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Technology Stocks : JMAR Technologies(JMAR) -- Ignore unavailable to you. Want to Upgrade?

To: Dave Lippert who wrote (7879)	4/30/1999 6:27:00 PM
From: Richard N Lambert	Read Replies (1) \| Respond to of 9695

FYI: This hits JMAR in two spots.... <SAN JOSE (ChipWire/EBN) --Cheap and abundant processed silicon may soon be a thing of the past, as demand for semiconductor wafers threatens to outstrip the industry's fabrication capacity, warn some chip analysts. Concerns are growing in the wake of projections that wafer requirements by fabless chip companies will increase 43% in 1999 over last year's consumption rate. A total of 1.5 million processed wafer will be needed by fabless companies, according to a new survey of those chip suppliers. The bulk of that growth--27%--is expected to occur in the first half of the year. This anticipated increase in demand, coupled with the tendency of integrated-device manufacturers (IDMs)--such as Motorola, Philips, and Toshiba--to rely on foundries for a greater portion of their semiconductor production, means competition for fab space may be intense. "We've seen the capacity being soaked up by the other vendors out there," said Chuck Tralka, director of strategic marketing for QuickLogic Corp., which relies on Hsinchu-based Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) for its chip supply. The concern is so great that the Fabless Semiconductor Association, which sponsored the 1999 wafer and packaging demand survey, is forming a task force to study IDMs' foundry wafer needs, said Jodi Shelton, executive director of the FSA, who is based in Dallas. Shelton said that FSA will be meeting next week with the "Big Three" foundries -- TSMC, UMC, and Chartered -- to discuss the IDM outsourcing trend and make sure they're prepared for the onslaught of new demand. By 2003, IDMs are expected to contract out 25% to 28% of their total IC fabrication, compared with just 8% today, according to Donaldson, Lufkin & Jenrette Inc. (DLJ) in San Francisco. What's more, pure-play foundries, which today produce 10% of the industry's devices, should account for 50% of total semiconductor production by 2012, according to estimates from Dataquest Inc. in San Jose. Though market watchers differ as to the severity of a possible wafer crunch, most agree the industry could be under supplied by next year. But while chip demand is expected to increase, investments in new manufacturing capacity have been curtailed, leaving some to worry that foundries-now running at near-sold-out production levels-won't be equipped to handle the influx of new orders. If the industry's capital spending stays at the current rate of less than 10% of revenue, the tightening supply situation may be aggravated, "possibly creating serious supply shortages in 2000," said DLJ analyst Charles Boucher. Even so, suppliers whose wafer needs are fairly small, such as Sunnyvale, Calif.-based PLD designer QuickLogic, are concerned that, in a shortage, they'll get squeezed out by larger foundry customers. "Part of [the foundry's] decision has to be the size of a customer and the potential for it to grow into a significant customer," Tralka said. "But I don't think we're likely to be in that [allocation] situation for the near term, because our existing supply agreements will cover our requirements." According to the FSA survey results, fabless companies believe 60% of their wafer requirements this year will be at 0.35-micron or smaller geometries. In 2000, 39% of the demand will be for 0.25-micron or less, up from a projected 19% this year and a mere 2% in 1998.