PEBBLE BEACH, Calif. -- A year ago at the 2001 Industry Strategy Symposium (ISS) here, there was good news and some bad news in the making for semiconductor equipment makers. Tool vendors were coming off record growth in the boom of 2000, but signs were building of a possible slowdown in 2001.
And wow--what a slowdown it was! Chip equipment suppliers ended up falling off a steep cliff in 2001, experiencing what most managers and analysts believe was the industry's worst downturn on record.
One year later, at this week's 2002 ISS event in scenic Pebble Beach, tool makers appeared to be licking their deep wounds from the 2001 recession, but there also seems to be a ray of hope for the new year. Analysts at the meeting said the IC and chip equipment industries had both finally hit the absolute bottom of the slump, and both sectors were now expected to start recovery cycles by the second half of 2002 (see Jan. 7 story).
In total, VLSI Research Inc. projected that the chip equipment market will decline 5% in 2002 from sales in 2001, which were 37.6% lower than record revenues in 2000. However, Dataquest Inc. this week released its newest forecast for total semiconductor capital spending, predicting a 24% drop in 2002 from $44.4 billion last year. Dataquest said semiconductor equipment revenues--excluding chip testers--would drop 19% this year from $25.2 billion in 2001, even with a recovery starting in late 2002 (see Jan. 7 story).
But some chip equipment executives remain highly pessimistic about 2002, saying that tool vendors will not likely see any major order activity until early 2003 or later.
In fact, the semiconductor equipment industry could fall 10-to-15% in 2002 over 2001, said Arthur W. Zafiropoulo, chairman and CEO of Ultratech Stepper Inc. The San Jose-based company is a supplier of lithography equipment for wafer-bumping packaging processes and mix-and-match applications in fabs.
"This is going to be another bad year," Zafiropoulo lamented. "The only bright spot for chip-equipment makers is China. China is going to be a major player in the semiconductor industry," he said in an interview with SBN at the symposium held at an exclusive golf resort in Pebbel Beach.
The Ultratech chief executive based his overall gloomy forecast on several factors. "The recovery in the semiconductor industry will occur in the second half of this year," he said. "Orders and bookings will also get strong in the second half as well."
But capital equipment companies will not realize the sales from these orders until early 2003 due to the new SAB accounting procedures, Zafiropoulo contended. "We won't see any real sales until 2003," he said.
Zafiropoulo also said he worries that the downturn will extend into 2003 because of the chip industry's glut of capacity. He blamed much of the problem on what he called poor forecasting by the chip makers, which may have caused some of the supply/demand imbalance now faced by the semiconductor industry.
"Whose fault is it?," he asked. "It's the chip makers. They did such a s---job of forecasting," he added.
Another executive at ISS was a little less pessimistic, but he also noted that it's difficult to predict anything in the IC industry these days. "We don't have a lot of visibility in the market for 2002," admitted Sven Lofquist, president and CEO for Micronic Laser Systems AB. The Taby, Sweden-based company makes pattern-generation tools for photomask and display applications.
Lofquist did say some businesses look better than others. While the photomask-tool market remains uncertain--if not soft--the flat-panel display equipment seems to be picking up for the company, he told SBN.
There are other positive signs as well, especially for automatic test equipment (ATE) and other back-end gear. This industry was one of the first segments impacted by the current downturn, and also seemed to be hardest hit during the 2001 campaign.
"I think we will see a small improvement in the ATE industry in 2002 in relation to 2001," declared Nicholas Konidaris, president and CEO of Santa Clara, Calif.-based Advantest America Corp., the U.S. subsidiary of the Japanese ATE giant.
Konidaris said he thinks the industry will see "small growth in the first half of 2002." He added, "I think we will see an acceleration of growth in the second half."
Demand is picking up for testers in the Asian markets, according to Konidaris. ATE for use in system-on-a-chip and mixed-signal applications will also pick up during 2002, he added.