Applied-TEL Watch

By Mark LaPedus
So far this year, the biggest story in the fab tool industry is fairly obvious—Applied Materials recently signed a definitive agreement to acquire rival Tokyo Electron Ltd. (TEL) for about $9.3 billion. The blockbuster announcement will likely be the top story of 2013.

Of course, the integration of Applied and TEL will be a challenge. In any case, the Applied-TEL deal is important for several reasons. First, it creates the world’s largest IC-equipment company. More importantly, the proposed Applied-TEL duo will provide some clues in terms of which direction the technology is heading in the semiconductor industry.

With the help of equipment vendors, chipmakers are in the middle of an inflexion point. For example, many IC makers are developing some or all of the new chip architectures in the market, such as 3D NAND, stacked die, and fully depleted devices based on finFETs and FD-SOI.

On top of that, the industry is migrating to new materials, and eventually, 450mm wafers. Flat-panel displays, MEMS, mixed-signal, and next-generation memories are also intriguing markets.

The proposed Applied-TEL duo is involved in most, if not all, of these markets. So, in any case, here are five technology/business areas to watch as the combined Applied-TEL entity moves forward:

1.  The progress of directed self-assembly (DSA). At one time, Applied had a wafer track venture with Dainippon Screen, dubbed Sokudo. But in 2009, Applied backed away from the business and reduced its stake in Sokudo from 48% to 18%. In the proposed deal with TEL, Applied likely will divest its stake in Sokudo. And Applied will regain its enthusiasm in wafer track for two reasons. First, TEL has a near monopoly in the arena. Second, TEL is leading the charge in specialized track equipment for DSA. Of course, DSA is still in the early stages. But if the industry can get DSA to work, the proposed Applied-TEL duo will find itself in the profitable eye of the lithographic storm.
2.  The direction of 450mm platforms. For some time, TEL has been developing an “open and modular platform” for 450mm tools. This would enable TEL—and rival fab tool vendors—the ability to develop plug-and-play process modules for the open platform, thereby reducing costs and development times. On the other hand, Applied has dismissed the open platform idea, because the technology would give its rivals an edge. Instead, Applied and others are developing proprietary 450mm tools. It’s unlikely that the proposed Applied-TEL duo would develop two separate 450mm platforms. So, chances are the open platform concept could fall by the wayside over time.
3.  Filling in the pieces. It takes huge resources to develop fab tools for all chip markets. So, companies are consolidating to obtain more pieces of the puzzle. For example, TEL is stronger in dielectric etch, while Applied focuses on conductor etch. Chipmakers want both etch technologies. Applied-TEL also need both to compete more favorably against Lam Research in the 3D NAND and finFET markets.
4.  The metrology race. For years, Applied has been expanding its metrology/inspection portfolio to compete against KLA-Tencor. Metrology is a fast growing market. Going forward, the Applied-TEL duo will likely expand its metrology portfolio. In fact, during recent conference calls, Applied has talked about a potential move into e-beam inspection. Also look for Applied-TEL to make future acquisitions in the metrology arena.
5.  The fallout. The fab tool market continues to consolidate. The big vendors are getting bigger and will continue to look for acquisitions. “Look for KLA-Tencor, Lam Research and/or ASML to become active over the next one or two years,” said Weston Twigg, an analyst with Pacific Crest Securities, in a recent report. In fact, Twigg believes a potential ASML-KLA merger makes sense in the long run. “We like the idea of ASML and KLA-Tencor, as it is somewhat synergistic.”