*AV*--Hmmm!!! You can hear a pin drop.
Tuesday July 14, 1:37 pm Eastern Time
Company Press Release
Semiconductor Equipment Down 9.3% In 1998, Up
10.4% In 1999 Says The Information Network
NEW TRIPOLI, Pa.--(BUSINESS WIRE)--July 14, 1998--The total worldwide market for front-end processing equipment will drop 9.3% in 1998 but will grow 10.4% in 1999, according to The Information Network, a New Tripoli, PA-based market research company.
''1998 revenues will drop 9.3%, but it could have been worse had it not been for the backlog of orders from 1997,'' says Dr. Robert N. Castellano, President of The Information Network. ''Everyone is pointing to SE Asia's problems, oversupply of DRAMs, and low sales of PCs. But no one is taking the blame internally, and there are fundamental issues in these corporations that need to be addressed.''
While there have been more than 35,000 layoffs in the semiconductor industry, I don't see any Chairmen/CEOs/Presidents. Where does the buck stop? There are too many corporations in the industry where the boss has the title ''Chairman, CEO, President''. Who does he account to but board members that are often picked by him anyway? He is more concerned with the value of stock and bottom line than with the future of the company -- what will happen to the company when the upturn happens and all those dedicated employees have moved on after being cast off?
Companies are touting newly hired executives as if they were going to be a ''savior''. But if these guys were so good, why were they allowed to leave the company they worked for in the first place, when they could certainly be enticed to stay with the much heralded stock options? Look what Aurelio did for Apple, and what Dunlop did for Sunbeam. You have to look at the fundamentals of the company, not only its management team, which is important for startups -- its
core technology, process integration, sales force, service team, and global presence. Emulate Applied Materials (NASDAQ:AMAT - news), details of which are in our report ''Applied Materials, Competing for World Dominance''.
Semicon is going on now. Try to reach a salesman in his office this week. A lot more potential customers are in their offices than are at Semicon. Try to get a return phone call. Try to find a receptionist who knows people and their titles, so you don't bounce from voice mail to voice mail trying to identify the right person. Try to get someone to send you literature on the first phone call. Problems at the bottom quickly become problems on the bottom line.
Who's responsible for the drop off in equipment sales? Certainly some of the factors cited (has anyone mentioned El Nino?). But had 300-mm wafers and equipment come on board as anticipated, the drop off would have been less. Who's responsible for the debacle? Semiconductor companies are blaming vendors, but had they not sat on their hands when the issue of contributing resources to 300-mm tool development arose, they would deservedly have more say than they insultingly think they do now. Remember how IBM pushed the growth of 200-mm wafer use? And had Applied Materials not reached into their deep pockets to develop their own suite of tools in an attempt to knock out the little guy, maybe there could have been more conversation between semiconductor manufacturer and equipment vendor regarding pricing
and footprint.
Sematech and SEMI have done nothing regarding this downturn, and since they are funded by the US government, perhaps their raison d'etre needs to be re-evaluated.
For 1999, the SE Asia macroeconomic issue will still continue, and DRAM and PC manufacturers will still be singing the blues after the 63% and 23% margins they saw in their heyday disappear. But, DRAM manufacturers will have to start buying new processing tools
since they will no longer be able to continue to use die-shrink as their means of producing more chips. New technology such as copper/low-k dielectrics will change the game plan, and Moore's
law will still be a reality so that 0.15 microns will be a force to be reckoned with. And bellwether Applied Materials will make some acquisitions or introduce a new product line for a change to
enable it to sustain the phenomenal growth its been accustomed to, which will have the powerful stock market analysts perk up their ears, issue some buy recommendations and change the current mentality of the entire industry.
PCs are not the only game in town, and there is a huge market for other high-tech products. Increased corporate investments in capital equipment and consumer goods will fuel increased demand in the automotive and telecommunications sectors, making electronic components one of the fastest-growing U.S. industries. Corporate profits, bulging because of the purchases by the consumer, have been utilized to expand the existing manufacturing base and have resulted in further purchases of semiconductor-based products such as LAN servers, workstations, large computers, robotics, and telecommunications equipment.
The Information Network is a leading consulting and market research company addressing the semiconductor, computer, and telecommunications industries.
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