OK, so I didn’t go to Semicon West. That doesn’t mean I don’t have opinions to share
OK, I have to admit this right off: I didn’t go to Semicon West (held two weeks ago in San Francisco). I try never to go to Semicon West (I’ve been twice in the last 30 years, both times against my will). Why should I go? To listen to the latest marketing messages and company spin? To see a few technical talks that are way too light on the technical, but still full of talk? I don’t need to walk the cavernous Moscone Center to get that – everybody plasters the Web with this stuff on a regular basis. Thanks, but I think I’ll stay home.
This year was a perfect case in point. The only real news from Semicon was in the news – Intel’s announced investment in ASML. Yes, it would have been fun to sit in a San Francisco bar each evening and dissect the press releases and develop conspiracy theories. But even that is not really necessary. I’m here to give my take on what the Intel investment means – and you don’t even have to buy me a beer to get it. (Though if you like this post, please feel free to buy me one the next time you see me.)
Intel’s investment in ASML has two parts – related, but separate. First, Intel is spending $2.1B to buy 10% of ASML, with an option to buy another 5%. ASML will use the money to buy back the same number of its shares, so there will be no stock dilution (a so-called synthetic buyback). That also means ASML will be getting nothing (no money, I mean) from this part of the deal. ASML is also offering similar deals to Samsung and TSMC, up to 25% ownership in the company. So what does this part of the deal mean? Intel and ASML made it clear that Intel gets no voting rights and won’t get early access to ASML technology or tools. Of course, they had to say that to avoid anti-trust litigation. So does the Intel investment help anyone?
There are three reasons why the Intel investment in ASML makes sense. First, it confirms the obvious: the success or failure of ASML will be mirrored as success or failure at Intel. Lest anyone doubt it, Intel needs Moore’s Law scaling to continue its growth and profitability. Lithography is the critical technology to make that happen, and ASML is the critical company to make lithography happen. Second, even without a place on the board, Intel’s ownership stake will add financial stability to ASML, whose stock price could easily drop dramatically if its EUV program were to flirt with failure. Since ASML’s importance to the industry goes far beyond its EUV program, keeping ASML developing and manufacturing lithography tools is critical.
But the third reason the investment makes sense is that the stock purchase is coupled with a $1B Intel investment in ASML R&D. This $1B infusion is what the whole deal is about, and the investment has one purpose: to speed 450-mm tool development at ASML. For several years now, as talk of 450-mm wafer sizes has heated up to what appears to be a critical mass, ASML has repeatedly said that it can’t do EUV and 450-mm development at the same time. After EUV has succeeded, then ASML will commit to 450-mm tool development. But since the day of reckoning for EUV continues to push out (possibly to 2016 or later), that means lithography, representing 50% of the cost of making a chip, won’t be 450-mm ready nearly in time to meet the (overly optimistic) timetables of the big 450-mm proponents (Intel, Samsung, and TSMC).
So here comes the investment from Intel. While the press release mentioned the importance of both EUV and 450-mm R&D, the only project mentioned for funding was 450-mm tool development. And to be clear, this is not only, or even mostly, EUV 450-mm development. A working 450-mm fab will need 193-immersion tools, 193 dry tools, and maybe 248-nm tools as well, all running at the 450-mm wafer size. If EUV works, a fab will need 450-mm EUV tools as well, but this is the only part of the lithography tool set that is optional for a 450-mm fab. So, in my opinion, the Intel investment is all about the 450-mm wafer size, and has essential nothing to do with EUV lithography.
Why is 450-mm development so important to Intel (and Samsung and TSMC)? My answer to that question next time.