Jonathan Hopfner
EE Times

SINGAPORE ? The consumer electronics boom will continue to fuel growth in the semiconductor industry, but it may also create an environment where only the biggest players thrive, executives told an industry forum here this week.

Tien Wu, chief operating officer of Advanced Semiconductor Engineering, told the SEMI Singapore conference that further consolidation in the technology sector means just a few large companies could control most of the consumer device market in ten years. Only a few chip makers and subcontractors would be capable of meeting their "massive orders," Wu warned.

Companies will have to accept that pricing erosion will be a "constant" in a "consumer- and volume-driven market" and focus on "maintaining margins, not maintaining prices," he added.

Wu said the emerging landscape would force companies to adopt one of two strategies: pursue "nothing but [intellectual property]" or manufacturing excellence and economies of scale.

"If you deviate from these models, you'll have to struggle to survive," Wu said.

His comments were echoed by Gartner semiconductor analyst Kay-Yang Tan, who told EE Times that some smaller companies would "definitely" be squeezed out of the sector over the next few years.

"Smaller players may be able to stand on a particular niche, but if they don't have one they won't be competitive, especially with the need for economies of scale and margins not being sufficient," he said.

Executives at some mid-sized companies were more upbeat. J.C. Lee, president and CEO of Singapore-based United Test and Assembly Center Ltd. (UTAC), said the outsourcing of test and packaging was "getting stronger and stronger" and that UTAC was well positioned to meet rising demand for customized, higher-value system-on-chip and -package products.

"The next interesting thing is Vietnam," Lee said. "The workforce will take some time to pick up, but at least they have the fundamental education in place." He added that "in the longer term it's another place that can compete with countries like China in assembly and test, even fabs."

Others see the consumer electronics boom posing particular challenges for back-end companies. Jan Vardaman, president of market researcher TechSearch International, said advanced packages required by consumer products account for current industry growth. But Vardaman warned that companies would also have to cope with massive package proliferation and possible substrate shortages after suppliers work their way through the current glut.