ASMI » Topics » Overview

This excerpt taken from the ASMI 20-F filed Mar 24, 2009.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor market. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 39.7% of our net sales in 2008, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 60.3% of our net sales in 2008, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 52.87% majority-owned subsidiary, ASM Pacific Technology.

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. Currently, the industry is experiencing a dramatic and unprecedented decline in demand for semiconductor devices due to the worldwide economic downturn, which has led to the announcement of significant layoffs, plant closings, reduced capital expenditures and other cost reduction measures by semiconductor manufacturers. These conditions have caused a substantial diminution in the demand for our products, which represent capital expenditures for our customers. In addition, these conditions may lead to the consolidation in the semiconductor manufacturing industry, which could further reduce demand for our products in the future. Our backlog at December 31, 2008 was down more than 50%, year over year, in both our front-end and back-end businesses. As with all such cycles, the timing, length and severity of this cycle cannot be predicted. The unprecedented nature of the current global financial crisis and economic downturn may result in changes in the semiconductor manufacturing industry and the manner in which we must conduct our business, in ways that we cannot now predict.

 

In response to this downturn, we are implementing a number of cost control measures. In our front-end operations, we have announced the restructuring of our ASM Europe (ASME) operations and accelerated the transfer of front-end manufacturing operations to FEMS, our low-cost manufacturing hub in Singapore. FEMS was established to manufacture certain generic subsystems and subassemblies for our vertical furnaces that we previously outsourced. This facility was launched in the third quarter of 2004 and is expected to further improve cost-effectiveness and strengthen our gross profit margin. As of the end of 2008, generic subassemblies for vertical furnaces, epitaxy and Eagle systems were manufactured in this facility. We intend eventually to manufacture generic systems and parts for substantially all of our front-end products in our manufacturing base in Singapore. We initiated other front-end cost control measures in the second half of 2008 and we intend to pursue further measures in 2009 in various formats throughout our global operations. These steps include, among others, workforce reductions, hiring freezes, factory shutdowns, mandatory vacations, unpaid leave and salary freezes. The timing and scope of these initiatives varies in each of our regions. For a discussion of our ASME restructuring and the related current and expected impairment charges, see Note 27 of the Notes to our Consolidated Financial Statements included elsewhere in this report.

 

In 2008, we announced our plan to dispose of our rapid thermal processing line. We expect this disposition to be completed in 2009.

 

In our back-end operations, we have implemented significant cost-reduction measures, including a hiring freeze, elimination of overtime, plant shutdowns during Christmas, New Year and the Chinese New Year and implementation of a short work week for some areas. We are focused on driving down the costs of our products, streamlining business and manufacturing processes, reducing time to market, and expanding automation in our manufacturing.

 

36


Table of Contents

We face increased payment and performance risk in the current economic downturn from our customers, which may result in write-downs in the value of customer receivables and, in some cases, may cause receivables from some customers to become uncollectible. In order to promote sales, we may be required to provide extended payment terms, lease financing or other modified sale terms for some customers, which will increase our sales expenses and further increase our exposure to customer credit risk, all in an environment of downward pressure on average selling prices. Even though we may be a secured creditor or lessor in these arrangements with rights in the underlying equipment, the equipment may have only limited value upon a customer default, especially if activity in our markets remains at the current low levels, which may result in substantial write-downs upon a customer default. To manage these challenges, we are monitoring our sales activities closely and taking a disciplined approach to evaluating and addressing customer credit risks. Where we deem it appropriate, we are bearing increased customer credit risk.

 

In this difficult economic environment, we also are subject to increased risk of performance failures of our suppliers, which could disrupt our manufacturing and/or increase our costs.

 

Our inventories, particularly in our front-end business, have decreased but are still high relative to our sharply reduced sales due to the long manufacturing lead time for some of our products and the time lag in reducing deliveries from our suppliers. If the downturn persists, we may have to write-off portions of our inventory as excess or because technological changes have rendered the inventory obsolete.

