EuroFocus
03/01/2000
SPECIAL SECTION: EUROPEAN TECHNOLOGY
Barbara Rott, European Correspondent
European boom led by telecom, automotive, smart cards
"Europe is booming," says Walter O. Roesger, VP of Semi Europe, based in Brussels. He sees the European semiconductor industry and its suppliers as key players in a strong, worldwide market resurgence. In agreement is Urs Rohrer, senior director of market intelligence for Infineon Technologies, Munich, who is optimistic about the future.
"The [European] business climate is fine," says Rohrer. The book-to-bill ratio has been above 1 for 27 months, he points out, and in December 1999, it reached 1.18. The recovery is driven mostly by the computing, telecommunications, and automotive sectors, he says. In Europe, the smartcard market is also on a steep growth path (see "Smart card market zooms").
"Mobile phones, telecommunications, and all related applications will have a big influence on the chip market," predicts Alec Reader, international marketing manager, semiconductors, for Philips Analytical of Almelo in The Netherlands. A strong sign of the resurgence in semiconductors is the growing interest by fabs in process tools and other equipment. Another factor is the potential use of new materials for high-performance chips with better characteristics, such as copper for interconnect and silicon-germanium as a challenger to gallium arsenide for wireless devices. Reader expects that "in both of the next two quarters the industry will pick up speed even faster than it did at the end of 1999."
At Ericsson Components, Stockholm, Sweden, growth is expected both this year and next, says Bengt Calmer, information manager. "We are working in a niche market, rather independent of the cyclical ups and downs of the classic semiconductor markets like PCs or consumer electronics." Telecommunications are using more semiconductors, and the Internet is driving the upgrade in infrastructure, he says. Aside from mobile phones and their multiple functions, customers want higher-speed modems and faster access to websites, Calmer explains.
Emerging standards for high-speed transmission of multimedia data is helping to expand the telecom market, and a good example is a cooperative agreement between Alcatel and STMicroelectronics in France. The two companies will work together to develop interoperable VDSL (Very high bit-rate Digital Subscriber Line) technology by promoting a DMT (discrete multitone) modulation technique as a world standard. This will make VDSL interoperable with ADSL (asynchronous DSL) systems. Alcatel has demonstrated a wide range of applications running up to 60 Mbits/sec through existing copper phone wires over a DMT-VDSL platform, including super-high-speed Internet access, digital video distribution, live video streaming, and video on demand.
"As an active member of the VDSL Alliance [a group of companies cooperatively developing this technology], Alcatel is committed to making DMT-based VDSL a success," states Paul Spruyt, VP for VDSL at the company.
A good example of innovative internet applications is the MP3 decoder for downloading audio standard music tracks onto personal computers. The market leader in these decoders is the Swiss/German company, Micronas. This company is now extending the applications for MP3 by introducing a number of new audio equipment concepts based on its MP3 MAS 35xx family. Uses include mobile telephones, car radios, and a new generation of mobile flash players that come with integrated download security. The company continues to work on specialty ICs and sensors for multimedia, consumer gear, and automotive electronics.
Automotive electronics sector growing fast
The automotive electronics sector, which Dataquest predicts will grow at 13%/year, is steadily increasing its use of specialized chips. This constant growth in applications attracts companies such as Elmos, of Dortmund, Germany, which also has facilities in Paris and Detroit, and there is no end in sight, according to Klaus Weyer, Elmos's president, who founded the company in 1984. The company develops and manufactures customized chip solutions for automakers. Europe is a leading designer, developer, and manufacturer of automotive electronics, with decisions made at BMW and Mercedes-Benz about new features and new technologies becoming driving forces in the industry. Weyer feels the trend will continue unabated because of the demands for more power and less fuel consumption, which cannot be achieved without increased electronics content. He works closely with the leaders of the German auto industry to meet these needs.
