SAN FRANCISCO – At last week’s Semicon West trade show here, there were two camps regarding the current and future business outlook: The bulls and the bears.
One camp, which appears to be in the majority, sees a multi-year equipment upturn, thanks to the traditional drivers like cell phones and PCs, as well as the newfangled products like 3-D chips, MEMS, LEDs, and solar. The other group is becoming slightly worried, as the recent capital spending announcements from chip makers point to a dreaded downturn. Perhaps the biggest issue in the near term are extended lead times for lithography tools and select order push outs for wirebonders.
Overall, the mood was upbeat at Semicon West, as compared to last year’s event. Needless to say, 2009 was a horrible year as vendors suffered amid the downturn. ''What a difference a year makes. Last Semicon, capital equipment suppliers were licking their wounds from the worst downturn in industry history,’’ said Dean Freeman, an analyst with Gartner Inc., in a report. ''This year, everyone was all smiles as the reports of industry growth of more than 100 percent seemed like a pretty sure thing. And it now appears that 2011 will also see growth, which should last into 2012.’’
There are some mixed messages, however. ''Last week was dominated by company presentations at Semicon West, where the general tone from most equipment companies was very bullish. Intel likewise reported strong results, particularly given muted expectations coming in,’’ said C.J. Muse, an analyst at Barclays Capital. ''However, with Kulicke & Soffa discussing 4Q pushouts, investors seized upon this data point, reversing all the earlier gains seen in the semi equipment space.’’
The analyst was referring to Kulicke & Soffa, which apparently is seeing unforeseen pushouts or order delays for copper bonders at Taiwan’s Siliconware Precision Industries Co. Ltd. Some believe the push out is an isolated incident.
On the other hand, another vendor, ASML Holding NV is still seeing huge demand and constraints for its 193-nm scanners. Applied, Novellus, KLA-Tencor and others are also seeing big demand for their gear.
Capital spending is expected to jump by a staggering 115 percent in 2010 over 2009, said Jonathan Davis, president of SEMI North America. And the IC market is expected to grow between 20-to-30 percent in 2010, said Stephen Newberry, president and CEO of Lam Research Corp.
But the party could be over sooner than later, as some see a slowdown in the overall IC market. The IC market is expected to jump by 28.1 percent in 2010, but the business will only see 3.7 percent growth in 2011, according to VLSI Research Inc.
Many foundries and memory houses have raised their capital spending. The capital spending rush could lead to a dreaded capacity glut in 2011 or 2012. And capital intensity is still relatively low. In fact, capital intensity is hovering around a mere 10 percent.
''I think we are pretty solid through 2011,’’ said Bob MacKnight, president and chief executive of Crossing Automation Inc., a fab tool automation vendor, ''but I’m nervous about 2012.’’
Others see the cycle running out through 2012. ''Just from a microeconomic perspective, there is going to be a run in 2011 and 2012,’’ said Joe Cestari, president of Total Facility Solutions (TFS). TFS itself sees ''strong demand for the next 12 to 18 months.’’ TFS is a wholly owned subsidiary of M+W U.S. Inc. It provides turnkey facilities for the semiconductor, solar and other industries.
The bulls outnumber the bears. For example, at Semicon, Applied Materials Inc. raised its fab tool growth forecast--again. Citing the upturn, the company's fab tool business is expected to grow greater than 140 percent in 2010, compared to greater than 120 percent in the previous forecast.
''Demand looks like it will be a multi-year cycle,’’ said Michael Splinter, chairman, president and chief executive of Applied Materials.
Brian Trafas, chief marketing officer at KLA-Tencor Corp., agreed and sees a multi-year up cycle, thanks to a new wave of buying patterns at the foundries and memory houses. For 2011, KLA-Tencor sees 8 percent growth for ICs and 15-to-20 percent growth for fab equipment, he said. The company is tracking 12-to-14 new fab expansion programs, including those from GlobalFoundries, Hynix, IM Flash, Samsung, Toshiba, TSMC and UMC, he said.
Solar, which suffered a downturn in 2009, is a big driver for equipment makers. Solar ''went down as fast as semis’’ last year, he said. ''It has not rebound as fast.’’
ATE vendors are seeing a different demand picture as compared to the front-end equipment players, said Keith Barnes, president and chief executive of ATE supplier Verigy Inc.
The front-end vendors are seeing demand across the board. The growth engine for Verigy revolves around the non-memory segment. ''2011 should pick up’’ for the ATE memory market, he said.
What are drivers going forward? Cell phones and PCs, of course. At Semicon, Rick Hill, chairman, president and chief executive of Novellus Systems Inc., said there are the three main drivers that will lead the semiconductor growth cycle going forward: infrastructure build-out; shifting consumer demand in China and India; and development of security technology.
LEDs represent another big opportunity for fab tool vendors, said Arthur Zafiropoulo, chairman, chief executive and president of Ultratech Inc. ''LEDs will add a new segment for our growth,’’ he said.
Ultratech is seeing strong demand for its lithography tools in the arena. Earlier this year, Ultratech introduced its newest lithography system, the Sapphire 100 for high-brightness light-emitting diode (HBLED) manufacturing. The tool is expected to intensify the competition in the space. For years, LED makers used traditional aligners for production. Ultratech’s tool sells for under $1 million, making it an attractive solution for LED makers.
There are other drivers for fab tool makers. ''Last year, it was TSVs (through-silicon vias),’’ said Steven Dwyer, vice president and general manager of EV Group North America. ''This year, it’s MEMS. The MEMS market is getting bigger.’’
For example, the electronics content in cars is soaring. There are some 8-to-10 MEMS-like sensors—such as an air bag sensor--in every car, he pointed out.
Another big driver is TSV-based 3-D chip designs. The first TSV-based designs have been seen in CMOS image sensors, but many wonder: When will it become mainstream?
''That’s the $64,000 question,’’ said Steve Lerner, chief executive of Alchimer S.A., a provider of nanometric deposition technology for TSVs, semiconductor interconnects, and other electronic applications.
Still to be seen, however, is just how long the party will last. Some see a downturn in 2012. Others see it sooner than later. But one thing is for sure: ''Clearly, we are going to have cycles,’’ Lerner said.