FormFactor Facing DRAM Investment Freeze
David Lammers, News Editor -- Semiconductor International, 5/1/2008 8:12:00 AM
In a trend that impacts the wider semiconductor manufacturing infrastructure, executives at FormFactor Inc. (Livermore, Calif.) said the probe card market is facing an investment freeze in the DRAM sector, with many of its DRAM customers sticking with older linewidths in an effort to preserve cash.
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| Igor Khandros, CEO, Formfactor Inc. |
Khandros said DRAM vendors are sitting tight, wringing higher efficiencies out of wrung-out tester strategies, using existing probe cards for much longer periods. Although a linewidth shrink theoretically would yield more die per wafer, there is also an initial hit on yields. He said it may be 2009 before companies move to new technologies in what he predicted would be a “hard shift” to DDR2 and DDR3 DRAMs.
Mario Ruscev, president of FormFactor, said, “Our customers need to conserve cash. They are finding it difficult to invest in 65 nm technology, so they are extending the life of current products. They will delay the transition to 65 nm or skip it altogether.”
As DRAM vendors regain their footing and move to DDR3 and mobile DRAMs at tighter linewidths, Ruscev said they will buy more of the company's full-wafer “Harmony” probe cards, which can test a full 300 mm wafer with only a few touchdowns by the tester.
With the wafer probe card market down by an estimated 50% this year, FormFactor saw its first quarter revenues decline to $65.7M, down 45.5% from $120.5M in the fourth quarter of 2007 and down 35.8% from $102.3M in the first quarter of 2007.
FormFactor is cash-rich, with ~$555M in cash and securities, and executives said they will use some of that cash to support the development of new probe card technologies through the current downturn. To reduce operating expenses, FormFactor is reducing its head count, moving more resources to areas close to customers to shorten cycle times, and restructuring R&D to make it more product specific.
FormFactor lost $18M in the first quarter, and analysts took a critical tone on the conference call, saying that the company has lost market share to rival probe card vendors and needs to more sharply curtail operating expenses. Oppenheimer & Co. (New York) analyst Gary Hsueh, for example, wrote in a note to investors that he believes FormFactor’s management is “just a bystander as revenue continues to implode"
One analyst argued that FormFactor should move its production from California to Singapore, where the company could enjoy a 10-year tax holiday. Khandros indicated any significant move to Singapore was “on hold” to keep spending in line.
The FormFactor executives acknowledged that they went through “ramping issues” in the fourth quarter that caused the company to lose “some share.” Ruscev said management is working hard to reduce operating costs while positioning the company for future growth.“Coming out of this period, we expect to be a very different company. Our fundamentals remain healthy despite the cyclical nature of our busines. We will regain market share as DRAM vendors reenter the market. We sold twice as many of the full-wafer Harmony products and have regained share at some accounts.”