 

Despite the difficult industry market, we must maintain our research and development at a high level to remain competitive in the future.

 

During 2009, 52.6 million of outstanding long-term debt and available credit facilities for our front-end business, substantially all of which is for our operations in Japan, matures and will need to be renewed. The current conditions in the worldwide credit markets are unpredictable and very challenging and there is no guarantee that we will be able to renew or replace these credit facilities or renew or replace them on terms acceptable to us. If we cannot effect a renewal or replacement, we will need to reallocate internal resources to repay the outstanding portions of these facilities which may negatively affect our ability to meet customer demand and invest in R&D for the future.

 

In the past, industry downturns have been followed by robust market upturns. It is important for us to retain sufficient production capacity to be able effectively to respond to such a market upturn, which limits our ability to reduce costs by reducing our manufacturing capacity and our commitments to our suppliers. If we are unable to retain adequate production capacity and supplier production capacity, whether due to cost reduction measures or otherwise, we may be unable to respond timely to a subsequent increase in demand, which would negatively affect our customer relationships and financial performance.

 

During 2008 we began the preparation for worldwide implementation in our front-end segment of a new integrated enterprise resource planning information technology platform, which we expect to implement in 2009. We expect to realize efficiencies and other advantages from this integrated system. However, the implementation is a complex process and will require us to devote substantial time and resources. If we experience any disruptions in our information management or operations during the implementation of this system, our operating results, cash flow and financial condition could be materially adversely affected.

 

In April 2008 we announced our Roadmap to Peer Group Profitability that included various milestones in our plan to improve the profitability of our front-end operations. The present downturn has allowed us to accelerate certain elements of the Roadmap, but also makes our achievement of the Roadmap milestones more challenging and the specific milestones less relevant. We do not envision a change in the fundamentals of the Roadmap as the underlying strategies still hold.

 

At this time, we have two primary focuses: first, to implement and refine our comprehensive cost reduction program; and second, to position and prepare our innovative product portfolios in front-end and back-end for the eventual order cycle recovery.

 

This excerpt taken from the ASMI 20-F filed Apr 1, 2008.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor market. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 47.2% of our net sales in 2007, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 52.8% of our net sales in 2007, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 53.10% majority-owned subsidiary, ASM Pacific Technology.

 

35


Table of Contents

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. In the period 2001 - 2003, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases.

 

To improve our margins in our front-end segment, we established a manufacturing facility in Singapore to manufacture certain generic subsystems and subassemblies for our Vertical Furnaces that we previously outsourced. This facility was launched in the third quarter of 2004 and is expected to further improve cost-effectiveness and strengthen our gross profit margin. At the end of 2007, generic subassemblies for Vertical Furnaces and Epitaxy systems are manufactured in this facility. We intend eventually to manufacture generic systems and parts for all of our front-end products in our manufacturing base in Singapore.

 

In our back-end segment we continued to benefit from our cost advantage due to the location of our manufacturing facilities and our high vertical integration allowing us to adjust labor costs quickly in volatile market conditions.

 

The transitions in the industry to new processes and materials require equipment providers to develop sometimes entirely new sets of tools and processes and continue to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains. We have participated fully in the transition to 300mm wafers, as evidenced by the large portion of sales volume of 300mm products.

 

This excerpt taken from the ASMI 20-F filed Mar 16, 2007.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor market. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 46.7% of our net sales in 2006, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 53.3% of our net sales in 2006, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and

 

34


Table of Contents

Malaysia. Our back-end operations are conducted through our 53.35% majority-owned subsidiary, ASM Pacific Technology.

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. In the period 2001 - 2003, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases.

