This is a strange newswire story considering Intel's copper process is still a couple years from production.
August 3, 1999
Dow Jones Newswires
Merrill Says Intel To Select Novellus For Copper Gear
By CHRISTOPHER GRIMES
NEW YORK -- Intel Corp. (INTC) is primed to select Novellus Systems Inc. (NVLS) as a supplier of gear to build chips with ultrafast copper circuit connectors, a technology thought to be crucial in future generations of semiconductors, Merrill Lynch & Co. analyst Mark FitzGerald said.
FitzGerald said Intel should make the selection soon. Novellus could end up splitting the contract with the industry leader, Applied Materials Inc. (AMAT).
"We think that the odds are better than 50-50 that Novellus will win this bake-off, or at least split the business," FitzGerald said.
Intel, the world's largest chipmaker, purchases about 10% of all chip-making equipment. But Novellus has had a difficult time penetrating the Intel account, FitzGerald said.
But as PC prices fall, pressuring the price of its microprocessors, Intel is increasingly focused on costs. It wants to have two equipment suppliers - Applied and Novellus - to make prices for the gear more competitive, the analyst said.
The gear in question is called PVD, or physical vapor deposition. These systems are used to deposit the metal lines used in the chip. Right now, circuits and their connectors are made out of aluminum, which doesn't conduct electricity as well as copper. The copper technology was pioneered by International Business Machines Corp. (IBM).
Applied's PVD product carries a profit margin of 65%, well above the company's average margin of 48%, FitzGerald said. "Intel knows there's a lot of room to bring prices down in this marketplace and they want to have two vendors to make it more competitive," He said. "Intel is focusing on costs like never before."
FitzGerald said the PVD tool market could total $1.2 billion in 1999.
Novellus shares were recently down 1/4, or 0.4%, at 64 on light volume. Applied was up 1 3/8, or 1.9%, to 73 1/4, also on lighter than average volume.
- Christopher Grimes; 201-938-5253
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