Tuesday, July 26, 2011

SEMICON West - Test in Transition: Changing Customer Requirements

If you are investing in the ATE (Automated Test Equipment) sector there's a must read series of presentations at this link:

SEMICON West - TechXPOT North Two: Test in Transition: Changing Customer Requirements.

Several comments from the presentation made by Dale Omhart (Texas Instruments) really stood out:

Test contribution to total semiconductor manufacturing costs continues to INCREASE

Memory Test cost may have decreased by 50% in the last 10 years

In most cases, Test does not add value to the finished chip:

  • This is especially true in NonMemory products

  • Therefore, any test cost is painful to chip makers

Semiconductors are becoming more customized:

  • There will be a very few high‐volume applications

  • Big consumer products like iPhone (being an exception)

This evening ATE provider Teradyne will provide investors with an update of their business. The Teradyne report follows right on the heels of the quarterly release from Advantest. If you will recall, Advantest recently closed the $1.1 billion acquistion of Verigy. Their report was solid but the outlook, like so many in the semiconductor food chain, they expressed caution about the future. Orders are expected to decline and sales will be flat. The report, with notes, is here:

Advantest Presentation with Notes

From slide 12:

"...semiconductor manufacturers are shifting to a wait-and-see stance on capital investment and utilization rates are falling, in step with deteriorating end-user demand for PCs, smartphones and other products."

"In non-memory testers, the company expects demand will remain high, led by the MPU test segment. However, softer demand is foreseen in the communications and consumer electronics device test segment."

This last bullet is telling. The MPU market is where you find Intel and the folks that are cracking out ARM processors. It's also a place where Teradyne is very strong and I am sure they will say something about this in their report and on the conference call.

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