Editor's Page

Life during downturns

The Asian financial crisis, or AFC as some refer to it, has been nothing if not interesting. If you had too many eggs in the Korean basket, you probably have yolk on your face. And that's no joke. While Cypress Semiconductor, Hitachi Semiconductor, Lam Research, CFM Technologies, Mattson Technology, and Unit Instruments have had to lay off workers and consolidate operations, other companies have tightened their corporate belts and weathered the storm so far without resorting to pink slips. As one equipment company manager told me, "We can't afford not to go forward with our strategic plan, because the future of the company is at stake. . . . We're closing deals but working twice as hard to do so."

Many pundits see the familiar face of cyclicality back in town, and with the down cycle comes the need to correct a perceived overcapacity of worldwide chipmaking. This is especially true in the memory area, because of its heavy Asian manufacturing share, although analysts continue to release bullish forecasts for microprocessor sales. (After all, an Intel spokesman pointed out recently that the company has a higher capital spending budget than last year!) Much of the industry, however, must swallow the bitter pill of capacity cutbacks and lower capital spending before it can get back on track with double-digit growth. The medicine may have a fairly quick curative effect, though. Many economists' models predict the industry will be back in gear by the end of the year. Today's surplus might be tomorrow's shortage.

In the meantime, Moore's Law is still on the books and geometries must contract. "People have to continue to invest in shrinks, even if not in capacity," another tool company manager noted, adding that chipmakers will have to use technologies like CMP to "stay in the game." Methods and equipment on the yield enhancement front can also bring tremendous benefits both to manufacturing efficiency and bottom-line performance during times of underutilized capacity.

The traditional strategies for life during downturns continue to pour from the lips of industry executives and their minions: Cut costs, look for ways to gain or consolidate market share, shorten cycle times, improve employee productivity, and strengthen customer service. When there's not as much of a crunch either to get systems out the door or to install them at the fab in order to meet tight ramp-up schedules, there are also opportunities to get to some of the root causes of contamination-related process defect problems. "We only have enough time to put out the fires, not find out why they started," a globetrotting senior manager of a major gas and chemicals company told me last year before the Korean house of cards collapsed. With a little bit of breathing room, his team might now have the time to ascertain the combustible factors that led to a customer problem and better prepare themselves for similar challenges once things turn north again.

Times may be uncertain and the cash flow may not be as liquid as companies would prefer, but fear not: in the not-too-distant-future semiconductor people will be surfing the growth wave again. It's not as if the world has lost its voracious appetite for chips.

Tom Cheyney
Editor

tom.cheyney@cancom.com

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