SAN JOSE, Calif. -- This is the worst downturn in the history of semiconductor equipment.
Most would agree about that. But what individual sector is the worst? ATE. Inspection. Litho. Wafer cleaning.
They are all terrible, but in my opinion, fab automation is the worst right now. Fab automation includes front-end modules (FEMs), sorters, load ports and automated material handling systems (AMHS).
Here's the evidence:
1. Fab automation pioneer Asyst Technologies Inc. has recently filed for bankruptcy and is looking for a buyer. It has suffered endless losses and layoffs.
2. Another vendor, Brooks Automation Inc., has also seen layoffs and losses. Brooks also recently said revenues for the second quarter of 2009 were $37.3 million, compared to revenues of $147.7 million in the second quarter of 2009, a decrease of 74.7 percent. Sequentially, revenues were down 49.2 percent from first quarter revenues of $73.4 million. Net loss for the second quarter of fiscal 2009 amounted to $152.5 million.
3. It's slightly a better picture at Japan's Daifuku Co. Ltd.. Third-quarter sales were up 12.9 percent, but profits were down 30.1 percent. Daifuku sells products in various diversified markets, but I'm sure its cleanroom unit is suffering.
4. The same is true for Japan's Murata Machinery Ltd. Other fab automation vendors must be suffering as well.
The problem is that fab automation orders do not come in bunches. A chip maker standardizes on a fab automation system for a plant. Then, the chip maker orders that system and installs it. The order is complete and there are few big, follow-on orders. FEMs could be an exception to the rule, but that isn't a great business.
Why does this matter? First, the fab tool industry needs three or so strong vendors in each sector. Each vendor pushes the others to innovate. And they attempt to offer good products at decent prices.
The trouble? The fab automation sector is stagnant. Innovation is scarce. The sector has perhaps two vendors that are in decent financial shape. Maybe less.
In other words, there is a crisis in fab automation. If or when chip makers begin to build fabs again, who will step up and devise the latest and greatest AMHS systems?
To me, that's unclear. The solution? Chip makers may have to help fund--or bail out--their friendly fab automation vendors. If not, look out for the next Chapter 11. And dreams of next-generation, automated fabs could up in smoke.
Send me your thoughts about that as well. Happy to debate the topic.
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