For long-term stability, embrace a more aggressive outsourcing model

Larry Dulmage, co-founder, VP sales and marketing, Crossing Automation, Mountain View, CA USA

Looking ahead to 2009, we find ourselves in an economic downturn, the depth and breadth of which is yet unknown. What is known is that it will lead to both consolidation and failures within the equipment space, as is already becoming clear with the smaller players in the market.

The nature of the current economic environment makes it difficult to assess the impact on the industry, and makes planning extremely difficult. We hope to see some improvement in the flash and MPU markets in third or fourth quarter 2009 with DRAM unclear, but likely rebounding, in 2010. If this somewhat optimistic view holds, we may avoid the historical challenge of an unsustainable upturn after a deep downturn, which the supply chain cannot support.

Given these factors, the industry needs to follow the lead of the few and embrace a more aggressive outsourcing model to insure long term stability. In particular, it must drive a shared R&D cost model for components and subsystems that are not part of a company’s core competency.

Another issue is where to focus during a downturn. Currently, the major activity in the industry falls into three categories: process technology, 300mm Prime/productivity, and the 450mm transition. From our perspective, the fastest way to ramp back into a productive market will be to focus on the developing process technology and increasing 300mm productivity, move forward with an outsourcing strategy, while delaying 450mm, which has the longest path to revenue.

Downturns are nothing new to the industry, whose cyclical nature is a given. An economic downturn often represents opportunities for equipment suppliers and IC manufacturers to review new approaches that offer benefits both in terms of manufacturing cost and efficiency. From that view, this downturn is no different. While some companies may struggle, others will thrive as innovation continues to drive the industry forward.


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