Although several component suppliers remain committed to building integrated passive devices, high development costs and the current downturn are causing one industry player, Intarsia Corp., to close its doors.
Design-ins and orders of Intarsia's integrated passives did not meet expectations, and development costs, mostly for capital equipment, were higher than anticipated, according to a spokeswoman for Dow Chemical Co., the majority owner of Intarsia. Those factors, coupled with the industry downturn, prompted Dow to pull the plug, she said.
Dow, Midland, Mich., and contract manufacturer Flextronics International Ltd., Singapore, founded Intarsia in 1997 to develop integrated passives for wireless and RF applications. Dow owned 80% of Intarsia and Flextronics had a 20% stake. Flextronics could not be reached for comment.
Intarsia's 2000 sales were small in comparison to Dow's $30 billion top line last year.
Dow plans to focus on other opportunities in advanced dielectric materials, the spokeswoman said. She declined to elaborate on Dow's revised strategy or what would become of Intarsia's 35,000-sq.-ft. manufacturing and engineering facility in Fremont, Calif., which includes clean rooms and semiconductor processing equipment.
Dow's decision surprised most Intarsia employees, including Jim Young, the company's executive vice president of sales and one of 12 remaining employees trying to complete business with customers. Intarsia's initial integrated passive devices have been slow to gain design-ins because users are unfamiliar with the technology, Young said.
Last fall, Intarsia revised its business strategy to develop more highly integrated modules, some with up to 30 to 40 passive components, to provide drop-in solutions for complex wireless and RF products. The strategy was paying off in increased design-ins and orders, according to Young.
"We started in 1997 processing about 50 wafers per month, and by the end of 2000 handled about 2,000 wafers per month," Young said. "We were in discussions with a major semiconductor supplier about a second-sourcing arrangement."
However, slumping market conditions in the wireless industry have dimmed this year's IPD outlook and likely sealed Intarsia's fate.
Sales of integrated passives are projected to fall to $465 million this year from $506 million in 2000, according to iSuppli Corp., an El Segundo, Calif., market research and online supply chain services firm.
Still, the move to suspend Intarsia's operation surprised Dennis Zogbi, an analyst at the Paumanok Group, Cary, N.C. "Closing Intarsia is not indicative of overall market conditions for integrated passive devices," Zogbi said. "If Dow Chemical had waited for the market to improve, they might have realized benefits."
Other suppliers of IPDs are taking a long-term view of the technology and see the current market slowdown as temporary.
"While orders for integrated passive devices are down, there's been an increase in design-ins," said Glyndwr Smith, senior vice president and assistant to the chief executive at Vishay Intertechnology Inc., Malvern, Pa. Vishay is forming a special products division to focus on the devices, according to Smith.
"Sales of IPDs are down somewhat, but not as much as our discrete resistors," said John Nelson, vice president and general manager of the advanced film division at IRC Inc., Corpus Christi, Texas.
Intarsia's reliance on a single technology, thin-film-on-glass, for integrated passives may have limited the company's market, other suppliers said.
"Thin-film-on-glass is intrinsically expensive, and not all types of components can be placed on it," said Jim Sommers, product line manager for chip-scale packaging at Bourns Inc.'s CSP business unit in Cork, Ireland.
"It was probably difficult for a start-up such as Intarsia to compete with just a single technology," said Ron Demcko, applications engineering manager at AVX Corp., Myrtle Beach, S.C., which produces integrated passives using thick-film and low-temperature co-fired-ceramic in addition to thin-film technologies.
The high capital investment to produce integrated passives presents a barrier to start-ups, said Scott Klettke, market segment manager at Murata Electronics North America Inc., Smyrna, Ga. Murata produces discrete passives such as baluns and low-pass filters on the same lines for its integrated passives to amortize costs, he said.