Ian,
Thanks for your incisive reply. It is indeed good to be back in the loop. Although I have been absent, I have enjoyed lurking in your discussions especially with Cary.
I do not know if the following segment from a Doug Lawson interview with The Wall Street Transcript last month has been posted but I thought it was quite interesting and certainly relevant to the 300-mm transition issue.
TWST: What do you see as the most significant trends or developments in your sector of the market over the
next few years?
Mr. Lawson: I think the biggest one is the introduction of 300 millimeter.
CEO INTERVIEW: DOUG LAWSON, PRI AUTOMATION INC (CONT)
For us 300 millimeter is key. If I look at our factory automation business, it's driven largely by the increase in
wafer size and the weight of a lot of wafers ' let me go back a little bit in history. The introduction of factory
automation to the semiconductor industry happened basically with the advent of eight-inch fabs, where the
boxes and the pods became too heavy to carry around. The lots needed to be stored at a height that the safety
engineers would allow. In order to do that, it would have taken up a huge amount of floor space. This drove
the industry to automated storage units, which were common in other industries but hadn't been implemented in
semiconductor. So that drove our business for factory automation. Three-hundred millimeter takes it to another
level. three-hundred millimeter pods are significantly heavier. The value of the material that is being carried in
them is much more expensive. So you can't have operators even carrying material out of the stocker to load it
on a process tool. You need to automate it right down to the tool. In addition, the cost of the process tools
continues to rise, so you want to keep them highly utilized, otherwise your depreciation costs are outrageous.
With Intrabay automation you deal with the handling problem of the weight of the box that you're carrying.
When you couple scheduling software, with this automated system you can ensure that you optimize the fab to
make sure that your very expensive tools are never sitting idle.
TWST: Will 200 millimeter continue to be in use for a while longer?
Mr. Lawson: Yes. If I look at the industry today, it's only recently that 200 millimeter actually crossed over, in
terms of the amount of silicon being processed. It's only in the last year or so that eight inch actually passed six
inch in terms of total silicon produced. There are no six-inch fabs being built, and haven't been for a number of
years, but it does take a fair amount of time for a wafer-sized conversion to happen. This year we see
approximately nine new 300- millimeter fabs going to be ordered. Two of those will be production fabs. One
of them has been started, and PRI has been selected to automate the second one in an evaluation phase. The
other seven fabs are a combination of pilot fabs or bridge fabs. Bridge fabs are built to accommodate 300mm,
but are probably outfitted with 200mm. This allows the customer to convert to 300mm at a later date with a lot
more ease. At the same time, we see 27 200mm fabs being ordered this year. Nine of those are new fabs, and
18 are expansion fabs. So there's a pretty substantial amount of 200 millimeter. If we look at 2001, we see the
number of 300mm factories being ordered increasing to about 14. Nine of those will be production fabs.
CEO INTERVIEW: DOUG LAWSON, PRI AUTOMATION INC (CONT)
So it's a substantial shift from the two that we see this year, yet we still see 24 200mm orders, nine of which
are new fabs, and 15 are expansions. So next year continues to look strong for 200 as well.
TWST: So you'll still be producing those for your customers.
Mr. Lawson: Absolutely. But for PRI, 300 millimeter is very important to our business, because the revenue
opportunity from each fab grows from approximately $20M in a 200mm fab to approximately $90M in a
300mm fab. So the opportunity for PRI is huge. It's very different from many of the other companies that
supply equipment to this industry. This increase is largely driven by three factors really. In factory automation
it's the implementation of the IntraBay, which means that a factory automation order could increase from
approximately $15 million to $45 million. The OEM business is driven by a shift from PRI supplying an
atmospheric robot, to selling an integrated front-end system. And that's driven by the fact that at 300 millimeter
the whole front end has been standardized, whereas in 200 millimeter every one of them was custom made.
Now the robot is the value-added piece, instead of the custom interface. So we expect that we'll get a
significant piece of this business. In addition, that tool front end is part of the overall factory automation system.
It's attached to the tool, and it is the interface point to the factory automation. We know our end-user
customers worry about every interface in the factory, and now there are going to be 400 new interfaces in a
factory. We would expect that they would be looking to PRI to make sure this interface is clean and
serviceable. We have the people onsite to take care of it as part of our factory automation system. So we think
we'll do well there. So that changes that business from a $5 million-per-fab opportunity to something on the
order of $30 million.
* * * * * * * * * * * * * *
In light of your optimistic comment about a possible triple within a year, I would note that it feels like an eternity has passed since last March when such expectations might have sounded conservative. With higher oil prices and the economy slowing down, I would settle for a much more modest return from here, though it would not surprise me in the least for PRIA to advance by 50% over the next 2 to 3 months if they show signs of getting the problem resolved.
As the above remarks from the CEO suggest, PRIA's ultimate salvation and prosperity appear to be linked inextricably with the 300-mm transition. Although it has been much heralded and much delayed, such transition appears to be inevitable and in fact well under way. I can think of no clearer beneficiary of such a trend than PRIA.
I suppose the main question for investors is simply whether the palpable effects of the 300-mm transition appear this cycle or whether these fruits will have to wait for the next cycle.
Cheers,
Sam |
