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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (33168)	10/1/1998 5:42:00 PM
From: eabDad	Read Replies (2) \| Respond to of 132070

MB - Semi manufacturing is made up of two major parts, commonly called front-end and back-end. The front-end processes wafers. The back end takes the finished wafer, breaks it up into the individual chips, assembles them into packages, and tests them. Front-end has the majority of the market for equipment and the much larger list of public companies (AMAT, LRCX, KLAC, SFAM, etc.) The front-end is driven by "process" technology, usually referred to in terms of linewidth (for example, quarter micron). Capacity is measured in wafers per month and is the culprit for the capacity swings in the industry. Back-end has a smaller set of players, and very few pure plays for public equipment companies (KLIC, Aetrium, probably a couple others). KLIC is the largest in this space for assembly and packaging. The test segment has slightly different driving forces and the public plays are TER, CMOS, LLTX, Advantest in Japan - TER and CMOS are the ones I follow. The back-end is driven by "product" technology and chip design considerations. Front-end capacity does not really affect them that much. TSMC in Taiwan is a front-end wafer foundry. They buy from AMAT but not KLIC. Advanced Semiconductor is a contract package assembler, and they buy from KLIC but not AMAT. There have been all kinds of press and analysis that tries to paint a picture that front-end leads back-end, or back-end leads the front in terms of the business. I've run the numbers enough to convince myself the two are not really correlated except through influencing macro factors. The stronger dependencies are the capacity and corresponding technology issues driving the separate business. Case in point was in 1994 when KLIC went down in the midst of a capacity shortage. In 1999, overall chip unit volumes will affect KLIC's business, but the product design changes and technology issues will drive a retooling surge. It will only last 3-4 quarters, but enough to juice the stock. Z