EDITOR'S PAGE

Crunching the numbers

Like the U.S. federal government, our company works on the October 1 to September 30 fiscal calendar. This means that I've been reconciling, projecting, and creating budgets like a regular bean counter of late. Since I've been in number-crunching mode, it seems appropriate to discuss some recent semiconductor market analyses.

Two of the keynoters at the recent Advanced Semiconductor Manufacturing Conference (ASMC) in Boston presented their takes on current and future semiconductor financials. George Scalise, president of SIA and vocal dead-ringer for TV talking head Pat O'Brien, split the economic part of his talk into megatrends and industry trends. To no one's surprise, he said information technology is the "number one driver of the U.S. economy" and that e-business will fundamentally change the way we do business. His stats on workforce challenges facing the semiconductor and other high-tech industries were sobering. Between 1988 and 1998, there has been a 35% decrease in the number of electrical and electronic engineering degrees awarded in the United States. He also noted the chronic underperformance of U.S. students in math and science compared with the rest of the industrialized world and the abundant opportunities for growing the number of women and minorities in the technological workforce.

Scalise's semiconductor industry numbers offered no real surprises, as he cited SIA's 31% growth forecast for the global chip market in 2000. He also presented what were then the current revenue forecasts from VLSI Research for both the chip and equipment sides, figures that have jumped since his talk and stand at nearly 43% for the chip side and a whopping 89% for the tool segment as I write this column. Of course, if you take Applied Materials' eye-popping dollars out of the equation, the increases are not quite as rarefied. Nonetheless, executives from certain equipment, materials, and components suppliers have told me recently that they expect to see growth rates at or above 100% year to year.

Klaus Rinnen, GartnerGroup/Dataquest's chief chip manufacturing analyst, summed up his forecasts by claiming that "things will get a whole lot better before they get worse," despite the warnings sounded by certain Wall Street naysayers. He said the speed of the wafer fab equipment market recovery in 1999­2000 has been surprising, fueled by explosive demand over the last 6 to 8 months. In fact, he noted, we are in the midst of the longest sequential period of quarterly growth in the last 10 years. Rinnen thinks growth could be even stronger, but it is limited by just how many tools can be made and whether the usual seasonal adjustments kick in. Don't expect the boom times to last forever--the chip biz is still cyclic. Like many industry prognosticators, Rinnen believes that "things will get worse--just wait for 2002," when he sees the "overinvestment wave" breaking.

An emerging part of the white-hot tool market is the 300-mm segment, which is coming on stronger than anticipated, according to a recent report from the team led by Eric Ross, vp of research on the semiconductor market for Thomas Weisel Partners. He sees some pull-ins of certain 300-mm fabs--Samsung's Line 11, NEC's Hiroshima facility, and TI's DMOS7--with perhaps a half-dozen companies pushing for production ramps in 2001. These factors should contribute to a rapid increase in demand for 300-mm tools in the coming months, as well as a possible shortage--and resultant price increase--of silicon-wafer real estate that could offset some of the economic benefits of scaling to the medium-pizza-sized substrates. It's clear from everyone I've spoken with and all the reports I've seen that, unlike a few years ago, this time it's not a false start. The starting gun has really gone off for the race to bring 300-mm production on line, heralding the advent of what Ross calls "hyperproductive superfabs."

Considering that most forecasters did not accurately predict the timing or severity of the last downturn, all these big numbers must be taken with a grain of salt. No one, however, is questioning the so-called "fundamentals" of the industry at this point, especially those stressed-out engineers working 18-hour shifts with few days off trying to keep up with their customers' demands.

Tom Cheyney
Editor

tom.cheyney@cancom.com
http://www.micromagazine.com

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