In Hard Times, Chipmakers and Suppliers Butt Heads

The pain the recession is currently causing the semiconductor industry has been well documented, but it may also escalate tensions between chip equipment vendors and their customers. An ongoing debate over the need to invest in the next cycle of manufacturing plants has pitted equipment vendors, such as Applied Materials, Tokyo Electron, and KLA Tencor, against their customers—primarily Intel, Samsung, and the large foundries, such as TSMC.

At the same time, the chipmakers are producing smaller and smaller chips with more transistors on them, essentially cutting . When you see news releases extolling the shift from making 65-nanometer chips to 45-nanometer chips, semiconductor makers are trumpeting those smaller slices. (And unlike pieces of cake, smaller is better when it comes to chips.) The next step down is 32 nanometers, and chipmakers and equipment makers are spending billions of dollars prepping for . When asked if that timeline still holds, given the economic climate, an Intel spokeswoman wrote in an e-mail: "I cannot comment on our suppliers' timelines, but the statement and is all we are disclosing at this time, which does still say goal of a pilot line in 2012." The , a consortium of chipmakers, backs Intel's plans, and Scott Kramer, vice-president for manufacturing technology, says he thinks the suppliers are overestimating the costs associated with those plans.

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