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Dog days of summer

Heatwaves, vacations, post–Semicon West letdowns, manufacturing shutdowns—the dog days of summer usually lend themselves more to lethargy than vivacity. On a nice day, when I see the Pacific a few miles away through my ninth-floor office window, the struggle to keep my focus intensifies. What has kept my concentration from waning too much over the past several weeks is my ongoing digestion and analysis of what I learned at the semiconductor equipment, materials, and subsystems industry’s big event—as well as following up on the host of leads and contacts. Aside from the show-related info, there’s also been several interesting stories emanating from large and small players alike, running counter to the usual late-summer information-flow doldrums. Before I take off on my much-needed holiday, let me share a few trends that we’re tracking.

Like the endless sands on a sun-drenched beach squeezing between your toes, the semiconductor industry often takes the availability of the grainy crystals’ highly refined progeny—polysilicon—for granted. But a looming poly shortage, caused by a combination of accelerating demand for photovoltaic (PV) or solar-cell silicon and underestimated 300-mm-wafer capacity needs, could lead to a supply-chain crisis.

The chip industry still gobbles up the lion’s share of poly (about two-thirds of the market), with the solar folks wolfing down the remaining third. The PV segment is growing between 20 and 30% annually and will likely match or overtake the semiconductor’s needs within a few years. According to my source at a major wafer-making company, the largest PV player, Sharp, consumes more silicon area than the top six semiconductor companies combined. Also, he says that the pricing and cost levels on the market and manufacturing sides are more attractive for solar. Problem is, there’s not enough manufacturing capacity to handle the demand, and the incremental capacity being built will go mostly to the PV players. With poly producers already running full out and scrambling to add manufacturing tonnage, concern is mounting about possible shortages.

In other words, there’s a very real prospect of certain customers not getting all the poly they need in the not-too-distant future, with the resultant food-chain reaction of the semiconductor producers not having enough wafers to meet their customers’ chip demands. Luckily, someone is paying attention: Sematech’s Critical Materials Council, which convened at Semicon West to discuss the problem, is taking the situation very seriously and is starting to put together contingency plans along with the wafer and polysilicon suppliers. MICRO will continue to follow this story in the coming months.

Another source of summer balminess wafted in from the mergers and acquisitions front, where the supplier segment heated up with the closing of the Entegris-Mykrolis deal, Rudolph apparently winning the August Technology sweepstakes, and Brooks Automation and Helix tying the corporate knot. But the scope of these consolidations, although they may have profound implications for the marketplace, was dwarfed by the news of the sell-off of several units of Agilent Technologies.

Investment firms Kohlberg Kravis Roberts and Silver Lake Partners have agreed to buy Agilent’s semiconductor division for a cool $2.66 billion, while Philips says it will pay close to a billion dollars for Agilent’s share of high-power LED manufacturer, Lumileds. Agilent also said that it plans to divest the group focused on automatic test equipment for DRAMs and SOCs, although no deal is yet in place.

Ironically, within hours of the divestiture announcement, Agilent released its latest financial results, which revealed a healthy escalation in bookings in both its chip and ATE segments. Whether the chipmaking division will be sold off in chunks or reborn more or less intact under a new moniker remains to be seen, but the glory days of what was once Hewlett-Packard’s potent semiconductor unit have slipped even further into memory.

Unfortunately, by the time many of you read this page, summer vacation 2005 will also be just a fond remembrance.

Tom Cheyney

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