And then there was the two hours that it took to cross the Allenby bridge into Israel. The young Israeli soldiers squeezed our toothpaste, shot a picture with our camera, and searched the contents of every suitcase. Now Americans have a taste of what citizens from other countries have been going through for decades.

Is Applied pulling plug
on its e-beam business?

The word is getting around the Valley that Applied Materials is looking at a plan to pull the plug on its electron-beam mask-writer business.

It was less than two years ago that Applied entered the e-beam business by acquiring Etec Systems in a stock-swap deal reportedly worth $1 billion. If Applied decides to shutter the e-beam unit, it would be a major blow for the U.S. chip-equipment industry. Etec, the world's largest e-beam supplier in terms of installed base, is the last supplier of these tools based in the U.S.

No one at Applied will comment, but sources say the company is "reviewing" a plan to shutter the e-beam portion of Etec. A final decision is expected within 30 days, possibly as early as next week, they say. Applied does not plan to shut down Etec's pattern-generation equipment operation, according to these sources.

Etec president Howard Neff is no longer running the subsidiary. He's been replaced by Moris Kori, who was named general manager of the Applied unit. Neff, who has moved from Etec to Applied's corporate office, is now working another project and says he "can't comment on Etec."

Etec has been losing market share in recent years and was more than a year late in delivering its latest generation e-beam system. The delay hurt Etec, as it "has been losing market share to Toshiba and JEOL," says Cristina Osmena, analyst at Needham.

So far, Etec reportedly has shipped only one of its new eXara systems and has only two on order. Sources believe Etec is still having trouble making the system work. It also faces another major problem--photomask shops now believe they can extend their current 130-nm mask-writing tools to the 90-nm node, something that could reduce the potential market for Etec's new e-beam system.

(See March 11 story.)

Chinese foundry is buying
used fab gear to save money

Instead of equipping its latest wafer fab--now under construction in Beijing--with new chip-making production equipment, Shougang NEC Electronics (SGNEC) is negotiating with United Microelectronics and Hynix Semiconductor to acquire used quarter-micron chip production equipment for its 8-inch plant.

Used quarter-micron gear is quite adequate for the foundry work intended for the new fab, and will allow SGNEC to get into production at far less cost than equipping the plant with new systems, says Tsuyoshi Suzuki, president of the Chinese chip maker. He expects to decide by mid-year on whose production equipment to buy Lowest price wins.

Shougang NEC is taking the same route in the upgrading of its existing 6-inch fab by retrofitting surplus quarter-micron equipment that it is buying from NEC. Both fabs are expected to begin production with the quart-micron gear next year.

(See March 12 story.)

Taiwan foundries to get okay to move
to mainland, but does it really matter?

Later this month, after months of delays and acrimonious debate, the Taiwan government will ease restrictions on local investment in 200-mm wafer fabs in China. That will officially open the door for Taiwan Semiconductor Manufacturing and United Microelectronics to fund mainland factories.

But ironically, few, if any, companies in Taiwan will bother to build more 200-mm wafer plants. "It's a meaningless argument," declares Frank Huang, chairman of Powerchip Semiconductor. "This is very old technology and by the time we move to China and build the fabs, it will be even older technology." His company is now ramping up a 300-mm wafer plant in Taiwan.

Taiwan already is ahead of the rest of the world in moving to 300-mm wafers. That alone, some say, is likely to keep many chip companies in Taiwan.

But the debate over whether to allow such fab investment has nearly paralyzed the Taiwan government. "We fear that if high-end companies like TSMC move there, then there will be no expansion opportunities in Taiwan," declares Wen Hsu, vice president of the Taiwanese Professional Engineers Association. To Hsu, Taiwan's foundries starting up plants in China is a death stroke to the island's future.

(See March 13 story.)

AMD's 0.13-micron MPU has
smaller die than Intel's latest

Advance Micro Devices continues to run a close horse race with its giant microprocessor competitor in process technology. Later this month, the company will begin shipping its first 0.13-micron processor, the latest member of its Athlon XP family of processors.

Code-named Thoroughbred, the new processor is about 38% smaller in area than its current 0.18-micron MPUs and has an even smaller die size than Intel's new 0.13-micron processor.

Intel's latest 0.13-micron processor is nearly 83% larger than AMD's 0.13-micron processor, declares Bill Siegle, AMD senior VP. "Moving to 0.13-micron technology will enable us to produce higher-performing products while lowering costs, putting us in an even stronger competitive position."

AMD's smaller die will give it "even more advantage in the future," claims Siegle. "Our Fab 30 team in Dresden is already approaching mature yields for the 80-square mm Thoroughbred die," he says.

