This is not your father’s semiconductor cycle

Bob Akins, co-founder/CEO, Cymer, San Diego, CA USA

Some industry observers may be under the impression that the cause of the current semiconductor and equipment slowdown is the traditional one — chipmaking overcapacity. However, while there is overcapacity in the memory sector, the primary cause of this slowdown is simply reduced consumer demand. This is not just a semiconductor industry-specific slowdown — housing, financial, automobile, and most other business sectors are in a growing crisis worldwide, resulting in consumer confidence dropping to an all-time low.

Over the past decade, we have watched happily as the consumer has become the largest user of ICs, driving the end demand for more than 60 percent of all chips manufactured; but this is a double-edged sword. When consumers enjoyed plentiful disposable income and there were compelling new electronic applications available, market growth has indeed been very robust. But in this degenerating economic environment, consumers are highly uncertain about the future and not inclined to make discretionary purchases, resulting in dramatically decreased demand for electronic appliances and the chips from which they are built.

During extreme times like these, semiconductor equipment suppliers that will fare best will be those that do three things exceptionally well: 1) Invest in leading-edge technologies and next-generation tools to meet the smaller, but ongoing, demand from chipmakers for leading edge production and advanced process development; 2) introduce new and innovative ways to lower the cost of ownership and increase the efficiency of their customers’ installed base of tools; and 3) leverage the above with lean and efficient business operations management to maintain strength of balance sheet. Suppliers who excel at these endeavors will be best positioned to realize the benefits when worldwide economic conditions improve and the semiconductor industry recovers.


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