Executives See ‘Pause’ In Equipment Buys
Demand for semiconductor equipment has become as chilly as the summer San Francisco weather, with foundries experiencing lower utilization rates and memory makers wary of adding more capacity in the face of relatively weak PC sales.
Several major semiconductor companies have postponed orders, said Novellus Systems CEO Rick Hill who characterized the push-outs as a “pause” in an otherwise robust semiconductor environmentHill spoke to analysts at SEMICON West shortly after the company reported that sales for the second quarter were $350.2 million, down $63.0 million (15.2 percent) from the first quarter of this year. Bookings were $311.6 million, down $103.5 million or 24.9 percent from the first quarter.
Hill said the financial results “are not the greatest news, but I do believe they are temporary news.” World financial uncertainty, coupled with the natural disasters in Japan, combined to weaken demand for semiconductors. “There is uncertainty in capital spending because of these worldwide events,” he said.
At an Applied Materials event this week, CEO Mike Splinter said factors such as high unemployment in the U.S., the Greek debt crisis, and other macroeconomic issues “are weighing on the demand” for electronics products.
Splinter argued that “the fundamentals are still good” for the semiconductor industry, with a still largely untapped market in the so-called BRIC countries of Brazil, Russia, India and China. Those nations account for about 18 percent of the world economy, compared with the 23 percent share of the U.S. But BRIC countries account for only 12 percent of electronics spending, while U.S. electronics sales are 28 percent of the total.
PC sales growth has not been stellar this year, and tablet sales by vendors other than Apple Inc. have been disappointing. “We thought DRAM investments would have come back this year, but that is less likely with the PC growth rates we are seeing,” he said.
Foundry utilization has dropped to the 80 percent range, low enough for some foundries to become more conservative. “They are cautious, but they want to be prepared” in case demand snaps back, Splinter said.
Novellus executives put the event’s focus on a two-year window, saying that by 2013 the trends toward wafer level packaging, vertical NAND, finFETs and other advanced transistors will propel Novellus’ annual revenues to the $2B level, up from roughly $1.5B now.
Tim Archer, the Novellus chief operating officer, said the company has developed tools capable of “making 3D NAND technology viable.” By vertically stacking NAND cells, memory vendors could get back on track with the needed reductions in the NAND cost per byte.
Armed with higher densities from vertically stacked bit cells, NAND memory vendors will be able to price solid-state disk (SSD) memory at a roughly 2:1 ratio with hard disk drive storage. “At 2:1, we will start to see a massive conversion to SSDs. 3D NAND will have a huge cost advantage,” Archer said.
– David Lammers