three' but there are still a lot of niche players," he said.
Consolidation is expected in the silicon wafer market, where some seven suppliers are fielding 300-mm substrates right now, said Karen Twillmann, a representative from MEMC Electronic Materials Inc., a supplier of silicon wafers. "We are not sure how many will be able to do that by 2008," she said. |
