ASML seen deciding on flat screen entry soon
Friday June 4, 9:41 am ET
By Lucas van Grinsven, European Technology Correspondent
AMSTERDAM, June 4 (Reuters) - Dutch chip equipment maker ASML (Amsterdam:ASML.AS - News; NasdaqNM:ASML - News) may soon decide to jump in the booming market for thin liquid crystal displays (LCDs), sources close to the company and analysts said on Friday.
The world's largest maker of chip lithography machines which map out electronic circuits on silicon wafers, will likely decide early next month, and may make an announcement in its semi-annual results statement, sources close to ASML said.
ASML, which has only said that it is studying options to enter the LCD stepper market, declined to comment.
Analysts believe that ASML will decide to get into LCD steppers in order to take advantage of the red hot market for flat computer monitors and televisions, where shipments are rising well over 50 percent a year as consumers replace tube displays.
The biggest makers of LCD displays, Samsung Electronics (KSE:005930.KS - News) and LG.Philips LCD (KSE:066570.KS - News; Amsterdam:PHG.AS - News) which each have some 20 percent of the market, have said they will invest a total $40 billion in new production lines over the next decade.
"We expect an announcement of a possible involvement by the third quarter of 2004," JP Morgan analyst Uche Orji said.
A decision to enter the LCD market will put ASML head to head with Nikon Corp (Tokyo:7731.T - News) and Canon Inc (Tokyo:7751.T - News), the two rivals it also encounters in the chip lithography market.
Right now, these Japanese companies are the world's only LCD stepper manufacturers, essential tools which can cost more than $6 million apiece and which put millions of pixels and connecting circuits on large sheets of glass. These panes are then cut up into smaller pieces for various sizes of displays.
Sources close to ASML said it had intensified efforts to come up with an LCD stepper that stands out from those made by Nikon and Canon, much like ASML's chip systems that can be more expensive but also more productive than those of its rivals.
"Some of the firm's biggest and brightest brains are working on the LCD project," one source said, adding that key decision-making meetings were planned in coming weeks.
Another source said a go-ahead may be expected "around the middle of the year", although there was still a small possibility that management would kill the plans.
DIFFERENT STEPPER
ASML has been feeling out potential customers like Samsung, already a major buyer of ASML's chip lithography systems.
Although the basic lithography principle is similar, producing desktop-sized sheets of LCD panels is not the same as projecting chip circuits with the thickness of a few molecules on a circular silicon wafer of just 300 millimetres.
"The major challenge is handling of the large glass panes," one analyst said. But he added that ASML has an edge in its stage technology, where it scans the tiniest irregularities on the silicon surface before projecting the lithographic image.
This process helps to achieve a higher yield, or percentage of working chips. Yield is also key in LCD manufacturing, where production lines start off with yields as low as 30 percent, meaning that seven out of every 10 panes are not working well.
Some of ASML's suppliers, such as Swedish Micronic (Stockholm:MICR.ST - News), have experience in thin displays, which can accelerate ASML's entry into the market.
The Dutch company's decision to start making display lithography equipment will also hinge on its prospects for making equipment for an even newer flat panel display technology, called Organic Light Emitting Diodes (OLEDs).
The first full colour OLED displays are expected on the market by next year, and the technology has the potential to produce brighter and crisper flat displays that are cheaper to produce than LCDs.
"OLEDs could be a game changer," one source said.
Japan's Seiko Epson (Tokyo:6724.T - News) is using OLEDs as an opportunity to enter the display equipment market. Canon is working with Japan's Toshiba (Tokyo:6502.T - News) on yet another new panel, called surface conduction electron emitter (SED) display.
Spending on LCD and OLED equipment will rise at $10 billion a year between 2002 and 2006 to $59 billion, according to United States-based research group DisplaySearch. By comparison, global sales of chip equipment totalled $22.1 billion in 2003, according to Semiconductor Equipment and Materials International. |
