Austin Business Journal
By Shannon Rentner

February 9, 2001

As part of a legal case claiming Austin’s International Sematech is monopolizing the semiconductor test wafer market, PricewaterhouseCoopers LLP’s Austin office has been subpoenaed to release nearly 15 years of documents related to its work with the nonprofit semiconductor consortium. The subpoena stems from a lawsuit filed by California-based Process Specialties Corp., a test wafer company based in Tracy, Calif. In the suit, the company accuses International Sematech of having a chokehold on the semiconductor industry’s test wafer market. The suit was filed October 24, 2000 in U.S. District Court in Sacramento, California.

Anne Englander, a spokeswoman for International Sematech, declined to comment. According to a related suit filed January 26, 2001 in U.S. District Court in Austin, the subpoena was issued January 9, 2001 because PricewaterhouseCoopers has been Sematech’s auditor since at least 1988. In a response filed January 29, 2001 PricewaterhouseCoopers seeks to void the subpoena, calling it “oppressive and burdensome.” PricewaterhouseCoopers claims many of the requested documents are irrelevant to the case, as well as the proprietary and confidential, and should be protected as trade secrets.

James Belford Brown, a partner with Stockton, California-based Herum Crabtree Brown Dyer Zolezzi & Terpstra PC representing Process Specialties, says his client and PricewaterhouseCoopers have reached an “amicable” agreement concerning the subpoena, but he wouldn’t disclose the terms. In the meantime, Brown says, the dispute between Sematech and Process Specialties is set for a jury trial in November.

Process Specialties claims Sematech is violating its original charter by selling “non-cutting edge” test wafers and might be breaking California antitrust laws. In the January 26 suit, Process Specialties claims Sematech “is doing to the test wafer market exactly what it was supposedly formed to prevent from happening to the microprocessor market. Sematech has become the ‘Japan, Inc.’ of the test wafer business.”

Under its charter, Sematech is prohibited from commercial sales of semiconductor products, unless the products are “cutting edge” and are sold to its member companies, including AMD Inc., Motorola, Inc., Texas Instruments Inc. and Intel Corp. However, Sematech is overstepping those bounds, the suit claims. “If they were only selling the most leading-edge test wafers and only to their own members, my clients would not be complaining,” Brown says. When it was formed in 1987, Sematech’s goal was to boost U.S. semiconductor manufacturing capabilities above those of Japanese rivals. The U.S. Department of Defense considered this country’s declining semiconductor industry a threat to national security. Therefore, 13 charter member companies joined the consortium and the government pumped money into it.

According to the October suit, Sematech has received more than $850 million in federal subsidies, $46 million in University of Texas subsidies, $17 million in donated equipment and tax-exempt status to achieve its goal. In 1994, Congress determined Sematech had fulfilled its purpose of restoring U.S. leadership in the semiconductor industry and cut off federal funding, according to the suit. However, Sematech continues to play a role in advancing the industry. During the industry’s push toward 300mm wafers, “it was a great sounding board. For defining the roadmap, it does a very nice job,” says Dean Freeman, principal analyst at San Jose, California-based research firm Dataquest, Inc.

To make up for the lost federal funding, which constituted 50 percent of its budget Sematech entered the test wafer business, according to the suit. Freeman says the test wafer market is “a hidden market because nobody knows how big it is, because some companies can do test wafers internally. But smaller companies cannot.”

(Federal District Court for the Eastern District of California, Cause No. CIV-S-00-414 FCD PAN.)
(Federal District Court for the Western District of Texas, Cause No. A 01CA-069-SS.)