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Weathering the Storm.

Article Excerpt
By Lawrence D. Maloney, Contributing Editor

A severe global recession has challenged the survival skills of many of the test field's premier companies.

Like many sectors of the economy, the electronics test industry started the year 2008 battling very choppy business seas and ended it facing something resembling a perfect storm, as the global economy tanked following the October stock market plunge.

Last year saw sharp cutbacks in semiconductor production--a slide that continues in 2009--causing huge revenue losses at major ATE (automated test equipment) companies serving that industry. In response, most ATE firms early this year announced layoffs, executive salary cuts, and other cost-containment programs aimed at keeping their companies afloat.

In fact, outside of the communications market, it was difficult to find a sector of the test market that showed healthy gains in 2008. "With a virtual halt in global manufacturing in late 2008 and early 2009, the test field has experienced an unprecedented period of decline, even worse than occurred in 2001 and 2002 following the tech bubble," said John Harmon, an analyst with Needham & Company. Even so, Harmon noted that electronics test came "roaring back" in 2003 from depressed conditions, and he sees the beginnings of recovery in 2010 and the chance for a solid year in 2011.

Tightening their belts

That hopeful scenario can't come soon enough for Advantest, the world's perennial semiconductor ATE leader. Customer orders in the October to December 2008 quarter fell more than 70% from the same period in 2007. For the fiscal year ending March 31, 2009, the Japan-based firm reported sales of $780 million, down 57% from the prior year's tally (see table ). To ensure profitability, the...

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