 

To improve our margins in our front-end segment, we established a manufacturing facility in Singapore to manufacture certain generic subsystems and subassemblies for our Vertical Furnaces that we previously outsourced. This facility was launched in the third quarter of 2004 and is expected to further improve cost-effectiveness, strengthen our gross profit margin and mitigate the impact of foreign currency transaction results. At the end of 2006, most generic subassemblies for 300mm Vertical Furnaces and 200mm Epitaxy systems were manufactured in this facility, as well as a number of generic subassemblies for the 200mm Vertical Furnaces. We intend eventually to manufacture generic systems and parts for all of our front-end products in our manufacturing base in Singapore.

 

In our back-end segment we continued to benefit from our cost advantage due to the location of our manufacturing facilities and our high vertical integration allowing us to adjust labor costs quickly in volatile market conditions.

 

The transitions in the industry to new processes and materials requires equipment providers to develop sometimes entirely new sets of tools and processes and continue to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains. We have participated fully in the transition to 300mm wafers, as evidenced by the large portion of sales volume of 300mm products.

 

This excerpt taken from the ASMI 20-F filed Mar 17, 2006.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor market. Front-end equipment performs various fabrication processes in

 

34


Table of Contents

which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 49.5% of our net sales in 2005, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 50.5% of our net sales in 2005, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 53.59% majority-owned subsidiary, ASM Pacific Technology Ltd. (“ASMPT”).

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. In the period 2001—2003, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases. In 2003 we have seen a recovery in our industry. This recovery resulted in an improvement in sales, operating results and net earnings in 2004. Sales decreased slightly to  726.4 million in 2005, a decrease of 3.7% when compared to  754.2 million in 2004.

 

The backlog of  221.9 million as of December 31, 2005 is 18.8% higher than the backlog of  186.8 million as of December 31, 2004.

 

To improve our margins in our front-end segment, we established a manufacturing facility in Singapore to manufacture certain generic subsystems and subassemblies for our vertical furnaces that we previously outsourced. This facility was launched in the third quarter of 2004 and is expected to improve cost-effectiveness, strengthen our gross profit margin and mitigate the impact of foreign currency transaction results. At the end of 2005, most generic subassemblies for 300mm vertical furnaces and the first generic subassemblies for the 200mm vertical furnaces and 200mm Epitaxy systems were manufactured in this facility. We intend to gradually manufacture generic systems and parts for all of our front-end products in our manufacturing base in Singapore.

 

In our back-end segment we continued to benefit from our cost advantage due to the location of our manufacturing facilities and our high vertical integration allowing us to adjust labor costs quickly in volatile market conditions. We have further streamlined our leadframe manufacturing and subassembly operations cost structure with the construction of a new plant in Johor Bahru, Malaysia, where production commenced the first quarter of 2005.

 

We believe that our cash on hand of  135.0 million at the end of 2005 is adequate to fund our operations, our investments in capital expenditures and to fulfill our existing contractual obligations for the next 12 months.

 

The transitions in the industry to new processes and materials requires equipment providers to develop sometimes entirely new sets of tools and processes and continue to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains. We have participated fully in the transition to 300mm wafers, as evidenced by the large portion of sales volume of 300mm products.

 

35


Table of Contents
This excerpt taken from the ASMI 6-K filed Nov 14, 2005.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor industry. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 47.1% of our net sales in 2004 and 54.5% of our net sales for the six months ended June 30, 2005, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 52.9% of our net sales in 2004 and 45.5% of our net sales for the six months ended June 30, 2005, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 53.84% owned subsidiary, ASM Pacific Technology Ltd. (“ASM Pacific Technology” or “ASMPT”).

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. In the period 2001 - 2003, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases. The year 2004 was a year of recovery in our industry, resulting in a significant improvement in sales, operating results and net earnings. In the second half of 2004 we have seen a reduced order intake indicating a lower level of activity of our customers, who became more cautious in adding capacity. This industry trend has resulted in lower sales in the nine months ended September 30, 2005. In 2005, positive trends were noticed in the level of new orders. Third quarter bookings increased for the third consecutive quarter and the backlog at September 30, 2005 showed an increase when compared to the backlog at June 30, 2005.

