These are the times that try men's souls," the American revolutionary Thomas Paine (1737-1809) wrote. While Paine was referring to the Revolutionary War, his words could just as easily describe the state of the semicon-ductor industry for the past two years. Few segments of the industry have escaped the ravages of this unprecedented recession, but the equipment makers and packaging foundries have been particularly hard hit.
Giant Amkor Technology, the industry's bellwether IC packaging company, has been gutted by the slowdown [amkor. com]. In addition to several layoffs in late 2001 and then again in 2002, Amkor profits have gone south. About two years ago, Amkor began buying up smaller competitors in Taiwan and Japan, even as the economic storm clouds began to darken. The company apparently viewed this as a means to increase market share in those Asian countries. Unfortunately, now the business to feed those new acquisitions is lacking. The recent end of joint venture discussions between Amkor and Fujitsu's IC packaging operation in Kyushu, Japan, may be one result. Assembly & Test Increase In its latest earnings report, issued October 29, Amkor reported an increase in assembly and test revenues of 12 percent over Q2 last year. The total amounted to $394 million, excluding its wafer fab business. That's the good news. Read a little farther, and the news is not so rosy: Amkor's Q3 net loss was $59 million or -$0.36/ share. Now, if you include various accounting disclaimers, the loss for the quarter was only $48 million or -$0.29/share. But, hold on here, this is good news-kind of! In Q3 of 2001, Amkor reported a net loss of $100 million-twice as much!
John Boruch, Amkor president, is quoted in the release as saying, "Our core assembly and test business has increased 36 percent since the first quarter (2002), which is a testament to the strength of the outsourcing trend and Amkor's leading market position." During 2002, Boruch claimed, Amkor gained customer share. ASE's Revenue Trending Up Taiwan's Advanced Semiconductor Engineering, which aspires to knock Amkor out of the #1 position, also reported a revenue increase for its Q3 ended September 30, 2002. For Q3, ASE reported revenues of $341,578,000, up 10 percent sequentially and a 42 percent increase over a year ago. ASE's balance sheet stayed (just barely) on the positive side with reported Q3 income of $9,079,632. This is comparable to per-share earnings of $0.015 for each American Depository Share traded. In ASE's formal announcement, Chairman Jason Chang reported, "Despite the slower than expected industry recovery, the overall environment is very favorable for us. We continue to benefit from the consolidation of IC backend manufacturing capacity worldwide." Chang correctly pointed out, "The industry recession and the depressed capital market have also weakened the competitiveness of many of our competitors." If you're a subscriber to Semiconductor Packaging Update, the incisive newsletter published by the backend's unofficial historian Dr. Subash Khadpe, you pretty much know who the players are and how they're doing.
Subash notes that the top 10 packaging foundries scored assembly and test revenues of $4.28 billion in 2001, a drop of 27.4 percent from $5.9 billion in 2000. The table, reprinted with Subash's kind permission, shows that the top 5-Amkor, ASE Group, SPIL, ChipPAC and OSE-kept their rankings from 2001.
Changes The putrid business climate for semiconductor equipment continues to exact its ugly toll. Gil Olachea, recently president of Kulicke & Soffa's Flip Chip Division in Phoenix, Ariz., has become one of its latest victims. Only a year ago, the Flip Chip division was one of K&S' most profitable operations. Proving, however, that it's not a one-way street, our columnist Lee Levine has returned to K&S in manufacturing technical support.
Lee exited K&S about 2H years ago for Agere/Lucent, which subsequently furloughed a large number of workers, including Lee. Until his return to K&S, Lee was consulting from Pennsylvania. Even as I was writing this column in November, I received word that Henri Van Parys, K&S' public relations manager, was given his walking papers, as part of the company's belt-tightening. Henri made my job easier and I'll miss him! Who's Forecasting the Forecasters? Admit it, don't you just love it when you find out the industry forecasters are wrong? Sure you do! So does David Crume of Advanced Forecasting Inc., Cupertino, Calif.-one of those forecasters! Recently, AFI noted that recent numbers compiled by the non-profit World Semiconductor Trade Statistics people pegged total semiconductor revenues from Jan.-Oct. 2002 at 3 percent below the same period for 2001. (ICs were 2 percent below.) AFT concluded that, given the then-current pace in November and December, 2002 would not change the picture very much. The final growth rate, said AFI, would be in line with its forecast published in October 2001. That forecast said chip sales would grow by a "negligible amount" in 2002. In comparing the numbers from various forecasters, AFI concluded that "some forecasts were pretty accurate, while others missed the boat." In fact, growth forecasts by well-known industry pundits for 2002 ranged from a negative 5.7 percent to as much as 20.6 percent! Space doesn't permit us to list the winners and losers; but you can find out how the forecasters did at www.adv-forecast.com. Taps I have to close on a sad note. The cantankerous John Brown, one-time engineer and former co-owner/CEO of the Cortani-Brown-Rigoli (CBR) agency in Mountain View, died in late October. He was 71. Tom Rigoli, the "R" in CBR, reports that John had been hospitalized for five weeks, during which time his condition became progressively worse (rigoli@mindpik.com). "I had a chance to visit with him over the weekend when he was still lucid and as ornery as ever," Tom told me. John, a heavy smoker, died from the results of an abscess on his left lung complicated by kidney failure. Born in Oklahoma, John often referred to himself as CBR's "beancounter," although he was an engineer by training. Earlier, he worked for Hughes Aircraft and Fairchild Semi, among others. Another unexpected October passing was an institution, not a person: That venerable weekly, Electronic News, founded in 1957, and often regarded as "The Bible of the Industry," has ceased publication. The paper was a victim of falling ad sales. As we look for the economy to get back in gear, remember the admonition often seen on bumper stickers: "Lead, follow or get out of the way!" This, too, may have been the product of Thomas Paine's sharp-witted pen.
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