Applied Materials Inc's
Slammed by sluggish demand and high development costs, chipmakers are joining hands to survive, but that is not happening among their equipment suppliers, Mike Splinter told a group of reporters on Tuesday.
Acquisitions in the chip gear sector are very difficult to conduct, Splinter said. That leaves very few avenues to give consolidation, other than ... companies failing.
Technological differences often hinder chip equipment makers from joining together even when the biggest are flush with cash.
Combining technologies takes precious time while rivals move forward, and scrapping one firm's technological base means overhauling equipment and high restructuring costs.
Orders for semiconductor equipment are emerging from near record lows, as chip makers replenish their inventory. Chip sales inched up 6 percent in April from March.
But the orders are still a fraction of levels from a year ago, while the world's No.2 PC maker Dell Inc
Chip makers are still thinking twice about investing big sums to make smaller, more powerful chips, as they deal with ongoing losses that are eroding their capital and that drove Spansion
The semiconductor equipment industry cannot support the necessary level of R&D without some amount of consolidation, Splinter said. Today there is too much repetition, too much waste in the industry.
Applied Materials competes with No.2 chip equipment maker Tokyo Electron <8035.T> of Japan.
Sliding prices and a weak demand outlook have forced chipmakers to team up to cut mounting development and equipment costs.
PC memory makers Nanya Tech <2408.TW>, Micron
(Reporting by Mayumi Negishi; Editing by Michael Watson)