Tests temper ATE firms' optimism

The bad news for the commercial ATE firms is that they are becoming victims of their own success.

By Rick Nelson, Editor in Chief -- Test & Measurement World, 8/1/2010 12:00:00 AM

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A wave of optimism is sweeping the semiconductor equipment industry as evidenced by the positive mood at Semicon West, held July 13 through 15 in San Francisco. ATE manufacturers in particular had positive things to say about the industry on the exhibit floor and in a special Thursday workshop titled "ATE Vision 2020."

But the news out of the workshop for the ATE industry isn't all rosy, and the ATE companies themselves will be tested as they contend with evolving markets and technologies. Consultant Ron Leckie, principal of Infrastructure Advisors, said in his workshop keynote address that he expects the field of five major ATE vendors (Advantest, LTX-Credence, Teradyne, and Verigy, all of which were represented in the workshop, plus Yokogawa) to shrink to three within the next three to 10 years.

In good news for the commercial ATE companies, Leckie urged chip makers to avoid in-house solutions. For focused test within captive test operations having few sites and serving a narrow product line, in-house testers can be effective, he said, but in most cases, the pitfalls far outweigh the positives: In-house strategies impose hidden costs and overhead, with respect to documentation, training, customer support, and ongoing maintenance. In addition, firms employing outsourced semiconductor assembly and test services will need to support their proprietary testers within the OSAT (outsource assembly and test) environment.

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The bad news for the commercial ATE firms is that they are becoming victims of their own success. Because of the ATE companies' successful implementation of parallel and concurrent test technologies—coupled with the increasing adoption of scan, built-in self-test, and adaptive test techniques—the cost of test hardware is falling as costs shift to fixtures, probe cards, handlers, and probers.

The good news and bad news combined, Leckie suggested, does not add up to support for all five major players. Showing the turmoil that has riled the industry through the years, he presented one slide listing about three dozen companies who have evolved through spinoff, merger, or acquisition into today's major players. You can view the slide at his Website, www.infras-advisors.com, and he invites additions and corrections.

Leckie attributed his prediction that the current field will shrink to three in part to "The Rule of Three," after the book of the same name by Jagdish Sheth and Rajendra Sisodia. According to the rule of three, markets support three generalist competitors plus several specialists, with the generalists including a dominant player with a 40% market share, a strong second-place player with about a 20% share, and a third-place player with about a 10% share. He noted that the dominant competitor in such a situation may be least innovative, with the fragile third-place company leading the field in innovation.

Leckie said that as the field consolidates, we may see mergers and acquisitions involving niche, specialist players such as Aehr Test, ELES, Micro Control Co., Roos Instruments, ProductionLine Testers, and SPEA. The good news for ATE customers is that they can expect to see a wave of innovation as the major and niche players alike struggle to be among the survivors.