And don't panic. This column is coming to you from Dallas this week because Electronics Alert! columnist Robert Henkel is on vacation. He will return next week to file his commentary and analysis of the week's news on June 29. But in his absence, here's a quick summary of top stories from the week of June 18-22.

DRAMs suffer worst year ever

The DRAM business appears to be collapsing at an unprecedented rate and will suffer its worst year in history during 2001, warned Dataquest Inc. this week. The market research firm now predicts that DRAM revenues will drop 55.5% to $14 billion in 2001 from $31.5 billion in 2000. Incredibly, the DRAM business will end up nearly one-third the size it was in 1995, when the memory segment hit its highpoint in revenues at over $40 billion.

Dataquest said the only remedy for the troubled DRAM business will be cutbacks in production by the major suppliers, such as Samsung, Micron, and Hynix.

(See June 21 story.)

Falling DRAM prices result
in big loss at Micron...

U.S. memory giant Micron Technology Inc. saw average selling prices for chips dropping 35% in the company's last fiscal quarter. The price decline contributed to a 24% sequential drop in revenues to $818.3 million in the quarter, ended May 31. The company also opted to take a pre-tax inventory write-down of $260 million, which resulted in an after-tax net loss of $310 million.

The Boise, Idaho-based company was able to partially offset the drop in average selling prices with a 20% increase in megabit shipments during the quarter. Micron still plans $1.8 billion on capital spending in fiscal 2001, which concludes at the end of August, with most of the investments aimed at ledge-edge processes and manufacturing capacity.

(See June 21 story.)

...and expected losses at Infineon

With average selling prices on 256-megabit DRAMs plunging 30% since the end of the first quarter, Infineon Technologies AG warned investors that it too will reported a loss in the current fiscal quarter, ending June 30. The Munich chip maker said it anticipates a loss of up to $516 million before interest and income taxes in the quarter. The company's revenues are also expected to decline 30% sequentially from the prior quarter to $1.4 billion in the current three-month period.

But the troubles do not end at DRAMs. Infineon said it has experienced order cancellations for wireless products from some of its main customers in mobile phones. The German company also said security and chip card products and wirelines communications ICs were under heavy price pressure due to push-out of orders and weak demand.

(See June 21 story.)

Micron's Appleton isn't too worried

While it might look as bleak as ever for DRAM merchants, Micron chairman and president Steve Appleton told analysts this week that "it won't take a whole lot of additional capacity to come off line to bring DRAM supply into balance with demand."

Appleton also said a pickup in DRAM demand would help even out the supply imbalance in the marketplace. However, news reports from South Korea indicate that Samsung Electronics and Hynix Semiconductor (formerly Hyundai Electronics) are reluctant to ease back on DRAM production because they don't want to lose market share--even in a rotten market!

Micron expects its own DRAM-bit shipments to increase by a percentage in the "teens" during the current fiscal quarter, ending in August, from the prior quarter, said Appleton. He attributed this growth in bit shipments to increased yields per wafer, resulting from a die shrink transition and new 0.15-micron processes.

(See June 22 story.)

Ready for DRAM 'futures' trading?

It's been tried unsuccessfully before about 12 years ago, but Houston-based Enron Corp. believes it can offer guaranteed forward contracts on DRAMs to reduce risks for buyers in fighting shortages and price changes. The concept works like futures or commodity trading, which is more commonly used in crude oil, pork bellies, and grains.

The idea appears to be grabbing attention at some memory chip houses. "In other industries, hedging is common, and it's something that the electronics industry has been trying to figure out for some time," said Tom Quinn, vice president of marketing at Samsung Semiconductor Inc. in San Jose. "Now that Enron is involved, everyone will sit up."

Enron is a $100 billion financial juggernaut with extensive experience in energy trading and marketing. "What Enron wants to do is step up and take the risks off of DRAM suppliers and consumers," said Kenneth Wang, director of Enron Global Semiconductor Services.

Under the service, Enron offers OEMs and suppliers a chance to secure or sell an agreed-upon volume of 128-Mbit DRAM at a definite price. If DRAM prices go above the strike price for OEMs or below the contractual price for suppliers, Enron will reimburse them, Wang said.

We'll see how well it works this time. But keep in mind that price erosion is expected to push down total DRAM revenues by 55.5% this year, according to a new Dataquest forecast.

