Every Downturn has a Silver Lining

The semiconductor industry is struggling out of a downturn, which has spurred on by the Asian financial crisis, overcapacity and falling DRAM prices. Although the long term outlook remains rosy, it does not look like the industry will be completely out of the present cycle until sometime next year.

As with other "hiccups" in the growth cycle, what has happened over the last few months is this: plans to construct new fabs have been put on hold; at least one fab, -- Siemens' North Tyneside facility in northern England -- has been closed; several of the larger equipment suppliers have announced layoffs; the implementation of 300 mm technology, driven mostly by cost issues, has been delayed significantly, and a wave of mergers and acquisitions has swept the industry, such as Texas Instruments' sell-off of its memory business to Micron. The longer the downturn, the more such things the industry will be likely to see.

As bad as this may seem however, there is actually much good news here. To many overworked and harried engineers, the break is certainly welcome. Rather than spending the day handling emergencies as the fab runs at full-bore capacity, there is now time for introspection. Processes can be recharacterized, optimized and otherwise fine-tuned. Management structure and fab procedures can be reevaluated. There is time to focus on "shrinks" of existing product lines. And, as Jim Morgan, chairman and CEO of Applied Materials pointed out in the company's third quarter statement, "Industry downturns provide an excellent opportunity to work closely with our customers..." These are all good for the industry.

This respite also could prove to be very beneficial to the 300 mm community, which has been extremely busy over the last two years developing standards for things such as wafer handling. Without getting into specifics, I think it's clear that some compromises were made just to speed things along. Now, without an imminent deadline looming, the opportunity exists to rethink some of the decisions that were made.

In preparing to write this, I initially thought ­ as harsh as it might seem ­ that there might even be some benefits to the layoffs. Aren't they part of a kind of cleansing cycle that sweeps out the deadwood every few years, I reasoned? Those who have been on the giving and receiving end of such layoffs however, tell me that this is probably true in only about 30% of the cases; the majority of those who lose their jobs are people whose knowledge of the company and its products and insight into the industry are valuable and often irreplaceable. This is the worst part of the downturn, and we wish those who are newly in the job market the best of luck.

On a final and more positive note, you have by now hopefully noticed an entirely new look for Semiconductor International. With the help of renowned designer Mitch Shostak, who has worked on such well known magazines as Business Week and Cahners' own Electronic Business, we have come up with a design that we feel is not only easier to read, but more adaptable to the technical nature of our presentation. Please let us know what you think!