 

The current transition in the industry to new processes and materials and to a larger, 300mm wafer size from the 200mm wafer size requires equipment providers to develop entirely new sets of tools and continues to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm

 

19


Table of Contents

commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains.

 

This excerpt taken from the ASMI 6-K filed Sep 29, 2005.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor industry. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 47.1% of our net sales in 2004 and 54.5% of our net sales for the six months ended June 30, 2005, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 52.9% of our net sales in 2004 and 45.5% of our net sales for the six months ended June 30, 2005, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 53.84% owned subsidiary, ASM Pacific Technology Ltd. (“ASM Pacific Technology” or “ASMPT”).

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. In the period 2001 - 2003, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases. The year 2004 was a year of recovery in our industry, resulting in a significant improvement in sales, operating results and net earnings. In the second half of 2004 we have seen a reduced order intake indicating a lower level of activity of our customers, who became more cautious in adding capacity. This industry trend has resulted in lower sales and operating results in the first half of 2005.

 

The current transition in the industry to new processes and materials and to a larger, 300mm wafer size from the 200mm wafer size requires equipment providers to develop entirely new sets of tools and continues to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains.

 

20


Table of Contents
This excerpt taken from the ASMI 6-K filed May 11, 2005.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor industry. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 47.1% of our net sales in 2004, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 52.9% of our net sales in 2004, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 53.84 % majority-owned subsidiary, ASM Pacific Technology Ltd. (“ASM Pacific Technology”).

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. In the period 2001 - 2003, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases. The year 2004 was a year of recovery in our industry, resulting in a significant improvement in sales, operating results and net earnings in 2004. In the second half of 2004 we have seen a reduced order intake indicating a lower level of activity of our customers, who became more cautious in adding capacity. This industry trend has resulted in lower sales and operating results in the first quarter of 2005.

 

Net sales in the first quarter of 2005 were € 134.7 million, a decrease of 31.2% from net sales in the first quarter of 2004 and a decrease of 17.2% from net sales in the fourth quarter of 2004. In line with industry trends, net sales for the first quarter of 2005 were lower as compared to the fourth quarter of 2004 in both wafer processing equipment (front-end) and assembly and packaging equipment and materials (back-end).

 

The first quarter of 2005 showed a positive development in order intake. With € 150.0 million in new orders, the order intake increased € 23.0 million or 18.1% as compared to € 127.0 million in the fourth quarter of 2004, reflecting a surge in back-end orders. The backlog at March 31, 2005 amounted to € 202.1 million, an increase of 8.2% compared to the backlog of € 186.8 million at December 31, 2004. Approximately one-third of this amount is attributable to the ending backlog of ASM Pacific Technology.

 

18


Table of Contents

The current transition in the industry to new processes and materials and to a larger, 300mm wafer size from the current 200mm wafer size requires equipment providers to develop entirely new sets of tools and continues to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains.

 

This excerpt taken from the ASMI 20-F filed Mar 31, 2005.

Overview

 

We design, manufacture and sell equipment and systems used to produce semiconductor devices, or integrated circuits. Our production equipment and systems are used by both the front-end and back-end segments of the semiconductor market. Front-end equipment performs various fabrication processes in which multiple thin films of electrically insulating or conductive material are grown or deposited onto a round slice of silicon, called a wafer. Back-end equipment separates these processed wafers into numerous individual dies, each containing the circuitry of a single semiconductor device, and assembles packages and tests the dies in order to create semiconductor devices. We conduct our front-end business, which accounted for 47.1% of our net sales in 2004, through our principal facilities in the Netherlands, the United States, Japan and Singapore. We conduct our back-end business, which accounted for 52.9% of our net sales in 2004, through our principal facilities in Hong Kong, the People’s Republic of China, Singapore and Malaysia. Our back-end operations are conducted through our 53.84 % majority-owned subsidiary, ASM Pacific Technology Ltd. (“ASMPT”).