The auto electronics sector grows much faster than the automobile industry itself, points out Ulrich Schaefer, marketing research manager of Robert Bosch GmbH, of Reutlingen, Germany. If the car business grows 2%, the automotive electronics sector will increase 12%, Schaefer says, because the electronics content is increasing to meet demands for more comfort, safety, and entertainment.
Smart card technology advances
One sector that tends not to swing up and down like so much of the business is medical electronics, according to Thomas Seidowski, president and CEO of KSW Microtec, which is located in Germany, and this is a major market for his company. "A lot of my customers need electronic support for medical applications," he says, "And their business was not affected by the recent downturn." KSW Microtec's flip-chip technology uses a special conductive polymer to attach chips to circuits. This is particularly useful for smart cards. One resulting smart card is so thin and inexpensive, Seidowski reports, that it can even be embedded in an airline luggage tag.
Another company that has grown some 40-50% annually for the past five years is Aixtron AG, of Aachen in Germany. The reason? "With our MOCVD technology, our customers produce compound semiconductors that are the key components in modern microchip and optoelectronics applications: cell phones plus other communications devices for fiber links, or CD and DVD lasers, plus bright LEDs for automotive signals and traffic lights," says Claus Ehrenbeck, manager of investor relations. As a result of all these applications, he expects growth to continue at a rapid pace for several years.
Tool market set to surge
While Aixtron serves a semiconductor market sector that has been climbing steeply recently, the last three years have been tough ones for many process tool companies. Now, as Semi Europa gets set to open in April, the news is much brighter than it was at this time last year. Dataquest is calling for an exceptional turnaround in the wafer equipment market, going from a decline of -12.4% in 1998 to a predicted rise of +31.0% in 2000. Along with rising semiconductor sales, the shift from 200mm to 300mm wafers is beginning, and many new tools for the larger wafers will soon be moving out of R&D into new or upgraded semiconductor fabs.
"The 300mm wafer will be used foremost in DRAM and microprocessor production in the coming few years," expects Juerg Steinmann, marketing communcations manager for Balzers Process Systems (BPS) in Liechtenstein. BPS shipped its first 300mm Clusterline tool in the spring of 1999. Steinmann also feels that advanced packaging will be much more integrated than it is today and will offer significant opportunities for toolmakers, with applications in the telecommunications market, automotive, and consumer electronics. For Andreas Dill, manager of cluster systems for BPS, the shrinkage of circuit dimensions will be a higher priority in the short term than the shift to 300mm wafers. He also sees the accelerated growth in telecom markets creating big opportunities for tools useful for silicon-germanium (SiGe) and gallium-arsenide (GaAs) devices.
The shrinkage of circuit features is also creating a growing market for metrology-tool vendors, such as BioRad in York, UK. "This reduction will be a driver for the technology, because the smaller circuit features get, the more companies will have to buy new measuring equipment to keep up with competitors," says Trevor Bosworth, product manager. A push to lower cost of ownership is also creating market opportunities, according to Bosworth. The push toward copper is being driven partly by the ability to reduce process steps, along with the need to speed up circuitry. He also sees the shift in emphasis in the industry toward foundries rather than DRAM fabs as helping to smooth out the market. "With foundry operations, forecasting purchasing patterns becomes a little easier and a little less cyclical." continued on page S8
A push to reduce chip sizes is having an impact on the market for imaging devices, according to Albert Theuwissen, product manager at Philips Imaging Center, Eindhoven, Netherlands. "The market requires a high pixel count for image sensors, but with a decrease in chip size, this trend is hard to follow," emphasized Theuwissen. The problem is that pixel sizes are limited by lenses, and it generally takes longer to develop a new lens than a new image processor. In years to come, he expects a separation to develop in the industry into two types of business: one dealing with larger chip sizes with higher pixel resolutions, and the second specializing in smaller chips with lower pixel resolutions for less demanding applications.