The company expects by the end of the year that all of its Athlon processor family will be fabricated with 0.13-micron technology. It also will use the 0.13-micron technology to build its next-generation, 64-bit Hammer processor. It will also incorporate silicon-on-insulator technology.

(See March 12 story.)

Agilent making big changes
in chip making operations

Agilent Technologies is making wholesale changes in its manufacturing operations to cut costs. It is consolidating its existing wafer fabs in a new 150-mm plant being built in Fort Collins, Colo., and closing down three fabs in California. It is slated to eliminate 8,000 jobs, or 18% of its workforce, by midyear.

The company already has closed an older bipolar fab in San Jose and transferred the technology into a plant owned by STMicroelectronics in Singapore. The technology from the other two California fabs, both gallium-arsenide processes, will be moved to Fort Collins by the end of the year.

The IC, test gear, and instrument spin-off of Hewlett-Packard is developing a new indium-phosphide (InP) process at Fort Collins, which it claims will give better performance at lower power levels than silicon-germanium (SiGe) technology. Agilent plans to develop 10- and 40-gigabit-per-second devices with the InP technology.

The move represents somewhat of a new direction for Agilent. The company had been developing devices based on CMOS and traditional GaAs processes. The company has no plans to develop SiGe technology, utilizing outside foundries instead for its SiGe requirements.

(See March 13 story.)

2nd U.S. backend firm forms
alliance with Chinese foundry

In what looks like a trend, another Chinese foundry startup has joined with another U.S.-based backend chip assembler to go after the Chinese chip market. Grace Semiconductor Manufacturing and Amkor Technology are forming a "multi-purpose alliance" for complete chip manufacturing and supply-chain services.

Their deal is similar to the one struck recently by U.S.-based ChipPAC and Shanghai-based Semiconductor Manufacturing International, which will cooperate in wafer fab-to-backend manufacturing services in China.

Under the new alliance, U.S.-based Amkor will become a customer for Grace's wafer-processing services and the Shanghai foundry will obtain chip-packaging and final testing services from Amkor. The U.S. company also will provide Grace with a full range of sales, marketing, planning, logistics, and information technology services to support its wafer fab business.

Amkor has set up a new chip assembly and testing facility in the Waigaoqiao Free Trade Zone near Shanghai. Grace expects to be in production at its 200-mm wafer fab by the end of 2002. Located in the Zhangjiang Hi-Tech Park in Shanghai's Pudong district, the new fab is expected to have a capacity of 50,000 eight-inch wafers per month, once it is fully loaded.

(See March 13 story.)

Utilization rate at foundries
going up faster than expected

The big Taiwan foundries, which took a major hit in recent months when their fab utilization rates fell so dramatically, may now be leading the industry out of the downturn.

Taiwan Semiconductor Manufacturing and United Microelectronics report demand for chips are picking up fast, which already resulting in higher utilization rates. TSMC's utilization rate will top 60% this quarter, while UMC is predicting the utilization rate for its fab will jump to 55-to-60% in the first quarter, 70% in the second quarter, and more than 70% in the last half of the year.

These very optimistic projections could indicate the global semiconductor industry may be gaining momentum faster than observers had expected following the downturn last year. "The inventory levels of our customers have been falling fast," says UMC vice chairman Peter Chang.

Business is coming back so fast, in fact, that TSMC will likely raise its 2002 capital spending budget from the $1.65 billion it set two months ago, says CFO Harvey Chang, which would put it closer to the $2.2 billion that TSMC paid out in 2001 for capital expenditures. UMC expects its capital spending budget this year will remain at what it had budgeted previously, $800 million.

(See March 13 story.)

Design teams will go
if HP, Compaq merge

From the get-go, I was on record as being against the merger of Hewlett-Packard and Compaq. This kind of merger "of equals" never seems to work in the electronics industry--particularly between companies with such different corporate cultures. I predicted earlier that shareholders would not approve this deal, but now I'm not so sure. It now looks too close to call.

Shareholder approval would not only be bad news for investors, in my opinion, but also bad news for many HP and Compaq engineers. If shareholders okay the deal next week, the combined company will move quickly to lay off several entire design teams.

A 900-person integration team, using an "adopt and go" strategy, has picked the two companies' top products. The staffs working on these products would be increased by 10-to-20%. But most of the employees working on products that didn't make the integration team's list will be laid off.

The idea is that the new company "will adopt the management teams that go with the business or function" being retained, says Webb McKinney, who heads the HP integration team. "A large merger like this is by definition unsettling to employees, because we can' tell employees which jobs will stay and which will go," he says. An estimated 15,000 people will be laid off.

The merged company will adopt Compaq's ability to make quick decisions, while retaining HP's engineer-like culture, McKinney says. "HP has a methodical approach to making decisions. We are a company founded by engineers and we have an engineering culture," he says. "Compaq largely grew up as a PC company that had to make decisions quickly and correct them the next time around as needed."

