FREMONT, Calif. -- In the 1980s and 1990s, a slew of companies took a page out of the silicon foundry business model and created the so-called chip-testing outsourcing industry.
The movement created a plethora of new and independent IC test houses, which have been set up to handle the chip-testing requirements for semiconductor manufacturers. Claiming that they can lower the soaring costs of IC-test, the third-party providers emerged in an assortment of sizes, ranging from tiny "mom and pop" shops, to giant chip-packaging subcontractors with chip-testing components.
Today, the IC test houses have become an important cog in the semiconductor supply chain. But the market also is ripe for consolidation amid the current and severe IC downturn. Amkor Technology Inc., ST Assembly Test Services Ltd. (STATS) and other large chip-packaging subcontractors have recently gobbled up smaller assembly and test houses.
It's unclear if the "mom and pop" shops will survive in the long term. But the IC-test outsourcing business will "require economies of scale to compete," said Tien Wu, the top U.S. executive for Taiwanese chip-packaging and test giant Advanced Semiconductor Engineering Inc. (ASE).
The market for IC-outsourcing is also set to double by 2005, said Wu, who is president of ASE's operations in Europe, Japan, and the United States. Taipei-based ASE is the world's second largest IC-assembly and packaging provider, next to Amkor. Wu is also the new chief executive of ISE Labs, a Fremont-based subsidiary of ASE Test Ltd., the world's largest IC-test house. ASE Test is 51 percent owned by ASE of Taipei ( see today's story ).