The ATE market--like just about every chip industry segment--suffered its worst downturn in history last year. In total, the worldwide ATE business fell from $6.7 billion in terms of sales in 2000 to $2.4 billion in 2001, according to analysts at VLSI Research Inc. of San Jose.

Without any doubt "2001 was a tough year," said Jean-Luc Pelissier, vice president and general manager of San Jose-based Schlumberger Semiconductor Solutions, in an interview with SBN at the company's headquarters on Thursday.

But the severe downturn appears to be at its end, and Pelissier said he believes the shell-shocked ATE market will show some positive growth in 2002. He added that, "2003 and 2004 also look promising. A lot of devices will require new test capabilities. This is going to drive demand for ATE," Pelissier said.

Driving the ATE market this year and beyond will be a new class of high-speed microprocessors, memories, chip sets, and graphics ICs, he predicted. Another key market for struggling ATE vendors will be system-on-a-chip (SoC) products as well as new ICs based on emerging I/O standards, such as 3GIO, HyperTransport, and others, he added.

But ATE vendors will also face several challenges going forward. One of the biggest challenges is to test a new wave of communications devices, including wireline circuits for 10- and 40-gigabit-per-second applications, noted Doug Cutsforth, vice president of SoC and logic test for Schlumberger Semiconductor Solutions.

"The biggest challenge is to reduce the cost of test," Pelissier added.

Indeed. Intel Corp.--reportedly one of the Schlumberger's biggest ATE customers--has declared war on chip-testing costs, which have surged by 25 times for complex microprocessors and other ICs in recent years. To combat the staggering cost increase, Intel is moving from a functional to a "distributed test" or structural approach to chip testing (see June 19 story ).

Last summer, Schlumberger Semiconductor Solutions rolled out its new low-cost structural tester. One of the first customers for the Schlumberger DeFT line of ATE is reportedly Intel (see June 25 story ).

Officially, the San Jose-based test systems supplier is part of Schlumberger Ltd., the French-based oil field service giant. Last year, the parent company announced plans to divest its ATE operations to focus on core businesses.

So far, the ATE operation has sold off two of its business units--one division making handlers, IC thermal conditioning systems and other automated equipment to Cohu Inc for $14.2 million in cash (see July 17 story), and its electron-beam wafer inspection business to Applied Materials Inc. (see Oct. 26 story). In the future, a spin-off of the test operation and other key groups into a new independent company is being planned later this year.

But either way, Schlumberger Semiconductor Solutions managers are confident that their business will remain a formidable force in chip-testing systems and technologies. Almost in unison, top executives insist that the operation has "no plans to go away" in the ATE market. In fact, the company makes a strong case that it could well be in the best position for survival and growth in the ATE market--based on its high-profile based of growing customers. Its customers include the likes of Advanced Micro Devices, Intel, NEC, STMicroelectronics, and Sun Microsystems.