But what if the new company ends up making decisions like HP and retaining Compaq's culture?

(See March 11 story.)

Via gambles big time
with fast DDR SDRAM

Via Technologies is taking a big chance this week. It's putting all its eggs in the DDR333 basket, the 333-megahertz version of the double-data-rate (DDR) SDRAM.

The Taiwanese company is rolling out its Apollo KT333 chip set for PCs based on Advanced Micro Devices's Athlon XP processor line. Shortly, it will introduce the Apollo P4X333 for systems based on Intel's Pentium 4 processors. Both chip sets will support the DDR333 standard.

Right now, the PC market is moving from SDRAM to DDR memory, thanks partly to Intel's efforts to support DDR with its new chip sets. But Intel's chip sets do not support DDR333, only with the slower DDR200 and DDR266 memory. This leaves it up to Via to push the market towards the faster DDR333.

Via says it is getting full support from such DRAM makers as Samsung, Micron, Hynix, Infineon, Nanya, and Elpida. All of them are shipping DDR333-enabled DRAMs to support Via's chip sets. Hynix's DDR333 memory module used with VIA's Apollo KT333 delivers "outstanding performance and features," brags Farhad Tabrizi, marketing VP.

"Our customers tell us that speed counts," says Tom Quinn, Samsung marketing VP. Samsung's DDR333 memory modules combined with VIA's DDR333 chip set will provide customers with "all the high-performance memory they need at competitive prices."

"DDR333 is well on its way to becoming the next DDR speed grade to be supported," says Brett Williams, strategic marketing manager for Micron Technology.

(See March 11 story.)

Infineon deals to raise
its DRAM market share

Infineon Technologies has lost one heckuva lot of money in the past year or so by betting big on DRAMs. But it still wants to get a lot bigger in this crazy chip market. This week the German chip maker signaled that it believes the DRAM market is beginning to recover from its long and steep downturn.

It signed two separate memory foundry agreements with Winbond Electronics and Mosel Vitelic, both based in Hsinchu, to increase its DRAM production capacity.

Infineon will license its advanced DRAM trench process technology to Winbond and, beginning in 2003, gain exclusive access to standard DRAMs fabricated by the Taiwanese company with this technology.

Mosel Vitelic agreed to increase Infineon's share from 38% to 48% of the output of DRAMs from their joint venture, ProMOS Technologies. The two new deals will increase Infineon's DRAM capacity by more than 20,000 eight-inch wafer starts per month.

"Infineon considers these cooperations as a major step to prepare for the upcoming market recovery," says CEO Ulrich Schumacher. He also expects the two agreements to raise Infineon's market position in the global DRAM business.

(See March 11 story.)

Intersil is humming,
buys Elantec for $1.4B

Hey, does this mean the semiconductor industry is starting to feel good about the marketplace again? Here's comes a new chip acquisition worth $1.4 billion in stock and cash.

Intersil has agreed to buy Elantec Semiconductor in Milpitas, Calif., so that it can enter the chip market for optical storage systems and flat-panel displays. What Intersil wants to do is combine Elantec's presence in analog optical storage and flat-panel display applications with its product activities in wireless local area networks and power management.

Once the purchase is completed, Rich Beyer, Elantec CEO, will become CEO of Irvine-based Intersil, while Intersil CEO Greg Williams will take over as executive chairman of the board of directors focusing on corporate, wireless, and analog strategies.

Elantec's communication ICs and standard analog products will "strengthen Intersil's portfolio of analog ICs," Williams says. "The product lines are complementary," he says.

The combined companies will have "one of the industry's strongest balance sheets, with greater than $550 million in cash after the transaction and no debt," says Intersil CFO Dan Heneghan.

Orders for Intersil orders are running above expectations in the current quarter, he says. "We now expect first quarter revenues to increase sequentially by 6-to-8%, vs. Intersil's previous guidance of 3-to-5%." In the quarter ended Dec. 28, Intersil's revenues hit $121.6 million, a 7.2% sequential increase from the previous quarter. "Increased wireless demand is driving most of the upside," Heneghan says.

(See March 11 story.)

Intel takes giant step
toward 90-nm process

Intel used this week's CeBit trade show in Hannover to ballyhoo another big process innovation. In a big step toward launching its next-generation 90-nm process technology, the chip giant says it has fabricated the industry's first fully functional SRAM chips with six-transistor memory cells measuring only 1 square micron.

"Intel is the first to achieve this milestone--this cell size is the smallest reported in the industry to date," proclaims Mark Bohr, Intel fellow who heads Intel's process architecture and integration unit. The SRAMs have a capacity of 52 megabits--biggest in the industry, he says.

