The Week In Review: Manufacturing

Chipmakers
Toshiba is still looking for a buyer for its prized NAND flash memory business. The leading contenders for the business are a consortium with Western Digital. Meanwhile, Toshiba’s memory unit is expanding its Fab 6 facility at its Yokkaichi Operations, based in Japan. And now, it has selected a site for its next fab in Japan, this time in Kitakami City, Iwate. Construction is expected to start in 2018.

Taiwan’s Foxconn said it is still in the hunt to buy Toshiba’s memory unit, according to a report from Bloomberg. Foxconn claims to have support from Apple, SoftBank and Sharp for its bid.

The Dow Jones Sustainability Index (DJSI) has selected UMC as a global component for the 10th consecutive year. DJSI awarded UMC with the industry’s highest scores for “Environmental Policy & Management System” and “Environmental Report,” with the foundry earning perfect scores in multiple other categories.

Packaging and test
Advanced Semiconductor Engineering (ASE) said that its K7 manufacturing facility in Kaohsiung, Taiwan has received the “Green Factory Label” from the Industrial Development Bureau, Ministry of Economic Affairs. K7 is the sixth factory following K3, K5, K11, K12 and K15, at the ASE Kaohsiung Nantze campus to receive the label.

Astronics, through its subsidiary Astronics Test Systems (ATS), has introduced its new ATS-3100 Radio Test Set (RTS) — a test platform that ensures military radio performance when failure to communicate is not an option.

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Reports recently surfaced that Cohu is attempting to block the sale of U.S.-based Xcerra to a group in China.

As it turns out, though, Cohu’s motives to block the deal appear to be off base, according to analysts. Calls and e-mails to Cohu’s management were not returned. Xcerra declined to comment.

In April, Sino IC Capital and an affiliate, Unic Capital Management, entered into a definitive agreement under which it would acquire Xcerra for $10.25 per share in cash. The deal is worth approximately $580 million.

Then, in August, reports surfaced that Cohu was attempting to block the sale, citing national security concerns. What were Cohu’s motives?

Xcerra, formerly known as LTX, is a supplier of automated test equipment (ATE), test handlers, bare board PCB test equipment, test contactors, probe pins and loaded PCB test fixtures. Meanwhile, Cohu is a supplier of test handling systems, thermal subsystems, package inspection and contactors.

Xcerra and Cohu compete in various markets, especially in test handlers. In total, the test handling market is roughly a $800 million business, according to Cohu, which cited VLSI Research as it source.

Test handlers are used in conjunction with ATE. They are used to automate the testing of packaged semiconductor devices. Test handlers are used in a broad range of applications, such as pick-and-place, gravity, strip and MEMS.

Late last month, meanwhile, Xcerra reported its financial results for its fourth fiscal quarter and fiscal year ended July 31. The company beat Wall Street’s forecasts. “Xcerra reported strong 4Q17 (July) earnings results, well ahead of expectations and likely reflective of industry strength and company-specific gains with its new products,” said Patrick Ho, an analyst with Stifel Nicolaus in a research note.

Xcerra did not have a conference call to discuss its results amid the pending deal with Unic Capital. In a release, Xcerra did not discuss the regulatory issues, nor did it mention Cohu by name.

Regardless, analysts believe that the national security concerns raised by Cohu are unfounded. If anything, the move is creating a mere distraction. “In its press release, (Xcerra) provided no update on the deal, but we believe any regulatory issues related to ‘national security’ concerns are unfounded, untrue, and irrational if these are the concerns that could derail the deal,” Ho said in the research note.

“Unlike Teradyne that does have a defense and aerospace test business that deals with some defense contractors, Xcerra has no relationships with any defense entities,” he said. “Moreover, semi test does not fabricate or manufacture devices (where proprietary technology could become an issue). Semi test simply utilizes electrical signals to ensure that a device meets the required design specifications (and admittedly, one can argue handlers have even less differentiated technology as they sort devices for a tester).

“There is no ‘secret sauce’ that chipmakers provide semi test companies that would ‘compromise’ either the test supplier or the chipmaker,” he said. “In short, we emphasize that the Chinese would not be ‘gaining a national security advantage’ by buying a semi test company. While we cannot gauge the political factors that may ultimately ‘sway’ a decision, the ‘national security concern’ argument would be a very weak one to use to kill the deal.”

Market research
What is the impact of artificial intelligence (AI) on the semiconductor industry? With AI becoming a growth contributor, TrendForce forecasts that the global revenue from semiconductor chip sales will grow at a CAGR of 3.1% from 2018 to 2022.

The top five suppliers of test and burn-in sockets–Yamaichi Electronics, Enplas, ISC, Smiths Connectors and LEENO Industrial–accounted for more than 38% of the total market in 2016, an increase of 3% on the previous year, according to VLSI Research.