(See June 18 story.)

Chip gear index nudges up
but recovery still isn't close

The book-to-bill for North American-based suppliers of semiconductor equipment bounced up ever so slightly in May to 0.46 from a revised reading of 0.44 in April. The SEMI trade group said new orders fell 3% while tool shipments dropped 9% in May compared to April, sending the book-to-bill ratio up.

However, SEMI's chief executive Stan Myers said it appears that it will be another three to four quarters--nine to 12 months--before capital equipment markets are able to sustain year-over-year growth. He also said it now looks like worldwide semiconductor equipment revenues will drop 30-to-32% from $47.7 billion.

Most industry analysts believe the equipment business has reached the bottom of the downturn, but capital equipment spending will most likely to stay at those low levels for many months instead of quickly rebounding in a "V-shaped" recovery.

(See June 22 story.)

Here comes 0.13-micron MPUs
just in time for notebook slowdown

At next week's TechX NY trade show in New York City, giant Intel Corp. and startup Transmeta Corp. plan to unveil competing 0.13-micron x86-compatible processors for the portable PC market, but analysts are worried that the desktop computer slump is moving into the notebook system space.

Intel said it will show its new 0.13-micron Pentium III processor-M design, which has new features for portable systems and battery power management. The processor has not yet been officially introduced, but it is being shipped to customers in volume quantities, according to Intel. The central processing unit will be official launched in the third quarter, but Intel wants computer users to see it at the New York show.

Also trying to grab a spotlight at TechX NY will be Transmeta, which will be debuting its 0.13-micron processors, TM5500 and TM5800, which are new members in the company's Crusoe series. Both Transmeta and Intel are promising 1-GHz and higher speeds with their 0.13-micron mobile-systems processors.

But Transmeta officials also this week confirmed what analysts have been worried about--the slowdown is moving into the relatively healthy notebook arena. The Santa Clara, Calif., startup lowered its sales estimates, blaming weakness in Japan where portable computer makers have been using its CPUs.

(See June 22 story.)

Costello testimony turns
into a tirade against Avanti

Emotions spilled out of Joseph Costello, former CEO of Cadence Design Systems Inc., when he took the stand at Avanti Corp.'s ongoing restitution hearing this week. Costello accused Avanti officials of "a pattern of lying and cheating and stealing" while trying to personally disparage him during Cadence's seven-year legal battle over stolen database code.

Costello grew more combative as Avanti lawyer Darin Snyder tried to cast doubt on the importance of the database code. The former Cadence executive was angered by Snyder's suggestion that Cadence may have signed away Avanti's liability.

Avanti officials last month pleaded no contest to stealing the code from Cadence.

During a speech that lasted 10 minutes in court this week, Costello pinned most of the blame on Avanti president and Gerry CEO Hsu, who Costello said left Cadence for Avanti after being passed up for promotion. Hsu then wooed some of Cadence's best engineers, Costello said.

(See June 21 story.)

ASML, Sweden's Micronic aim
to create new litho systems

Sweden's Micronic Laser Systems AB and Holland's ASM Lithography are planning to set up an alliance to jointly develop new exposure systems, which could include direct-write systems for rapid turnaround of IC designs and small-volume production runs.

As part of the alliance, ASML will make an interest free convertible loan to Micronic totaling $30.2 million.

ASML continues to branch out in the lithography segment following its acquisition of Silicon Valley Group Inc. last month, and for Micronic, the deal gives it a powerful European ally as it attempts to take business away from long-established leaders in photomask pattern generators. Micronic jumped into the semiconductor mask segment only two years ago. It had net sales of 704 million kronor ($66.4 million) in 2000 with a profit of 90 million kronor ($8.5 million), after financial items.

(See June 21 story.)

Schlumberger still hunting
for buyers of tester group

It is hard to imagine the chip industry without Schlumberger Ltd.'s involvement in some form or fashion, but the French company is pushing ahead with its plans to sell off its semiconductor test business so that it can focus more on core oil field services, smart cards, and other sectors.

Officials with Schlumberger Semiconductor Solutions, the test unit in San Jose, told SBN that the business would most likely be sold in pieces rather than to one company. "We don't think there are many companies that will buy all seven units," said Jean Luc Pelissier, vice president of marketing and business development for the Schlumberger's chip test group in San Jose.