Intel's is using the SRAM test chips as its prototyping vehicle for its new 90-nm (0.09-micron) process technology. It is scheduled to be put into volume production next year, fabricating the Pentium 4 processor codenamed Prescott.

The company believes the SRAM prototype chips have the smallest physical transistor gate lengths of any working IC, measuring less than 50 nm (0.05 micron). The Intel SRAM is not a product, but it plans to use the tiny six-transistor cell in cache memory blocks on its next-generation processors.

Intel's new 90-nm process is the first time it has used193-nm step-and-scan tools. The D1C fab in Hillsboro, Ore., will be converted to 90-nm manufacturing by the end of next year," Bohr says.

This announcement is important, Intel execs say, because it shows that "Intel is on track to deliver a new process technology every two years." It also shows that Intel is on schedule to hit its goal of producing a microprocessor with 1 billion transistors by 2007. The SRAM prototype chip has 330 million transistors, 50% more than Intel's latest Itanium processor McKinley.

Intel's schedule is roughly comparable to the one disclosed by TSMC, which has partnered with Philips and STMicroelectronics to move 90-nm processes into production next year. At 1.36 square microns, TSMC's SRAM cell size is larger than Intel's. But the partners plan to reduce this cell size to 1.27 square microns by the end of the year.

(See March 12 story.)

Agilent says its ATE revenue
will grow despite flat market

Agilent Technologies figures the global automatic test equipment market will show little or no growth in sales this year. But it expects its ATE business to grow much faster, thanks to the spread of system-on-chip designs, graphics ICs, and other high-performance products.

But that's not saying all that much since last year was no winner. The worldwide ATE business fell a spectacular 64.2% last year--from $6.7 billion to just $2.4 billion, according to VLSI Research.

"Our semiconductor test business is picking up," says Pascal Ronde, sales VP for Agilent's Automated Test Group. These sales in the quarter ended Jan. 31st were up 155% over the previous quarter, he says.

Driving ATE growth was an uptick in orders from test subcontractors in Taiwan, and stronger ties to Nvidia and other suppliers of chip sets and graphics chips. "We see strong growth for ATE in chip set and graphics," Ronde says.

(See March 12 story.)

Is it too late to build
parts plant in China?

Yep, it may be too late for foreign suppliers to enter the fast-growing China electronic components market.

Most major overseas suppliers had anticipated China's recent entry into the World Trade Organization some time ago and had opened new China plants during the past several years. "These companies now have entrenched operations in China, which will make it difficult for newcomers to come into the market with their own new factories," says Enrico Baravalle, CEO of Epcos.

Epcos, a Munich-based spin-off from Siemens AG, "has completed its $30 million Stage 1 investment to open four plants," he says. They will make or assemble most of the firm's line of SAW chips, tantalum and film capacitors, surge arresters, inductors and ferrites. Stage 2, he says, will upgrade the plants and bring more front-end operations to those facilities now used only for assembly and test.

Another foreign company already deeply entrenched in China is Yageo. The Taiwanese firm has invested $289 million over the past decade in its two large passives plants in Suzhou and Donguan.

Taiwan firm already has invested $289 million over 10 years in its two large passives plants in Suzhou and Donguan. "These plants not only supply the domestic China market, but 50% of their production is for export," says Manas G. Roy, director of global key accounts. A major incentive, he says, for locating its plants in China is the 86% savings in labor costs over Yageo's plants in other countries.

(See March 12 story.)

AMD takes market share from
Intel in several MPU markets

Advanced Micro Devices is bragging again. But you can't really blame them. It's really tough for any company to compete with Intel, the world's largest chip builder. But AMD executives are pointing to new market share figures from Dataquest that show AMD gaining ground in several desktop computer sectors.

AMD's overall PC processor market share in Windows-based desktop computers jumped from 18% in 2000 to 22% in 2001, based on the new Dataquest estimates.

AMD claims it gained even more market share in processor chips for computers for small- to medium-sized businesses, educational desktop computers, and desktop PC education markets in the U.S.

AMD's microprocessor share in U.S. small business desktop PCs nearly doubled, surging from 20% in 2000 to 37% last year. In the medium-sized business market, AMD claims its PC processor share of desktop systems jumped from 11% in the fourth quarter of 2000 to 28% in the fourth quarter of 2001. Its share of PC processors going to the educational desktop market grew from 12% in the fourth quarter of 2000 to 17%, while its share of the U.S. desktop government sector doubled to 32% in this period.

It was also able to grab market share outside the U.S. AMD claims its PC processors went into 42% of the Japanese home computers during 2001. In Western Europe, AMD had 41% of the processor business in home desktop computers and 28% of this same business in Eastern Europe.

(See March 4 story.)

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