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An empirical study, which examines the economic relationship between chip making and mask making, concludes that manufacturers of photomasks operate in a challenging economic environment. High capital cost that is difficult to amortize, pricing pressure, the need for high yield and rapid turn-around, accelerating time-to-market pressure and potential market segmentation present a threat of consolidation in the photomask industry. For photomask manufacturers, sustainable profitability is likely to depend upon transfer of yield-learning knowledge from wafer fobs to mask shops and the ability to develop technology concurrently and collaboratively with their customers and complementers. These factors give semiconductors manufacturers the incentive to invest in internal mask shops or joint ventures that produce leading-edge photomask technology.