FREMONT, Calif. Credence Systems Corp., a seller of semiconductor test tools, is pushing to expand in the fast-growing Chinese semiconductor manufacturing industry. The company is involved in several joint ventures with the Chinese government or with chip manufacturers, and is targeting the rapidly expanding segment of independent assembly and test houses.
"Historically, China has been a small share of the Asian semiconductor manufacturing market, but we see it growing now as fast as any other segment in the region," said Mark Faust, director of business development at Credence. "What's really exciting for us is the growth in the nascent subcontractor manufacturing services industry."
Faust described two waves of chip-making development in China. The first was characterized by joint ventures sponsored by the Chinese government, whereby American, Japanese and European chip companies were encouraged to open fabrication facilities in mainland China, enticed by generous tax incentives and cheap labor costs. In return for providing human capital, China got an inside look at the advanced technology required to produce semiconductors, while the chip companies were granted access to China's massive market for consumer-electronics devices.
Faust said the Chinese are now starting to apply knowledge learned in the first wave to a second wave of chip-making infrastructure development, as evidenced by the opening of test and assembly houses. This latest market, which competes with other assembly and test operations on the basis of cost and throughput, is tailor-made for Credence, which claims the industry's lowest cost-of-test, according to Faust. With a foothold in this emerging market, Credence expects to see its tester sales swell as more fabs begin pumping out more chips in China over the next decade.
"Credence will definitely be able to sell over there, because they are strong in the low end of the test market," said Dan Hutcheson, president of VLSI Research Inc. (San Jose, Calif.). "The Chinese chip-manufacturing market is expanding, and we tend to see that come up first in the back end, such as assembly and test houses."
Hutcheson said the Chinese equipment market acquired more than $1 billion in tools last year. That's only about a quarter of purchases from Taiwan, but represents the bulk of the Asian regional market excluding Taiwan, South Korea and Japan. The total world market for chip-making equipment last year was some $26.5 billion, so China accounted for nearly 4 percent of that.
Credence currently garners half its revenue from sales in Asia. Counting sales to companies buying gear for use at facilities in China, Credence ships 60 percent of its systems to that country. "I'm pretty bullish on China," said Faust. "It doesn't have the volume of Taiwan, but its growth rate is much higher."