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Politics : Formerly About Applied Materials

AMAT 339.94

+3.3%

Feb 11 3:59 PM EST

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To: Kumar Nathan who wrote (4155)	4/30/1997 1:09:00 AM
From: Exciton	of 70976

Kumar, Although photolithography is the last large piece of the equipment sector in which AMAT is not involved, I think it would be a mistake for AMAT to try to expand into this area. Even if they bought SVGI, which has good deep UV technology, they would immediately set themselves up for competition with the lithography giants--Nikon and Canon. I don't know the market share figures offhand, but I suspect that the two of them combined have the vast majority of the stepper market. Nikon alone shipped over 600 steppers last year, and although they appear a little behind SVGI in shipping their first .25 deep UV systems, I think it very likely that they will soon ship in volumes that SVGI simply can't come close to matching. Their well established market presence, demonstrated quality, and customer loyalty are also major factors that AMAT would have to contend with if they entered the lithography business. I would also be concerned that Nikon and Canon are likely the low cost producers given their volume and experience. There is also the possibility that the two firms are viewed as a national technological asset by the Japanese government which might be willing to back them in the face of any new significant competition. Taken together, these factors suggest to me that in the photolithography business, AMAT would face extreme competition from multi-billion $ firms that could force AMAT to accept very low margins in its acquired stepper business. AMAT has fantastic growth potential in its existing product lines as the industry goes through the transistion to both smaller device geometries and 300 mm wafers. They don't need a photolith business and it might actually harm the company IMHO.

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