New York, N.Y. — Donna Fuscaldo relays a message to chip testers from chip makers: Speed it up. The speed of chips is accelerating at a breakneck pace, but that isn’t true for the testing equipment vital to finding malfunctions.
“Up until eight years ago, processor speeds were sub-100 megahertz, and today speeds in communications and power machines are running at 1 gigahertz levels,” said Joe Jones, founder, president, and chief executive of BridegPoint Technical Manufacturing, a outsource semiconductor test equipment company in Austin, Texas. “We have 200 megahertz testers trying to test 1 gigahertz products.”
As semiconductors get even more complex, so will their tests, said Dave Ranhoff, chief operating officer of automatic test equipment maker Credence Systems Corp. (CMOS). As a result, he said, the testing community is worried that its services will become more expensive than making the chips.
Apparently investors are also concerned. Credence, of Fremont, Calif., recently traded at $28.75, well off a 52-week high of $79.39 set in May. Teradyne Inc., which reached a one-year ceiling of $115.44, also in May, was at $33.94. And Agilent Technologies Inc., which Hewlett-Packard Co. spun off in November, was at $50.19, less than one-third of its high of $162 reached in March.
William Blair & Co. analyst Candace TenBrink said that as chip speeds increase, test companies will have to spend more on research and development, which could put pressure on their margins and keep earnings from beating Wall Street’s estimates.
Test companies spend an average of 10% to 12% of revenue on R&D each year. Even though most are confident that they will be able to develop new technologies, the cost/performance question will always linger.
Still, Banc of America analyst Mark FitzGerald expressed confidence that test companies will meet this challenge. “The question is not so much can they do it,” he said, “but at what cost.”
Chip makers generally budget 5% to 6% of their selling prices for testing, said Marc Loranger, semiconductor director of marketing at Credence. Of that, about half is spent on the test equipment. As the chips get more complex it becomes more difficult to stay within that budget, he added.
TenBrink noted that chip makers don’t see testing as enhancing their products’ value but rather as a “necessary evil” on which they don’t want to any more money.
Automatic semiconductor test equipment maker Teradyne recognizes the problem, said Dave Sulman, vice president of semiconductors, but the Deerfield, Ill., company doesn’t see test costs rising dramatically. “It is our hope and plans,” he said, “that the cost of test will keep pace with the cost of devices.”
And Agilent has no constraints in terms of testing 1 gigahertz chips, said Mike Resso, product manager of its Lightwave unit.
To test chips at today’s speeds, testers have to tweak existing equipment. For the long-term, most companies, despite their fears about costs, are looking at a built-in self-test on the chip itself. This will make the process easier and will work on future chips too fast to test with today’s equipment.
The self-test concept has been around for many years but has not been commercially viable, said Ron Leckie, chief executive of Infrastructure, a private research firm in Saratoga, Calif., that tracks the semiconductor test industry. “If you only have 100,000 circuits on the chip you won’t want to take 20% and dedicate it to a test,” he said. “But now as you get a million or 10 million circuits, the tester is almost insignificant.” As a result, he said, the self-test is only as expensive as the silicon used.
So is a built-in self-test all it will take to overcome chip testing’s “speed wall?” Most test companies said the chip designers will have to bear more responsibility.
“It’s important that semiconductor companies have open and thorough dialogue with the test community,” Credence Operating Chief Ranhoff said. “Testing is still too much of an afterthought.”
Leckie said designers must make sure the chip is testable rather than simply “throwing a chip over a wall to testers and saying, ‘Here, tell me what’s wrong.”
Chip giant Advanced Micro Devices said it works closely with testers, spokesman John Greenagel said, likening the relationship between the Sunnyvale, Calif., company and its testers to a marriage. “We share so much information of what we need today and what the protocols are going to be and what we will need to test,” he said. “We get deeply entwined with these people and share a lot of information.”
No. 1 chip maker Intel Corp., which has been flogged with problems lately, closely guards what it uses to test chips, spokesman Michael Sullivan said. “We look at all the areas and have invested in companies that make test equipment to make sure next-generation test equipment will come to market,” he said. The company has a good idea where the technology and equipment is going and actively develops products in house, he added.
For example, Intel, as well as Credence and Teradyne, has invested in LogicVision Inc., a pre-IPO company based in San Jose that makes test equipment and is working to address the speed hurdle.
BridgePoint’s Jones said the testers and chip makers must form a consortium and spend billions of dollars to overhaul the test industry.
Considering the cutthroat competition of the semiconductor market, most agree a consortium is not likely to happen. But all are spending millions in R&D and are confident that the problem is just a speed bump rather than a speed wall.