At present, Schlumberger Semiconductor has seven major business units: automation equipment, metrology, probe systems, telecommunications ATE, test systems, verification, and yield enhancement systems.

In 1979, Schlumberger entered the chip business by acquiring a Silicon Valley pioneer--the original Fairchild Semiconductor company, which was eventually sold to National Semiconductor Corp. in 1987. The 1979 purchase also included ATE pioneer Fairchild Test Systems, which is now Schlumberger Semiconductor Solutions.

(See June 20 story.)

Intel shifts test strategy to cut costs

Intel Corp. is on the warpath, but this time it's chip-testing costs that are being fought by the world's largest chip maker. Testing costs have surged by 25 times for complex microprocessors in recent years, and to combat those costs, Intel is revamping its entire testing strategy to leverage built-in self-test (BIST) and lower cost test systems.

Intel officials told SBNthat it has hifted to what it calls a "distributed test" approach to chip testing. "Distributed test," commonly known as structural test in the industry, makes use of BIST and related technologies to reduce the cost of test.

"We're seeing the end of the road for functional testers," declared Mike Mayberry, general manager of sort test technology at Intel. "Functional testers are simply running out of capacity."

(See June 19 story.)

Homing in on embedded gateways

In a move to accelerate the use of embedded Internet connections in household systems, IBM Corp. and National Semiconductor Corp. have formed an alliance to develop a new platform and technology for home gateways. These gateways are expected to be used to access and manage home appliances, lights, security systems, air conditioners, entertainment units and other consumer products.

The partnership teams up National Semiconductor's Internet appliance development platform--including Geode microprocessor--and IBM's WebSphere embedded software. The jointly-developed platform will be generally available in August.

IBM and National believe applications developers will find it difficult to create these kinds of products since no one set of features addresses all the demands of consumers. Consequentially, IBM and National said they are creating a single development platform for complete home gateway development.

(See June 19 story.)

Canceled headquarters project shows
impact of slump on Silicon Valley

How bad is it for wafer fab systems suppliers? Well it's bad enough that Asyst Technologies Inc. this past week canceled plans for a new headquarters while cutting estimates for revenues in the current fiscal quarter due to a slowdown in spending on new production plants.

Asyst said its revenues are now expected to drop 38-to-43% to a range of $65-to-$70 million in the quarter, ending June 30, from $113.4 million in the prior three-month period.

Underscoring the impact of the downturn on Silicon Valley is the fact that Asyst says the 36-acre site being purchased for the canceled headquarters in Fremont, Calif., is now worth "substantially less" than the original $38.3 million price set at the end of 2000. The supplier of fab automation, wafer pods, and minienvironment systems is uncertain if it will keep the land or try to resell it.

(See June 19 story.)

Design tools will keep growing
because new software can save $$$

While uncertainty swirls around chip and fab equipment segments, suppliers of electronic design automation software will still see 20% year-over-year revenue growth in the foreseeable future, according to Dataquest Inc. this week. "EDA companies have confronted some licensing model problems lately, but they have to get the next-generation tools out the door sooner -- they run three years behind silicon," added Dataquest analyst Gary Smith during the start of the annual Design Automation Conference, which was held in Las Vegas.

Reusable design cores and libraries have saved billions of dollars in new ASIC products, but design tools are just keeping pace with the need for cost savings, according to Smith. He added that there is a huge opportunity for EDA vendors to help save billions of dollars for those designing the next-generation ASICs. And that will end up fueling new budgets for software design tools in the coming years.

(See June 18 story.)

X-Fab moves into Colorado

Colorado will soon have a new foundry fab after LSI Logic Corp. sells its 8-inch wafer plant in Colorado Springs to Germany's X-Fab Semiconductor Foundries AG for about $120 million.

The two companies this week announced the deal two months after LSI Logic decided to close the fab, but X-Fab now believes it can use the facility to expand its analog and mix-signal foundry business. The Erfurt, Germany-based company operates 6-inch fabs at this headquarters and in Lubbock, Tex.

(See June 18 story.)

If you have any comments, criticisms, or questions, don't hesitate to E-mail us at bhenkel@aol.com. Have a great weekend!

(Click here for last week's Semiconductor Alert!.)