In fact, the so-called wafer-fab software market is playing key but often-overlooked role in the IC-manufacturing food chain. To get a handle on this complex market, SBN caught up with Joe LaChapelle, vice president and general manager of the EGsoft Division at Electroglas Inc..

San Jose-based Electroglas is known for its wafer probers in IC-testing applications. But not to be outdone, EGsoft is developing and selling critical software products for a range of process applications, such as failure analysis, yield management, statistical process control, e-diagnostics, overall equipment efficiency, and automated process control.

SBN: How is the current business climate in semiconductor manufacturing affecting the software segment?

LaChapelle: The most significant weather element, of course, is that we are still in the grips of a downturn, and it appears that in 2003, there will not be significant improvement to warrant added capacity in the fab. The resulting economic factors are driving chip producers to control costs by consolidating organizations where possible, creating a business priority domino affect across the industry.

The industry continues spending money on software solutions, but their focus is changing. There is growing pressure to optimize manufacturing processes and reduce headcount, while maintaining core competencies. Process optimization software development is not typically a core competency for the majority of semiconductor manufacturers. It is a context activity necessary to guarantee their operations generate as many good die as possible. This focus shift to core activities has opened a significant opportunity for merchant software suppliers to fill the gap.

Historically, IDMs, test houses and foundries, even fabless chip makers, have maintained internal software development groups that have focused on different aspects of process improvement-- failure analysis, yield management, MES, test optimization, etc. With the severe economic climate, these companies are compelled to consider and pursue merchant-based alternatives that provide increased benefit, while maintaining the manufacturing expertise differentiation they currently enjoy with their in-house development.

SBN: Can you give us an example of this trend?

LaChapelle: Using the DRAM market as an example, where marketing and chip design play a role in differentiating the contenders, it is advanced manufacturing technology that primarily separates the top three. As a rule, whenever there's a process enhancement, the leader gets to market first. The same holds true in the foundry business. The top contenders don't have significantly better service or lower pricing, but they invariably offer the most sophisticated manufacturing technology with the highest yield and throughput, first. The market leader in virtually every semiconductor segment is the company with the leading manufacturing intellectual property.

The primary hurdle for any merchant software supplier in this market is the ability to enable the customer to integrate, leverage and extend the manufacturing IP that already resides in their organization. Indeed, the substantial growth forecasted for merchant CAM software initially depends on suppliers in this category to provide a product portfolio, which successfully negotiates that hurdle.

SBN: So, you're saying that applying the manufacturers' own intellectual property is the key to the success of merchant software?

LaChapelle: Actually, that just gets you a ticket to the party; it is not enough to make you the belle of the merchant software ball. The customers in this space already enjoy the benefit of software applications incorporating their differentiating manufacturing expertise. Internal development groups have done an excellent job capturing the institutional manufacturing knowledge that exists within a given fab. What they haven't done is integrate the wealth of application content available, extend it with the best of their own internal manufacturing IP, then globally deploy the resulting software framework across their worldwide manufacturing value chain.

That's where we've laid our bet-- on the efficient, customer-specific IP extension and global deployment of best-of-class software applications targeting yield and throughput optimization. We deploy software in an enterprise manner that allows our customers to leverage their localized expertise across their global manufacturing enterprise -- globalization of the manufacturers local IP is prerequisite for success in the merchant software space.

The job does not end with the installation of any given software optimization application; there is a continued requirement to extend and adapt to the next process challenge presented. To that end, EGsoft has been aggressively partnering with professional services organizations to provide the consulting services necessary to support the requisite value chain equation to compel semiconductor manufacturer's to augment, and even shift, their internal software expenditures to an external merchant purchase.

SBN: Where does EGsoft's technology fit into the semiconductor manufacturing process? What is the scope?

LaChapelle: One of the things you quickly recognize about this software business, as you deliver applications solutions, is that the breadth of data sources required to perform analysis spans the entire manufacturing process; many times from the design schematic all the way to bin results at sort.

For example, one of the newest products from our Design-for-Manufacturing group utilizes test floor data, defectivity analysis results and schematic (EDA) information from our CAD navigation product to provide a yield optimization application for the fab. Our ability to provide our customers with software applications that acquire data, perform analysis and interpret the results, from design to test, is quite unique compared with our competitors. There is no one else who has that much scope, let alone the infrastructure to support the data flow, customization and connectivity.

SBN: How does this relatively new division fit into the overall Electroglas corporate vision?

LaChapelle: One thing all successful companies do is pay attention to trends in the marketplace. Electroglas recognized five years ago that software would be the element providing the value in the maturation of the manufacturing process. Dataquest and VLSI put the total fab software market at $400 million today. By 2007, that same market segment will be at $2.2 billion, a 45% CAGR. Something is fueling that expectation--we believe it's the necessity for continuous optimization of the manufacturing process.

There was, and continues to be, the vision developed and communicated by our CEO, Curt Wozniak back in 1997--to become the industry leader in providing process management solutions. I believe we are right on target with EGsoft.

SBN: Can you give an example of how EGsoft is taking advantage of process management trends?

LaChapelle: Here's a very specific example from the test floor. There is a significant trend developing which effectively takes the functional performance decision away from the tester, in favor of a host of data sources and analysis algorithms. Many of our customers are determining the functional performance of a die as a result of data collected from schematic rules, structural test data, parametric data, defectivity data and limited functional test data.

In its simplest form, a lot scheduled for the test floor is analyzed die-by-die for killer defects and a minimized test control map is created. The result is increased throughput at test and burn-in as well as improved device reliability in the field.

Another example is bin spatial analysis: Customers have found that the spatial distribution of functional performance has high correlation to long-term device reliability. In this application, analyzing the spatial distribution of functional performance results in the real-time modification of the test control map. Again, the result is increased throughput at test and burn-in as well as improved device reliability in the field

You can see where this is going. A current trend is to reduce the test load. At EGsoft, we anticipated trends would develop requiring a broad range and scope of applications solutions to optimize manufacturing efficiency. We never know exactly what trends will develop, but we have put ourselves in a position with a business model and technology and to take advantage of it.

SBN: What has been EGsoft's strategy during the downturn?

LaChapelle: Our strategy has been to grow revenue at a breakeven net income. We have been able to successfully grow the top line every quarter since the inception of EGsoft. No small feat in the current economic climate, and a sign that bodes very well for the future.

SBN: How do you see the software sector changing?

LaChapelle: I think the key trend is outsourcing. As customers gain more confidence in the purchase of merchant software, we will see a consistent migration from internal development to external sources. You can bet that semiconductor manufacturers, especially the tier one players, will maintain their manufacturing IP as a key differentiator. As a result, they will be looking for partners who can provide flexible, efficient products that protect that differentiation while providing additional value that means a growing market for software solutions and professional services.

SBN: Are there emerging technologies that EGsoft is uniquely positioned to provide or support?

LaChapelle: Absolutely. We will shortly be announcing a new platform that is a generational leap in allowing customers to integrate, expand, and globalize their manufacturing expertise. Our solution will provide an enterprise-wide information portal that integrates and acts as a platform for existing applications (MES, APC, etc.). It enables those applications to be integrated as subcomponents of a larger enterprise platform. Built on Microsoft's .NET technology, it brings a whole new standardized environment for connectivity, integration and collaboration.

SBN: How would EGsoft like to be known?

LaChapelle: That's a good question. We'd like to be known as the company you call when you need software solutions for yield and throughput optimization.