 

We sell our products worldwide to the semiconductor industry, which is subject to sudden and extreme cyclical variations in product supply and demand. Starting in late 2000, the semiconductor industry experienced a severe cyclical downturn characterized by overcapacity and reduced demand for products, lower average selling prices across certain product lines, reduced investments in semiconductor capital equipment and other factors, all of which led to lower sales and earnings for our business, in particular for capacity-driven purchases. Since the fourth quarter of 2003 we have seen a shift in order momentum and a recovery in our industry. This recovery resulted in a significant improvement in sales, operating results and net earnings in 2004. Sales improved to  754.2 million in 2004, an increase of 29.6% when compared to 581.9 million in 2003. The increase is primarily due to increased sales volume.

 

In 2004, sales levels in our front-end segment continued to increase quarter over quarter as a result of the strong order intake, which started in the fourth quarter of 2003. In 2004 the order intake in front-end continued to be strong with more orders than sales in the first three quarters of 2004. The order intake in the fourth quarter for the front-end segment weakened somewhat as a result of the reduced demand industry wide. In the back-end segment the strong order intake in the fourth quarter of 2003 and the first half of 2004 resulted in record sales levels in the first half of 2004. The abrupt decrease in demand for the back-end products in the second half of 2004 resulted in a sharp decrease of sales levels. In the second half of 2004 net sales in the front-end segment increased by 10.0% compared to the first half of 2004, while net sales in the back-end segment for the second half of 2004 decreased 32.8% compared to the first half of 2004.

 

The backlog of 186.8 million as of December 31, 2004 is 6.1% lower than the backlog of 199.0 million as of December 31, 2003.

 

To improve our margins in our front-end operations we initiated plans in 2003 to strategically increase our manufacturing capability in Asia. Our Singapore-based generic parts manufacturing facility was launched ahead of schedule in the third quarter of 2004 and is expected to improve cost-effectiveness, strengthen our gross profit margin and mitigate the impact of foreign currency transaction results in 2005. Our plan is for all generic parts of our vertical furnaces to be manufactured in Singapore by the second half of 2005, and for our first Epsilon epitaxy generic systems to be ready for shipment from Singapore by mid-2005.

 

To lower our fixed cost base we implemented restructuring plans including work force reduction in our front-end segment in the second half of 2003. The restructuring resulted in a reduction of our workforce by approximately 110 employees in the second half of 2003, and restructuring charges in 2003 in the amount of  6.5 million. The restructuring was completed in early 2004.

 

In our back-end segment we continued to benefit from our cost advantage due to the location of our manufacturing facilities and our high vertical integration allowing us to adjust labor costs quickly in volatile

 

36


Table of Contents

market conditions. We are further streamlining our leadframe manufacturing and subassembly operations cost structure with the construction of a new plant in Johor Bahru, Malaysia, with production commencing the first quarter of 2005.

 

Our capital expenditures increased from 30.1 million in 2003 to 58.1 million in 2004. During 2004 we expanded our manufacturing facilities in Singapore for our front-end operations and in Malaysia for our back-end operations. We expect capital expenditures to be between 40 million and 50 million in 2005.

 

In December 2004 we strengthened our financial position by issuing US$150.0 million of 4.25% convertible subordinated notes, which are due December 2011. The notes were issued to ensure that we have sufficient liquidity to deal with the maturity of the US$115.0 million 5% convertible subordinated notes, which are due November 2005. We believe that our cash on hand of 218.7 million at the end of 2004 is adequate to fund our operations, our investments in capital expenditures and to fulfill our existing contractual obligations for the next 12 months.

 

The current transition in the industry to new processes and materials and to a larger, 300mm wafer size from the current 200mm wafer requires equipment providers to develop entirely new sets of tools and continues to present us with an opportunity to displace existing suppliers to major semiconductor manufacturers. We believe that we are well positioned and that our firm commitment to research and development, our readiness in new technologies and design-in wins at top-tier customers provide us with a broad basis for substantial long-term market share gains.

 

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki