EDITOR'S PAGE

The arrow points up

This year's Industry Strategy Symposium at Pebble Beach in early January had a definite good news, bad news atmosphere. The good news was obvious. The industry's economic fortunes are rebounding, and stories abounded of booming bookings, revenues double the original projections, and fiscal-year targets nearly met two quarters early. The semiconductor cyclecontinues its mischievous oscillations, but at least the arrow's pointing up, way up, with double-digit growth predicted almost across the board for the next few years.

The downside of this order and manufacturing hyperactivity is how rapidly it has all hit the fan. One equipment maven described a meeting he'd had with a high-level Taiwanese exec who told him that his company had decided to push forward its ramp schedule a month, so naturally the tool company's order was needed a month earlier than the terms of the original agreement. His company, like scores of others, is churning product out the door as fast as it can, its facilities running seven days a week, so such a request was not exactly welcome news. Another tool manager told me that his company has had to push out lead times because the current quarter is sold out. He warned of bottlenecks later this year if his chipmaker customers didn't step up to the plate soon with their next wave of orders. Muckety-mucks borrowed natural disaster metaphors like "hurricane" and "avalanche," shaking their heads at their sudden turns in fortune. As Regis McKenna said during his keynote on "E-volution," "managing diversity in real-time" through the "digital technology understructure...is like being in a sandstorm trying to predict how big it'll be."

Despite their failure to foresee the last downturn, the market researchers confidently predicted how big this recovery will be. On the chip side, Bill McClean of IC Insights said that the semiconductor industry should enjoy 15­25% growth, with a good chance that the rate could exceed 25%. Both VLSI Research and Dataquest see a bull run for the process equipment business in the coming year, predicting 27% and 44% upticks, respectively. The materials market also should experience a significant expansion, according to Dan Rose. He believes that the wafer-fab materials sector will grow more than 9% this year to about $13.5 billion, fueled by a recovering silicon wafer market that should reach nearly $6.5 billion. Quantitative modeler Moshe Handelsmen of Advanced Forecasting was the lone voice of dissent among the upbeat chorus, positing that there's an 80% chance of a "significant slowdown" in front-end tool shipments in the second half of this year.

The increasing importance of the fabless-foundry connection was touted repeatedly, with several speakers agog at how the aggressive capital expenditure plans of TSMC, UMC, Chartered and others are stoking the industry boiler. Taiwan Semiconductor vp Mike Pawlik sees a compound annual growth rate of at least 25% over the next five years. He believes that the foundries' piece of the semiconductor revenue pie should grow to some $13.6 billion by 2003, about two-and-a-half times the level of 1998 sales.

Even though the foundries are doing their part, the industry's 800-pound gorilla, Intel, still packs a mighty wallop, as evidenced by its recent capex budget and 300-mm Fab 22 construction announcements. Although SEMI members are salivating for a piece of that $5 billion earmarked by the microprocessor giant, there were cautionary words from one Intel exec. Mike Splinter, senior vp and gm of Intel's technology and manufacturing group, admonished supplier companies to prepare now for the inevitable downturn and plan how to maintain their R&D and manufacturing capacity when things go south the next time. He noted that Intel expects three key things from its suppliers--technical readiness, affordability, and agility. "When our window opens to select equipment," Splinter told the crowd, "you guys have to be there."

Many who attended ISS are ready to jump through that window without a safety net--just as they've done many times before.

Tom Cheyney
Editor

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

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