During the panel session with the press here at the Semicon Southwest trade show, executives from FSI International, Semitool, DuPont Photomasks, Extraction Systems, and NetMercury said concerns about an early downturn in the chip business were overblown by industry analysts and the press. The executives along with panel moderator C. Richard Deininger, AMD's director of strategic equipment, technology and planning, expressed more concern about the ability to get skilled employees to keep up with the booming demand for products.

"We are not seeing any slowdown PCs, and we are not seeing any slowdown in chip demand," said AMD's Deininger. "And we not seeing any slowdown in the cellular phone area for flash memories, microprocessors and other communications chips. It is unbelievable that people in the rest of the industry would be saying in the press that they are seeing a slowdown or we've reached the peak of market growth. We just don't see that ladies and gentlemen right now."

Executives on the panel discussion Tuesday cited a number of factors for causing some of the concern about too much capacity in the chip industry, including uncertainty about the presidential election in the United States, oil prices, and general economic growth conditions. But the managers said there was no reason to believe that worldwide chip demand would cool in the foreseeable future from the strong growth of the past year.

"Every customer I've spoken to is running flat out, and they are trying to squeeze as much capacity as they can out of their existing infrastructure," said Don Mitchell, president and CEO of FSI International Inc., a supplier of fab tools based in Chaska, Minn. The chief executive said a recent trip to Asia and Europe indicated that a number of semiconductor companies had announced expansion plans internally to employees, but those facilities had "not yet hit the press."

Mitchell did express concern about the ability to maintain the current strong growth rates for new orders, which is not sustainable over a long period. "You cannot keep up at this pace, but I still see this cycle as having a lot of legs on it," he added.

One surprise in the current upcycle for capital expenditures has been stronger-than-expected 300-mm tool demand. Industry analysts had generally predicted that about 10% of the wafer fab systems would be for the larger diameter substrates in 2000, but at FSI 300-mm (12-inch) tool orders are already running in the 10-to-15% range, Mitchell estimated.

"There is no question that it 300-mm is really providing momentum," he said during the panel discussion on Tuesday afternoon. "The majority of tool orders is still 200-mm systems, and the forecast now is that by 2005 it will be 50%. But there are 14 companies building 300-mm fabs around the world right now. "

AMD is one of those chip companies preparing to jump into the 300-mm fab movement. The Sunnyvale, Calif.-based company has two 300-mm fab projects on the boards--one in Japan with flash memory partner Fujitsu Ltd., and the other set for logic ICs at another location still be determined, said Deininger.

"The logic factory is expected to be on stream sometime between the end of 2003 and 2004," he said. While those plans have been made public, "there is still a long way to go between having a plan to go somewhere and having a commitment to break ground," Deininger added. "But based on the chip demand we are seeing right now, we have the need for that kind of factory."

Deininger said AMD is planning next year to install new systems in its Sunnyvale Submicron Development Center for development of processes in those two 300-mm fabs. The company is working with Motorola Inc.--its partner in advanced copper processes--on the early technology for the 300-mm logic fab, but a formal joint-venture in a production facility has not been announced by either company, which are widely rumored to be considering a shared plant.

Recently, Motorola executives indicated that they were still unsure if 300-mm tool sets were fully ready for volume production, and that issue was playing a factor in the timing of the company's investment decisions (see company strategy feature). But AMD's Deininger said he was unaware of any major problems and believed that 300-mm systems were just about ready for volume production.

"Lithography tools still have a way to go--no question about it," he said responding to questions about the tool sets. "Some of the deposition tools have a way to go too. But there are working tools. Etch is in its second or third generation for larger 12-inch diameter substrates." He also noted that new technology nodes--such as 0.13- and 0.10-micron--will require new lithography systems and processes, which must be brought up on 300-mm wafers in the next couple of years.

"I see no 'show stoppers' but that doesn't mean everything is perfect," he said. "Can we turn on full production today? I don't think so, but I don't think we are far from it."