Eurofocus

05/01/2000

ISS Europe: Prosperous times for European semiconductor market

With the worldwide semiconductor industry poised for 25% growth this year, the European semiconductor industry is in an excellent position to benefit from the upturn, according to analysts gathered at the recent two-day European International Strategy Symposium (ISS) in France.

More than 250 delegates gathered in Marseilles for the Semi-sponsored event. The mood was generally upbeat, as analysts called for even stronger growth in 2001, when the worldwide semiconductor market is expected to see a growth rate of 40%.

"It will remain a cyclical industry, because of the capacity demand imbalances," said Stuart McIntosh, managing director and chief operations officer for Philips Semiconductors. McIntosh dashed false hopes that the cycles will disappear as new devices, such as communication ICs, begin to take a larger share of the worldwide IC market. He agreed with the other experts attending the meeting that technology will continue to advance at a breathtaking pace, requiring innovation and cost-effectiveness in both the semiconductor and equipment sectors.

Moreover, downturns foster research and development activities, noted Peter Kuecher, general manager of Semiconductor300, the joint venture between Infineon Technologies and Motorola. The effect: substantial productivity improvements, more effective logistics, automation, and development of new technologies.

The "cycle-game is good for the customer and for the industry," added Jean-Philippe Dauvin, group VP and chief economist for STMicroelectronics. Without the cycles, "we would never be forced to be the pioneer for the system-on-a-chip," he said. Dauvin explained that the strength of the European integrated circuit industry—with Philips, STMicroelectronics and Infineon, three European companies among the top ten semiconductor manufacturers worldwide—may also strengthen European chip equipment companies.

To increase IC production significantly, 300mm fabs will hold a key position in the next cycle. An important question will be whether the price of chips and future demand justifies investing in 300mm technology. The delay in introduction of 300mm has hurt equipment manufacturers as well as chipmakers, noted Albrecht Mozer, executive VP of Wacker Siltronic, Burghausen, Germany. In addition to 300mm technology, the challenges for wafer suppliers continue to mount: unpredictable quantity forecasts, dramatic price pressures, increased silicon crystal perfection—even for mature products—and an ongoing need to improve the wafer surface.

Moreover, the chip and equipment sectors must learn to think in terms of complete process solutions in both the front and back-ends in order to meet the future requirements of every part of the semiconductor industry, from research to production. This, more than equipment functionality or price performance, will be the key to success, said ISS speakers.

ECSI launches System Design Industrial Council

The Electronic Chips and Systems design Initiative (ECSI) has launched the SYDIC-Telecom project, which aims to define methodologies and techniques to facilitate intellectual property re-use for system-on-a-chip (SOC) design. The project includes 8 European telecom companies (Alcatel, Bosch, Ericsson, Infineon, Italtel, Nokia, Philips and VTT Electronics), members of ECSI that will receive funding support from the EC Commission for 3 years.

The SYDIC-Telecom alliance aims to develop new ways of modeling and delivering intellectual property, in order to facilitate traditional IP licensing and innovative business models. SYDIC-Telecom will analyze the various practical aspects of SOC for telecom system companies. The goal is to generate a set of recommendations and rules regarding design flows, system-level languages and formalisms, and system IP specification and encapsulation, and to provide the system design automation industry and research labs with requirements on tools and ideas of subjects for new research.

The partners have complementary configurations concerning the semiconductor, software, and system design processes. Some have full vertical integration, and some are mainly architecture and software oriented. As a consequence, their design methods and business models often differ. The SYDIC-Telecom alliance hopes to establish methodological foundations for strategic market and business considerations, which can also be extended to a variety of other industries.

After rebound, ESEC again focused on core bonder market

After seeing fiscal 1999 end with sales of CHF448 million (Swiss francs)—about US$270 million—and finalizing divestitures of its non-bonder operations, Swiss back-end tool supplier ESEC says it plans to stay focused on its core bonder business.

Company CEO Felix Bagdasarjanz, who took over the lead position from founder Karl Nicklaus last June, says demand for ESEC's die bonders has far exceeded company expectations set at the beginning of the fiscal year in March 1999. Then, ESEC planned to produce 25 bonders/month; by February, resurgent market demand caused ESEC to ramp production to 80 bonders/month. Bagdasarjanz says production since then has ramped to 100 bonders /month to fill the backlog. As the company and its supply chain adjust to the new demand levels, Bagdasarjanz expects to bring monthly production back to the 60-70 bonder/month level. Roughly 75% of production is outsourced, and the severe swings in demand require both ESEC and its suppliers to have "the utmost flexibility," particularly when customers make last-minute changes to system configurations, notes Bagdasarjanz. Currently, lead time for ESEC's more standardized wire bonders is six to eight weeks; lead times for die bonders can range from six to 20 weeks, depending on configurations.

In addition, Bagdasarjanz says ESEC is seeing customer demand vary by region. "For customer demand in Asia-Pacific, the preference now is to add capacity over improved productivity," says Bagdasarjanz. "In the US and Europe, it's different."

ESEC recently ended its fiscal year with sales of CHF448 million, up roughly 55% from severely depressed sales of CHF289M in the prior year. Bookings also rebounded, reaching CHF497.6M for the year, and the backlog as of March 1 was CHF124.6M. The positive results are attributable to the recovery of the chip market in general, but also follows a restructuring of ESEC that included the most recent divestitures of its BDM film-assisted molding and 3P encapsulation business and Sempac smart card operation.

ESEC now believes demand in the still-fragmented flip chip market will nearly double between this year and 2002. "We're starting to see some signs that manufacturers are moving toward flip chip," notes Kent Connell, VP/GM for ESEC (USA), adding that the demand is driven by both a need for greater speed and higher I/O count. The company plans to address the flip chip sector with two new products under development: a successor to its Micron 2 flip chip bonder for high-end applications, and a new flip chip bonder based on a die bonder platform for low-end applications. Both are slated for introduction in 2001.

In the US, nearly 50% of ESEC's business is for communications IC customers. "Today we've really seen a shift ... an evolution," notes Connell. "Clearly the high volume manufacturing for PC-type applications is in Asia." Connell also said ESEC (USA) wants to establish a network of suppliers of reflow ovens, ball attach, underfill, board assembly and other equipment—perhaps in an OEM arrangement—to give customers a complete back-end solution. One such project is already under way, and is slated for installation this summer.

Market acceptance of automation in the back-end is still spotty, specifically in some smaller Asia Pacific regions. "Today, labor cost is just too cheap," says Bagdasarjanz; but, he adds, ESEC sees a trend in customer demand away from single equipment suppliers to suppliers that can offer integrated systems. "More customers in Europe want system suppliers—not so in Asia," he said.

In addition, a lack of standardization for factory automation makes integration of machines from different vendors difficult. Last year, competitor Kulicke & Soffa Industries worked with ESEC to integrate its model 8020 ball bonder into ESEC's Autoline factory integration environment. While the program was successfully completed, Bagdasarjanz says other customers are not requesting similar programs.