Semiconductor ATE: Out of the doldrums

As its test business gathers steam, Teradyne faces new challenges in meeting the demands of emerging markets, says Mark Jagiela, president of the company's Semiconductor Test Division.

T&MW: You must be encouraged by the revival of the electronics field.

Jagiela: Yes. There's been a slow but steady climb out of the doldrums that affected our industry for three years. In the fourth quarter of 2003, we saw both rising demand for semiconductors and an increase in the average selling price for these devices. IC companies are now investing in capital equipment to meet this growing demand in all segments of the market—from automotive and cell phones to computers and consumer electronics.

T&MW: What testers does Teradyne rely on to serve this improving market?

Jagiela: In terms of sheer volume, the Catalyst and J750 product lines are the workhorses, each with more than 1000 units installed worldwide. However, our new FLEX platform is testing many of the hot new semiconductor devices. FLEX provides the high parallelism of the J750—which keeps test costs in check—while serving a broader range of applications.

T&MW: How do you assess your industry's progress in curbing test costs?

Jagiela: Each generation of testers from 1975 to 1995 got bigger—and their prices rose right along with the size. But in the 1995 to 1998 period, the trend was reversed, largely because of new developments in silicon technology. Testers became more silicon-centric, versus employing more cable, metal, and boards. As a result, we can offer more functionality at a lower cost.

T&MW: What other major challenges do you face in growing your test business?

Jagiela: Certainly, we will continue to battle the volatility that has always affected this industry, with cycles of surging demand followed by sharp declines. We also must adjust to changing geography, with more semiconductor testing being outsourced to test service companies in Asia. Teradyne has established a manufacturing center for the J750 product in Shanghai, as well as the beginnings of an engineering operation. This is similar to what we did in Japan, where we set up manufacturing and design operations in the 1990s to be closer to our customers.

T&MW: As more companies move semiconductor production to Asia, who makes the decision on what test equipment to use?

Jagiela: Most decisions on what test equipment to buy are still being made by the device design houses, whether they be the fabless companies or integrated device manufacturers. When you go to a test house in Asia, you'll see a proliferation of testers to accommodate the needs of customers. The test houses, of course, would rather have fewer but more versatile testers that can handle a wider range of devices.

T&MW: What is Teradyne's stance on the open-architecture debate?

Jagiela: We have an initiative called OpenFLEX, which allows third parties to build products for this new Teradyne platform. In contrast, Advantest advocates an open-architecture initiative, which aims to create an industry standard by committee. Our architecture has thousands of man-years of Teradyne's intellectual property embedded in it. In the end, the free market will decide this question, based on best economics and performance. We are providing an attractive opportunity for third parties to work with our platform and thereby gain access to new customers and new markets.