The increased emphasis on cost of ownership is forcing tool vendors to form alliances or to become more diversified so they can offer one-stop shopping, says Ronald Pohlmann, general manager of CS GmbH, Ismaning, Germany. Agreeing with this is Heinz Oyrer, director of marketing for SEZ, Villach, Austria, who thinks offering integrated solutions is a big advantage over competition in selling to semiconductor fabs. To do this, manufacturers need to form strategic alliances with toolmakers making complementary equipment, and possibly with suppliers of subsystems or materials for a tool or process.
An interesting development in eastern Germany is the rise of Dresden as a potential center for semiconductor manufacturing and toolmakers. Strong growth in the Dresden area is likely, according to Hans Deppe, director of operations of AMD Saxony Manufacturing GmbH, in Dresden. He points out that many suppliers to AMD's Fab 30 have relocated to the region. This fab is a pioneer in developing commercial 300mm wafer manufacturing.
The consensus appears to be that the positive mood in Europe should last at least for the next couple of years, with accelerated growth of applications in many industry sectors.
1000+ exhibitors expected at Europa
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Attendees hurry into the entranceway to last year's Semicon Europa Show, which this year will run from April 3-7, 2000 in Munich, Germany. Most technical conferences, business and marketing programs, international standards meetings, and the 1000+ exhibitor hall will be located at either the New Munich Trade Fair Centre or the adjacent International Congress Centre. Check the Semi web site at www.semi.org for more information. (Photo courtesy of Semi)
Smart card market zooms
Smart card markets have developed much faster in Europe than in the US, and one result has been a good market for wafer-thinning equipment. Embedding ICs within a credit-card sized item obviously requires a very thin chip, and the huge volume for smart card and memory card applications — expected to top the 2 billion mark this year — has driven the wafer-thinning market. The figure shows that Dataquest does not see a plateau in the demand for smart cards for the next few years, with a CAGR of 24%.
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Chip card (smart card plus memory card) volume worldwide (Source: Dataquest)
SEZ (Villach, Austria) is one company that has benefited from the huge smart card market in Europe. The company has sold approximately 100 systems (Spin-Processor 203 platforms) in Europe for wafer thinning and backside stress relief applications. Michael West, business and strategic technology director at SEZ America in Phoenix, AZ, says that 80% of SEZ's wafer thinning applications are in Europe. STMicroelectronics recently ordered new SEZ systems, including a wafer-handling mechanism that uses the Bernoulli effect to avoid mechanical contact with the wafers. This allows the equipment to thin wafers to <70µm. West sees a steep ramp in the demand for this type of equipment for smart card production in Europe.
Europe has led the US by a significant margin in the implementation of smart cards, although the gap will be decreasing. Infineon Technologies, a major supplier of ICs for smart cards, reports that 88% of smart cards were sold in Europe in 1998. By 2003, though, Infineon expects Europe's share to drop to 35%, while North America will account for 25% of the market. Japan and Asia/Pacific will each account for 16%.
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Leading the upcoming ramp in the US is the introduction of the American Express Blue Card, which contains a chip that acts as an electronic ID for its owner. AmEx will be adding additional functionality soon. The worldwide usage of smart cards is already in the tens of millions or higher for numerous applications (see table). The volume of transactions performed via smart cards was $5.3 billion in 1998, and this is expected nearly to triple by 2003 (Source: Business Communications Company).
European companies dominate the manufacture of smart cards just as Europe is the leader in the consumer use of them. The two largest manufacturers are Schlumberger (Montrouge, France) and Gemplus (Gemenos, France), and together they have a commanding 63% of the market, according to Dataquest. The next largest supplier has only 8%. Similarly, the supply of the chips that go into smart cards is dominated by two European companies, Infineon (Munich) and STMicroelectronics (Saint Genis, France), which together control 83% of the market (Source: Frost and Sullivan).
The manufacturers of wafer thinning equipment and other technologies needed for making smart cards are optimistic that their current success in Europe will continue as the market expands worldwide. —Jeff Demmin