The semiconductor industry is working through excessive inventory coupled with unusual slowness in the third quarter of 2011, which has caused the average capacity utilization rate for IC testing service providers to drop to 50-60%, according to Mike Liang, president and CEO for King Yuan Electronics Company (KYEC).
Weakness in the overall chip sector will likely remain or even worsen in the fourth quarter, as downstream companies continue to make adjustments to inventory, said Wang. But the market is expected to return to its traditional seasonal cycle in 2012, Wang indicated.
Overall, the semiconductor market will go through a particularly weak second half of 2011 as global economic uncertainties discourage consumers from spending, Wang observed.
In addition, Wang expressed concerns that the IC testing business is facing ASP erosion while foundries continue to make advances in shrinking process geometries. With the die-per-wafer number increasing, ASPs for standard IC testing will be dragged down resulting in lower production value, Wang pointed out.
The testing equipment business is also being affected, Wang said. The market for automated test equipment has seen its annual production value decline from US$6-7 billion to US$3-4 billion over the past five years, and has experienced consolidation, Wang noted.
KYEC has in recent years developed and produced its own manufacturing tools while cutting down its expenditure on overseas-made ones to lower costs, Wang said. KYEC's in-house production equipment is initially focused on entry-level products, and will expand to include tools for the mid-range product segment, Wang added.