ASML To Buy Hermes

Looking to expand into new markets, ASML Holding has entered into an agreement to acquire e-beam wafer inspection specialist Hermes Microvision (HMI) in a cash transaction valued at 2.75 billion euros (US$3.08 billion).

With the proposed acquisition of Taiwan’s HMI, ASML will enter two new markets—-wafer inspection as well as mask inspection for extreme ultraviolet (EUV) lithography. In addition, ASML will expand its efforts in the process control market, where it is on a collision course against the likes of Applied Materials, Hitachi, KLA-Tencor and others. (In October, Lam Research signed a deal to acquire KLA-Tencor for $10.6 billion.)

The move also represents the latest acquisition for ASML. Several years ago, ASML acquired Cymer, a lithography light source company that is developing an EUV power source.

ASML’s move to buy HMI represents a recent and ongoing theme in the fab tool market. Like many fab tool vendors, ASML is looking to expand into new markets amid a slowdown in the equipment sector. In total, worldwide semiconductor capital spending is projected to reach $62.8 billion in 2016, down 2% from 2015, according to Gartner.

With HMI, ASML is moving into the competitive wafer inspection market. Applied Materials and KLA-Tencor also compete in the wafer inspection market. In total, the wafer inspection segment is a $2.1 billion business, according to KLA-Tencor.

Both Applied and KLA-Tencor separately sell wafer inspection tools based on optical techniques. In contrast, HMI sells wafer inspection systems based on e-beam technology.

In the past, e-beam inspection was mainly used for R&D and engineering analysis, while optical was utilized in the production fab. More recently, though, e-beam is moving into parts of the production flow, posing a threat to optical inspection.

Both technologies are complementary and have some trade-offs. E-beam inspection has sensitivities down to 3nm, but the technology is too slow in terms of throughputs. Generally, optical inspection is fast and can find defects down to 30nm. The grey area for optical is somewhere between 20nm to 10nm, but the technology is being stretched to the limit below 10nm, according to experts.

In any case, the next big thing in this arena is multi-beam inspection. Multi-beam inspection technology can find defects down to 2nm. It is also faster than today’s single-beam e-beam tools.

For some time, Applied Materials, HMI, Maglen and Sematech/Zeiss have been working on multi-beam inspection technology. But this is a difficult technology to develop. And a viable multi-beam e-beam inspection tool might not be ready until 2020 or so.

EUV mask inspection
Meanwhile, ASML’s biggest motivation to buy HMI is fairly apparent. ASML’s proposed move to acquire HMI will propel the Dutch company into the mask inspection segment, particularly in the EUV arena.

Today, there are two basic techniques to inspect EUV masks—optical and e-beam. KLA-Tencor’s existing optical mask inspection tools can be used to inspect EUV masks. Optical inspection can do the job, but this technology may have some resolution limitations for future EUV masks.

E-beam is another way to inspect EUV masks. In fact, HMI has pioneered e-beam inspection systems that are specially designed for mask manufacturers to identify pattern defects in EUV photomasks. This, in turn, will support the ramp of ASML’s EUV lithography tools, which are set to be used for volume production of semiconductors starting in 2018.

In addition, ASML’s proposed move with HMI will expand ASML’s efforts in process control. Today, ASML sells an integrated overlay metrology tool, where it competes against KLA-Tencor.

The combination will allow ASML and HMI to further integrate and enhance their product offering at an accelerated pace. “Our metrology technologies are complementary, and when combined offer the chance to significantly improve process control, and hence yields, for our customers,” said Peter Wennink, president and chief executive at ASML, in a statement.

Jack Jau, chief executive of HMI, added: “The transition to sub-10 nm logic nodes and the ramp of advanced memory devices require innovation, and we look forward to continuing to help our customers make it a success, now by offering HMI and ASML technologies.”

The transaction, which was unanimously approved by the boards of directors of ASML and HMI, will entitle each HMI shareholder to receive TWD 1,410 per share in cash. The price per share reflects a premium of 31 percent over HMI’s 30-day volume-weighted average price (VWAP).

The transaction is expected to close in the fourth quarter of 2016 and is subject to customary closing conditions, including review by Taiwanese, U.S. and international regulators.

Closing is also subject to approval by HMI’s shareholders. Hermes-Epitek (HEC) and certain affiliates, as well as certain officers of HMI, currently own approx. 48% of HMI shares in total and have entered into agreements with ASML pursuant to which they have agreed to vote in favor of, and otherwise support, the transaction.

As part of the transaction, HEC and certain HMI officers have also agreed to reinvest in ASML part of the proceeds to be received by them from selling their HMI shares in the transaction, underscoring their belief in the strategic rationale for the transaction and their commitment to the combined businesses going forward.

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