Gear firms unite under pressure at 'first of kind' SEMI event

Electronic News, Feb 3, 1997 by Carol Haber

New York--As massive R&D investments loom in 300-millimeter (12-inch) technology for many equipment and materials companies, Semiconductor & Equipment Materials International (SEMI), which represents 1,850 of these firms, led a delegation of equipment firms to Wall Street last week to state their case on why they are worthy of long-term funding by major institutions and other investors.

Companies also had the opportunity to eye each other with the possibility of sharing the load.

The joining of forces by firms that attended SEMInvest '97 at the Pierre Hotel, here--which ranged from the Fremont, Calif.-based heavyweight Lam Research to the much smaller but no less critical Danbury, Conn.-based Advanced Technology Materials, Inc. (ATMI)--was a hot topic, with mergers, alliances, licensing uppermost on investor minds, as companies touted their latest R&D efforts in an effort to lure lucrative relationships.

As companies sought Wall Street's interest, Wall Street pushed for partnerships among companies.

Attending this first-ever conference solely for this sector--held in order to gain exposure for those companies which usually get upstaged by the likes of Intel and Texas Instruments at major events--GaSonics' Dave Toole said equipment firms have their own special needs.

"The shift to 300mm is extremely expensive, and the expense is being placed on the equipment manufacturers," he explained. "Customers in the past who have shared in this round (of technology) aren't sharing it this time. It's in the billions of dollars. Customers are continuing to increase their requirements from us," said Mr. Toole. "And we don't have a promised return. Usually you like to see when you are going to get a return on the investment. No one wants to be first to have to go through the debugging of the tools. They would rather have someone else go through it and get more mature tools. There are no orders that have been placed of any significance on 300mm."

Wall Street's reaction? "Wall Street isn't intimate on the (300mm) issue," said Mr. Toole. "They are focusing more on when the (equipment) growth cycle will accelerate again. Until 300mm becomes more feasible in the financials, only companies that have the critical mass to be able to afford it, will be able to."

Mr. Toole said that $20 million a year at GaSonics goes into development, "with a good chunk going to 300mm. If you are a $20 million company, it will be too tough to compete. Even if you are a billion-dollar company and you have a multitude of products, you can't switch all of them to 300mm that easily.

"The investment community is looking more at the 0.35 to 0.25 (micron) process transition, the supporting of capacity requirements, where they believe the current problems are. Maybe two years from now, these folks might be interested," he said.

Nanometrics, Inc. of Sunnyvale, Calif., is happy for the opportunity to strut its stuff. "We are seeking more exposure, especially now, when we're on an upswing," said CFO Paul B. Nolan. "The timing is good for us."

Another small-ish firm that would get trampled at one of the larger events was Knights Technology, Sunnyvale, Calif., the only private attendee. CFO Mary P. Korn noted: "A lot of technology is emerging out of the smaller companies. We wanted to talk to potential investors as a kind of pre-road show exposure." Knights is contemplating going public. The company offers a yield and failure analysis product and seeks additional partners for its yield management team. "The yield management job is very complicated and requires so many diverse technologies, it can't be done by any one company," Ms. Korn explained.

Said Rockville, Md.-based Fusion Systems Corp. CFO Joseph F. Greeves: "We are talking here (at the conference) about our R&D, including our 300mm program; we are working on a 300mm version for each of our products, and are continuing to spend at a higher than normal rate, probably somewhere in the range of 17-18 percent of sales in the foreseeable future.

"Yes, we are looking for new sources of revenues...We sold one business and the company has $110 million in cash and we are looking for opportunities to diversify and add complementary businesses or technology, especially opportunities to expand globally.

"Overall analysts have viewed what we have to say about 300mm technology positively. There is an expense associated with that, that they are trying to understand; in other words, how it will be funded." R&D funding competes with expansion needs, he said. "We think there will be some consolidation in the industry to provide the critical mass that's needed. It makes more sense for multiple companies to combine and have one support group to sell their products. If you are going to develop 300mm platforms, it makes more sense to put multiple products on it," Mr. Greeves noted.

Investment bankers are promoting consolidation, he said. "They are essentially out soliciting people to try to get them to do deals."

Billerica, Mass.-based PRI Automation president/COO Mitchell G. Tyson wants to get "PRI's story" to Wall Street with a presentation that includes new product development. "We are working on the 300mm product set. These fabs will be very dependent on automation." Added Mr. Tyson: "This is the year 300mm decisions will be made." Meanwhile, Asyst Technologies has closed its present automation subsidiary but is substantially increasing its commitment in R&D to leading-edge automation, including 300mm efforts (see story, page 6).