ASML Knocks AMAT Off Its Perch
Confirming the growing cost gap between lithography and all other semiconductor manufacturing tools ASML has surprised much of the industry by pushing Applied Material of the number one spot of suppliers after three decades as the dominating industry tool suppliers according to the latest figures from VLSI. Nikon also saw increases much greater than the industry average highlighting the changing dynamics in the industry created by the need to shrink devices further and further. Lithography accounts for a greater percentage of overall tool costs for manufacturers as they scale down the Moore's Law path.
What is more impressive for ASML is that it is less than a decade ago it was considered the European upstart who would never be able to take on the might of the two Japanese competitors, Nikon and Canon with many critics citing the ASML's reliance on a single tool as the main reason they would not be competitive enough. In fact this particular focus has served the company well as the subsequent success eloquently proves.
The ranking changes in 2011 were produced by large acquisitions and strong spending in lithography tools. During the year, Advantest closed the Verigy acquisition in July and Applied Materials acquired Varian Semiconductor in November. Despite the acquisitions, lithography spending overwhelmed these activities and European based ASML became the industry's largest equipment supplier.
Overall, the Top 15 equipment suppliers grew 13% in 2011. The lithography equipment suppliers, ASML and Nikon, grew 27% combined, more than twice the industry growth rate. Japanese equipment suppliers also recorded higher than average growth rates. Advantest led the growth of Japanese suppliers by recording a 28% sales increase in 2011. The Verigy acquisition and SOC test equipment sales in North America contributed to Advantest's overall performance.
Equipment spending was driven by aggressive capacity expansion in the foundry and logic sectors, mostly the result of increasing demand for mobile devices. Capacity expansions in memory sector were limited as strong pricing pressure reduced profitability for memory suppliers and their ability to expand.
The gap between lithography and the rest of the industry is only set to widen as plans are now afoot to move towards 450mm wafer manufacturing. The reality of such a move suggests that most tools will continue to function effectively at the new dimensions excepting lithography which is moving towards the more expensive EUV options. The dramatic price increase in lithography is not going to end soon with next generation tools commanding tens of millions price tags.
