In the midst of one of the worst ever downturns in business for the semiconductor industry, investment bank BancAmerica Robertson Stephens hosted its annual semiconductor conference in San Francisco. And while most visiting companies were willing to speculate about the inevitable rebound in the market, there was a general lack of consensus as to when it would arrive. I believe we’re at the bottom now, said Scott Kulicke, CEO of Kulicke & Sofa Industries Inc, it couldn’t get much worse. Orders at the world’s largest producer of semiconductor assembly equipment have fallen by two thirds in the last quarter, compared to the firms compound average annual growth of 40% every year. Asian demand has gone to hell and total IC demand is off said Kulicke, PC business is soft and PC hardware performance has run off the edge of the price elasticity curve… most applications no longer stretch the hardware and so demand is now governed by factors external to the box, he said, the recovery will be slow… [and] it will be tough in the meantime. Kulicke said that for planning purposes, it would be a year before there was any capacity increase. Applied Materials Inc, the supplier of fabrication equipment to all the world’s major chip makers, tried to put a brave face on current conditions with CEO James Morgan reminding investors that the future will be paved with silicon. He said the internet would grow into a major engine, powering increased demand for semiconductors. Morgan said the industry faced a triple witching hour at present, comprising lack of Asian demand, the rise of sub $1,000 disposable computing and the ‘market share at any cost’ attitude prevalent among chip makers. But he predicted that supply and demand for DRAM chips would come back into balance again next year after two years of excess capacity. Dallas Semiconductor Corp’s CEO, Vin Prothro, lamented the imminent demise of his firm’s profitable trading record. Out of 44 quarters as a public company, Prothro said 39 had shown record trading. Unless something dramatic happens in the second half of 1998, the year will end our run of growth, said Prothro who has now started to strip out costs. The third quarter wasn’t going to bring any cheer either due to seasonal weakness. The third quarter is always made up of two months you wish would never happen, followed by September, said Prothro. As for the eventual upswing, Prothro said he had no visibility because half of what the firm ships in any quarter is ordered in the same period. Dallas Semiconductor endured a similar period in 1991, then one day, it just turned around! said Prothro. The most upbeat presentation of the conference came from Rambus Inc’s CEO Geoff Tate. Addressing a conference room filled to capacity, Tate was effusive about his firms patented technology which gives manufacturers a cheap way of boosting the data transfer rate to and from computer memory; sometimes called ‘memory bandwidth’. Bandwidth demand is infinite said Tate, citing the example of future games where the graphics requirement will call for the quality of, say, Pixar Animations Studio’s ‘Toy Story’. Rambus’ business model takes a per chip royalty from manufacturers who license its technology. Quoting a study by researchers InStat, Tate said the total percentage of DRAM’s incorporating Rambus technology would grow from around 1% today to 50% by 2001. Directly following the presentation, shares in Rambus rose around 10%. Sadly, the biggest of them all, that giant bellwether company Intel Corp, had nothing to say. Rather than buoy up investors with tough talk about turning this market around, Intel simply sent along a general manager of its Technology and Manufacturing Group, Sunlin Chou, who bamboozled a puzzled assembly of investors with a lecture in managing technological risk; all based around slides from a decidedly low-tech overhead projector (see separate story). รก
