R. Keith Lee, president and CEO, Advantest America

The driver of this new business environment: the rapid semiconductor growth in consumer electronics. This fundamental change is driving the entire test industry to adapt in order to survive.

This should surprise no one. Industry analysis firms such as VLSI Research have forecast market consolidation in semiconductor test for years, and the theme of the November 2005 International Test Conference was "survival of the fittest." But what defines being fit?

The shift to consumers as the primary market mover means downward price pressure and accelerated time-to-market cycles driven by competition and consumer expectations for products that are faster, more feature-laden and cheaper.

The effect on the semiconductor test equipment industry is that it finds itself in a quandary—it must develop sophisticated state-of-the art testers and simultaneously lower test cost. Another potential consequence: The traditional level of R&D funding for the test industry is in jeopardy, because the relentless downward price pressure of consumer demand significantly narrows margins and, therefore, R&D spending. What's more, the traditional model of a proprietary tester designed for a limited number of device types (and at affordable prices) no longer applies in a world of novelty-driven ICs.

So what is the alternative? In 2002 the Semiconductor Test Consortium (STC), which now numbers more than 70 global semiconductor industry and instrumentation companies and universities, was formed to develop a test architecture standard that is open, documented and applications-oriented. The standard is aimed at SoC ICs. In 2003 the STC successfully yielded such an open platform, called the Openstar-compliant T2000, which is the first modular test system defined by chip makers for chip makers.

For semiconductor manufacturers, the most profound benefit of an open test standard is lower test equipment cost. Test system lifetime is extended through upgrades with future applications from multiple suppliers. Frequent changeover to next-generation, proprietary, closed test systems for new leading-edge devices is eliminated, significantly reducing test costs. A common test platform also maximizes test equipment use, increases factory efficiency and lowers training costs. Finally, having multiple test suppliers for a standard platform ensures that new test products are developed to meet time-to-market and production ramp-up schedules for new semiconductor devices.

Test equipment suppliers also benefit from open test standards. As for chip makers, the primary benefit is lower cost. Test vendors lower R&D costs and minimize investment risk when products are codeveloped with other suppliers.

The creation of the STC as well as other recent alliances is moving the industry from cutthroat competition to collaborative relationships. As the marketplace changes and industry players are winnowed out, the companies that will survive and thrive will need more creative problem-solving strategies.

Strategic alliances used to be primarily marketing agreements. The new order of collaboration involves creating value-added products and services, with everyone—chip makers and equipment suppliers. The definition of best will change as market dynamics change, but certainly state-of-the-art technology, precision engineering, high quality and cost will be key factors.

Do you think open test standards will benefit the test industry? Send your thoughts to feedback@eb.reedbusiness.com.