Starting a New Year

I recently talked to many engineers and forecasters to see how this year has begun and what forces are at work.

At Billerica, Mass.-based Newport Corp., engineers are busy with their advanced packaging solutions, including military legacy systems, working with standard wire bond packages. The U.S. defense industry reflects a growing need for sophisticated, though established packages. Newport Chairman and CEO Robert Deuster says the company will implement several restructuring actions in its advanced packaging and automation systems division. Restructuring usually equates to negative events, but in this case it means that new product development will lead to innovations for their existing advanced packaging market.

In January, National Semiconductor announced a program to streamline manufacturing operations, cut expenses, and run with a leaner business model. “These actions reflect our continuing focus on higher value-added analog products and our de-emphasis on commodity products,” explains Brian L. Halla, chairman, president, and CEO of National. Result: 100 positions spanning several product lines and support functions will be eliminated.

Though belt-tightening is evident, this past holiday season’s sales propped up chip sales, rising to $19.02 billion in November 2004 – 18.0% above last year’s sales. Increased sales reflected a strong growth in sales of microprocessors, digital signal processors, DRAMS, and flash memory devices, according to the Semiconductor Industry Association.

How many of you are still trying to understand how to deal with new PCs, cell phones, cameras, iPods, TiVos, and other programmable, interactive, wireless products? AMD recently unveiled its Alchemy Au1200 processor, a SoC designed to run personal media players, allowing for scalable DVD-quality displays, video content transfers and long battery life. This should grow rapidly.

Others have also picked up on developing consumer markets. For instance, Singapore-based United Test and Assembly Center Ltd., a provider of semiconductor assembly and test services, is in full turnkey volume production of MP3 audio decoder chips for SigmaTel, Inc. “The MP3 audio decoder chip is essentially the soul of the portable MP3 player. With MP3 players projected to grow at a compounded annual rate of 36% from 2003 to 2008, we see SigmaTEl expanding rapidly to be a customer of significance in UTAC’s broadband, mobile/wireless strategy,” says June Chia, UTAC’s executive VP. It’s a good problem.

However profitable, gift-giving celebrations and unexpectedly protracted wars will eventually give way to the much-anticipated slowdown, though most are now expecting it to be modest. SEMI’s latest projections call for a semiconductor equipment sales decline of 5.2% worldwide for chipmaking tools this year, after a 59.1% increase in 2004.

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So begins the new year, with a few careful steps forward and some tentative belt tightening.

Gail Flower


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