Companies outsource to concentrate on core business

11/01/1998

Companies outsource to concentrate on core businesses

Lorraine Savage, Associate Editor

As the semiconductor industry gets more complicated, chipmakers are finding it worthwhile to outsource some fab operations and lease some process equipment. While outsourcing is not a new idea, the current hard times are increasing its use. With cycle times and the number of personnel shrinking, companies want to shed tangential operations so they can concentrate on their core businesses.

Leasing

Leasing has always been an economical alternative to buying new equipment. The customer pays only for use of the equipment, while the risk and cost of remarketing is shifted to the lessor.

Advanced Micro Devices (AMD) was looking for a third party to provide "cradle-to-grave" equipment management services and to assume the risk associated with equipment ownership. AMD turned to Comdisco Electronics Group (CEG), San Diego, CA, which provided a lease line of credit, leased R&D equipment, remarketed surplus equipment, and offered a single account manager responsible for coordinating all of CEG`s services.

At a time when the equipment market has been contracting, leasing`s increased acceptance is evidenced by the double digit growth rate CEG says it has seen. Companies benefit from the flexibility to change their equipment mix. They may modify, extend, or terminate their lease, in reaction to changing market conditions. Other benefits include the ability to scale down production in certain areas based on current supply/demand; to use off-balance sheet treatment for operating leases; and to use sale-leaseback options allowing companies to convert installed equipment into working capital that can be used for other business functions.

Outsourcing

An implanter is one of the largest tools in terms of fab floor space and is viewed as more of a noncritical fab tool, making it ideal for outsourcing. Fabs are sending production wafers to off-site contractors for processing. Implant Center Inc., San Jose, CA, offers ion implantation for production overflow, machine down situations, and in some cases, full production for the implant process.

Outsourcing such tasks frees up floor space in a customer`s fab for more critical tools that allow for increased wafer output and reduces the need for a fab expansion. In addition, during the transition to larger wafer sizes, outsourcing provides an alternative to replacing 200-mm implanters. An average service contract can last years and is not tied to just one order.

Another task being outsourced is chemical management. Microbar, Sunnyvale, CA, provides bulk and point-of-use chemical delivery and collection, including photoresist material handling, low-k dielectric materials, copper electroplating chemistry, and CMP slurry.

Increasing costs, hazardous processes, and environmental concerns associated with chemical management are causing more and more chipmakers to outsource. Controling chemicals during delivery increases the manufacturing process window - a critical factor in driving higher device yields. As for safety, Microbar`s closed-loop systems are designed to address the rising challenges associated with safe, cost-effective chemical management.

Technical and business management services are also available. Schlumber-ger Advanced Business Engineering Resources (SABER) provides value-added services to semiconductor manufacturers and fabless companies. Outsourcing pro-jects range from test cell productivity optimization to full technical and business management of mixed-signal device programs. Through its test program development, capacity planning and management, and process integration, SABER has helped customers achieve as much as a 35% productivity improvement.

Outsourcing information technology (IT) services can increase machine utilization, improve yield, enhance fab productivity, and lower personnel expenses. Customers outsourcing IT processing can benefit from a broader view of IT trends as they apply to the semiconductor industry, better stability of systems and infrastructure, and a technology roadmap to support business growth and change within the IT infrastructure.

Electronic Data Systems (EDS), Santa Clara, CA, assists chipmakers and equipment manufacturers by offering project management and financial planning. EDS designs and supports management execution systems; automates material handling systems and integration in the fab; provides fab optimization consulting; and supports computer integrated management within the fab.

On-site management

Rather than sending wafers or tasks to outsourcers, some fabs are hiring others to come on-site and perform tasks. Some suppliers provide fabs with personnel - experts in the products they sell - who manage day-to-day functions. This allows manufacturers to focus on their chipmaking. Other potential benefits of on-site service include fewer interruptions in production, improved yields, increased equipment uptime, less space required for storage, and improved quality/process integration.

Olin Microelectronic Materials, Norwalk, CT, and Matheson Electronic Products Group, San Jose, CA, jointly supply on-site chemical and gas management services, including gas and chemical inventory management, analytical monitoring and sampling, purity to the point of use, and disposal of chemical waste. Other services include equipment maintenance, continuous improvement programs, and uptime of gases to the point of use.

Hayes Anderson, Olin`s business director, notes that because of fabs` heightened awareness of cost, on-site chemical and gas management programs that can show results in reducing costs are more likely to be considered today.

Refurbished and pre-owned equipment

With the increased cost of purchasing new tools, some chipmakers are choosing refurbished or pre-owned equipment. Besides the cost savings, customers who buy pre-owned equipment may want quick delivery and cannot wait for a new unit to be manufactured, or might supplement a large order of new units with some pre-owned units to stretch their budgets.

In the arena of test and measurement equipment, Hewlett-Packard (HP), Palo Alto, CA, offers more than 1200 refurbished products. HP calibrates and tests the units before sale, and includes the same accessories as when the product was sold new. HP offers a one-year warranty for all components covered when the system was new. Orders can include new equipment, refurbished equipment, services such as training and support, and extended warranties.

HP is seeing an increasing number of Asian customers. South Korean and other Asian companies, which historically have preferred to buy new equipment for their cutting edge technology and latest features, are turning to refurbished equipment.

The LaserCare Division of Resonetics Inc., Nashua, NH, refurbishes older generation excimer lasers and has an excimer laser installation with more than 20 units in active use for contract manufacturing. LaserCare offers solid-state and CO2 laser products, and excimer laser services that include preventive maintenance programs, laser vessel exchange programs, and on-site services. Clients of these services include multilaser production organizations and smaller R&D and prototype facilities.

These services offer immediate availability of refurbished laser vessels, maximized uptime with schedule maintenance, cost efficient refurbishments to meet original output specifications, and on-site service with 24-hour notice.

Companies are turning to this type of refurbishment for the obvious cost savings - the difference between refurbishing a laser and buying it can be over $100,000.

The expected laser vessel life is more than 10 years, in which time the laser can be refurbished over 20 times. Advances in excimer laser design have increased the lifetime of components so that refurbishments are needed less frequently and offer longer component and gas lifetimes.

Surplus equipment advocate

The increased use of pre-owned and surplus equipment has prompted some to organize and provide information about the availability of this equipment. The SEMATECH Surplus Equipment Council consists of member companies that offer contacts for surplus equipment sales and sourcing. The Surplus Equipment Consortium/ Network Inc. (SEC/N) is a third party advocate to the semiconductor surplus industry. The council meets twice a year and has invited brokers, refurbishers, and OEMs to the meetings in hopes of finding ways to make the surplus equipment business better for the industry. SEC/N promotes the semiconductor surplus industry, conducts seminars on the surplus equipment business in conjunction with several of the SEMICON equipment shows, provides monthly updates on the surplus business, and provides a means for member companies to market their equipment.

The list of companies in this article is by no means complete. It illustrates some of the choices semiconductor manufacturers are making, either reluctantly or eagerly, during this downturn. Perhaps leasing, outsourcing, and purchasing pre-owned equipment will be a continuous option for companies, even after the industry recovers from the current downturn.