Chip-testing houses struggle to get new ATE systems

Chip-testing houses struggle to get new ATE systems
SAN JOSE -- Faced with expanding lead times for delivery of new chip testers and explosive growth in outsourcing of manufacturing steps, independent test subcontractors say they are now suffering from a capacity crunch and having a hard time keeping up with demand.

Several leading test subcontractors cite an unexpected surge in business, and in some cases, these companies say they are now turning away new customers in order to handle the growing volumes at existing accounts. The problem could become even worse in the future.

"Test is running pretty close to capacity in most cases, but we do not have enough test capacity for some products, especially communications devices," warned analyst Ron Leckie of Infrastructure Inc., who is based in Saratoga, Calif. Today, only 5% of the world's IC-testing requirements are outsourced to subcontractors, but that figure is expected to grow as "more and more integrated device manufacturers IDMs outsource their testing requirements," Leckie said.

A number of trends are pushing IDMs and fabless chip suppliers to greater use of chip-testing houses, including the growing cost of automatic test equipment (ATE), changes in packaging technologies, and the increase in silicon foundry use in Asia where contract test services are mushrooming (see February feature).

But now it is unclear if these test subcontractors can meet the current or future challenges. Shortages of capacity, fast-changing chip applications, and inability to procure a new class of complex ATE systems are creating some new headaches for both service providers and chip suppliers. The inability of procure new ATE systems is especially troublesome.

"Test subcontractors are expanding and buying automatic test equipment like crazy," Lecke noted. "But the problem is that lead times for equipment have gone up. Typically, the lead times for ATE is 10 to 12 weeks, but now it's 50% on top of that. Some lead times for ATE are even five to six months," he added.

In fact, Agilent, Credence, LTX, Teradyne, and other test systems vendors are facing greater-than-expected demand for their respective products, according to Lecke.

For this reason and others, test subcontractors--and their customers--are now feeling the heat. "We see chip companies in the market scrambling to find test capacity," said Emillo Salvioni, general manager of the Technical Support Center for Fremont, Calif.-based United Test Center America Inc., the U.S. subsidiary of Taiwan's United Test Center Inc. UTC claims to be Taiwan's largest independent test subcontractor.

"In our case, for example, we have to send some of the smaller customers or non-strategic accounts away," lamented Salvioni, who was interviewed at this week's Taiwan Semiconductor Day conference in San Jose. "Our strategic customers take priority."

Hsinchu-based UTC plans to boost its capital expenditures from $40 million in 2000 to between $50 million to $65 million in 2001. "We plan to triple our capacity," Salvioni said.

But that won't be easy. "The lead times for test equipment is long, especially in Taiwan," he said. "The ATE companies tend to serve their strategic accounts first."

Other test houses say they are facing similar problems. "We have capacity, but can't get the testers from Agilent,'' said Vicent Kok, sales manager for San Jose-based Siliconware USA Inc., the North American subsidiary of Taiwan's Siliconware Precision Industries Co. Ltd. (SPIL)--Taiwan's second largest IC-packaging, assembly and testing house.

In fact, one of SPIL's largest IC-packaging customers is graphics-chip supplier Nvidia Inc., which has instructed the company to test its ICs on Agilent's 93000 line of testers. The 93000 is a 960-pin ATE system, designed for high-speed digital logic, memory, and mixed-signal device testing. Agilent Technologies Inc. of Palo Alto, Calif., and other ATE suppliers did not respond to requests for interviews about the shortage of testers in the marketplace.

To boost its capacity, meanwhile, SPIL recently announced plans to acquire the remaining shares in another local company, Siliconware Corp. (SWC), a provider of IC-testing services. Taichung-based SPIL already owned a 32.26% stake in SWC, and the acquisition will place chip assembly, packaging, and test capabilities under one roof (see Aug. 25 story).

Another Taiwan-based IC-packaging and test house, Orient Semiconductor Engineering Ltd. (OSE), is also boosting its test capacity. "Test takes a lot capital, but we are still increasing our test capacity by fivefold," said Tom Majeski, vice president of sales and marketing for the company's U.S. subsidiary in San Jose.

Business is so good in chip testing that OSE is changing its policy in this arena. Previously, OSE's test services were only offered to its IC-packaging and assembly customers, Majeski said. Now, the company will offer its test services for any chip customer, he added.