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Fab tool business model for better or worse?

Posted: 24 Jan 2011     Print Version  Bookmark and Share

Keywords:semiconductor equipment industry  fab tool industry consolidation  fab tool business model 

Still, there are some alarming trends, especially in lithography, which is turning into a one-horse race on the optical side. In 2009, according to Gartner Inc., ASML held 51 per cent of the lithography market, followed by Nikon (39 per cent) and Canon (9 per cent). Last year, Barclays Capital estimated ASML's current share of the leading-edge, 193nm immersion market at a whopping 80 per cent, leaving Nikon and Canon in the dust.

Canon has already exited the leading-edge lithography business. Nikon, which once filled 100 per cent of Intel's leading-edge lithography requirements, took a body blow from ASML last year when the Netherlands-based vendor won half of Intel's leading-edge lithography business at the 22nm node. Some believe that ASML could grab Intel's entire leading-edge lithography business—at the expense of Nikon.

Nikon is falling further and further behind, as it struggles to ship its 193nm immersion tools. As a result, ASML is commanding a premium for its scanners, partly due to the lack of competition from Nikon.

For the last year or so, ASML has also experienced trouble in terms of keeping up with customer demand, causing some chip vendors—namely second-tier memory makers—from getting their tools on a timely basis.

Clearly, this is not a healthy scenario for chipmakers. Simply put, Nikon needs to play catch-up or must join forces with another vendor. One possible idea is a joint lithography venture between Nikon and Applied Materials Inc. Another possibility is that Nikon will need a bail-out from the Japanese government.

Nikon will clearly need help if or when chipmakers move towards EUV. Right now, ASML is grabbing most-if not-all of the EUV scanner business. If Nikon can't deliver EUV, ASML will become the sole source in the arena—a nightmarish thought for chipmakers. A production-worthy EUV tool from ASML could soon cost Rs.573.33 crore ($125 million) per unit. And without competition, tool costs could go even higher.

Red flags
There are other red flags in the EUV arena. Right now, there is an urgent need for inspection and metrology equipment for EUV. The industry is looking for separate EUV-based reticle inspection, mask blank and metrology gear. But for the most part, there are not enough R&D funds to support multiple vendors in each segment. So, the various equipment in each sector will likely come from a single vendor, warned Daniel Armburst, chief executive of Sematech, during a presentation at ISS.

Another tool concern is ion implanters. "On our end, we estimate Varian's overall share growing incrementally from ~77 per cent in 2009 to ~78 per cent in 2010 and ~79 per cent in 2011, with risk to the upside," said Barclay's Muse in a recent report. In 2010, Nissin was projected to have 9 per cent share, followed by Sumitomo (8 per cent) and Axcelis (6 per cent), according to the report.

In 2008, Sumitomo—along with private-equity firm TPG—launched an unsolicited and hostile bid to acquire ion-implanter specialist Axcelis. Axcelis rejected the offer in 2008, but the implanter firm could be a takeover target in 2011, observers speculated.

Sumitomo may make another bid for Axcelis. Applied, which exited the implanter market several years ago, may want to make a bid for Axcelis, observers speculated.

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