New “asset-lite” financing schemes emerging in test

by Bob Haavind, Editorial Director, Solid State Technology

Much higher costs for fab tools are leading in some cases to new “asset-lite” business models. Examples of how this can be implemented already exist with test systems, as detailed by Brad Nelson, VP of worldwide sales for Teradyne, in the Confab session on “Capital equipment: Alternative financing models.”

Some chipmakers want to get assets completely off their balance sheets by moving required test systems to subcontractors, Nelson explained. Also, product life transition periods are being shortened for both devices and associated equipment as the industry shifts to a consumer-driven market.

Teradyne noted that some test firms were also seeking ways to reduce balance-sheet investments, using outside financing to help cut capital expenditures. Instead of depreciating capital outlays over extended periods, lease payments can be expensed. Also, some subcontractors had problems with full 12-month utilization of equipment of the factory floor, due to the seasonal nature of consumer buying periods.

Teradyne started to work with outside financing companies so they could lease automated test systems to customers on 3-6 month rentals.

In other cases, test equipment users pay a variable amount, matching their actual utilization of a system. Different types of “pay-per-use” models based on utilization levels are developing, according to Nelson.

One important factor, he explained, is that both downside and upside (when usage is slow, or when the equipment runs full-out) must be shared between the equipment manufacturer and the test user.

Changing technology can create problems, Nelson explained, because the equipment vendor cannot offer a return provision if the technology shifts and there is no more revenue generated from the equipment. One solution being explored is a buyback guarantee through an outside company that could potentially place the equipment elsewhere. This could offer an ideal solution, Nelson believes, for integrated device manufacturers (IDMs) with large balance sheets that need flexibility in tool utilization or a technology hedge.

A residual value guarantee can be useful if equipment will only be needed for a defined period, perhaps three years. The leasee pays an up-front charge, but then gets paid back on the estimated residual value of the equipment at the end of the lease period by the third-party leasing firm, which can then place the equipment elsewhere. An alternative is a capital lease, where payments are stretched out but the user gets ownership of the equipment at the end of the lease period.

While Teradyne has resisted providing alternative financing schemes in the past, Nelson says the company is now changing its approach, based on shifting needs in the marketplace. — B.H.


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