Here is the research report that just came out on AVTI. I would encourage everyone to get a copy by sending an email request to jgant@aimcomm.com.
Investment Bank
iBanc Group, Inc.
Tel. 949-260-0197
Accord Advanced Technologies, Inc
AVTI (OTC-BB)
Recent Price: $0.13 November 13, 2000
Business Description
Small-Cap - Emerging Growth
High-Tech Semiconductor Wafer Processing Systems Refurbishment and Full-Service Support Provider
Financial Highlights
Market Capitalization: $5.1M 5-Day Avg. Daily Volume: 35,340
Outstanding Shares: 39.6M Book Value/Share: N/A
Insider Shares: 27M Current Ratio: N/A
Floating Shares: 11.6M 12 Month Price Range: 0.03 to 1.34
Summary of Investment Opinion
Ö We are initiating a Speculative BUY for shares of Accord Advanced Technologies, Inc. (AVTI).
Ö The Company is positioning itself as the leader in the refurbishment of semiconductor process equipment with multiple products and services. The Company's core business is focused upon the refurbishing and full-service support of semiconductor process equipment, systems, and components. Currently, the Company primarily refurbishes the Precision 5000 system of Applied Materials, the largest original equipment manufacturer ("OEM") of semiconductor process equipment in the world. Future business developments will broaden the manufacturer base to include the refurbishment of semiconductor process equipment from Lam Research, Novellus Systems, and TEL.
Ö The Company's five year business plan will focus on the following:
1. Equipment Refurbishment: The Company's core business is the refurbishing and modification of advanced multi-wafer processing systems. These systems are comprised of semiconductor process (front-end) equipment used in chemical vapor deposition ("CVD"), etching processes, physical vapor deposition ("PVD"), and planarization processes for semiconductor circuit (chip) fabrication.
2. Foundry/Wafer Deposition Services: The Company has finished the installation of a state-of-the-art Applied Materials Centura deposition/etch process equipment. The Centura will be used to support research and development and to create proprietary products and additional custom services and products to customers.
3. GreenGas (G2) Chamber Equipment: The Company has developed a patent pending concept that is a chamber upgrade kit that will be installed into existing multi-chamber equipment with minimal downtime. The technology will substitute the use of the current gases with relatively benign process-gas chemistries that will meet increasingly stringent EPA greenhouse gas emissions regulations and eliminate costly gas abatement systems.
4. Planarization Technology: The Company has received a patent on a new concept of planarizing the layers without relying upon pressure or chemical abrasives, which would allow the use of low-k materials (dielectrics). The Company's concept provides a stress free process.
5. Consumable/Spare Parts/CVD Wafer Handling Hardware: Every semiconductor processing system uses spare parts that are affected by the gases and other materials within the process chamber. These consumables must be replaced regularly. The Company plans to use its R&D/test laboratory to design and manufacture replacement parts.
® Accord Semiconductor Equipment Group, Inc., the wholly owned subsidiary of Accord Advanced Technologies, Inc. was formed in 1993 under the name Integrated Semiconductor Service. It is the only operating company of Accord Advanced Technologies, Inc.
® Accord Advanced Technologies, Inc. was originally incorporated under the laws of the State of Nevada on May 22, 1996 as Investment Book Publishers, Inc.
® On August 1997, Investment Book Publishers, Inc. exchanged shares with Accord Semiconductor Equipment Group, Inc. whereby Accord Semiconductor Equipment Group, Inc. became a wholly owned subsidiary.
® On November 18, 1997, Investment Book Publishers changed its name to Accord Advanced Technologies, Inc.
The Company is positioning itself as the leader in the refurbishment of semiconductor process equipment with multiple products and services. The Company's core business is focused upon the refurbishing and full-service support of semiconductor process equipment, systems, and components. Accord Semiconductor Equipment Group, Inc. ("SEG") specializes in re-manufacturing and modifying multi-chamber systems for chemical vapor deposition ("CVD"), physical vapor deposition ("PVD"), and Etch processes. These precision systems are responsible for transforming individual silicon wafers into integrated-circuit ("IC") products such as computer chips. Refurbishing provides Accord SEG's customers an equally high quality alternative to new OEM equipment and enables the customer to immediately produce its IC products at a reduced cost due to lower manufacturing equipment costs. The Company also provides system decommissioning, commissioning, after-sales service and supplies among equipment re-manufacturers because of its ability to custom engineer modifications to customers' systems. The Company primarily re-manufactures the equipment of Applied Materials, primarily the Precision 5000 system, the largest original equipment manufacturer ("OEM") of semiconductor manufacturing equipment in the world. Future business developments will broaden the manufacturer base to include the refurbishment of semiconductor process equipment from Lam Research, Novellus Systems, and TEL.
Authorized Common Shares 47,000,000 Shares
Outstanding and Issued 39,568,638 Shares
Insiders 27,000,000 Shares
Floating 11,600,000 Shares
Authorized Preferred Shares: 3,000,000 Shares
Outstanding and Issued 0 Shares
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
June 30, 2000
(unaudited)
Total current assets $ 718,334
Property and equipment $1,805,441
Deferred income taxes $ 81,303
Deferred loan costs $ 82,659
Total assets $2,687,737
Total liabilities $3,259,377
Total stockholders' equity $ -571,640
Total liabilities & stockholders' equity $2,687,737
Products and Services
The Company's five year business plan will focus on the following:
1. Equipment Refurbishment: The Company's core business is the refurbishing and modification of advanced multi-wafer processing systems. These systems are comprised of semiconductor process (front-end) equipment used in chemical vapor deposition ("CVD"), etching processes, physical vapor deposition ("PVD"), and planarization processes for semiconductor circuit (chip) fabrication. Refurbished equipment offers a lower cost, shorter lead-time alternative to new OEM equipment. In addition, the refurbished equipment will meet or exceed all OEM specifications. The Company provides full-service support and installation services. The Company expects a 35% gross profit margin on this business segment.
2. Foundry/Wafer Deposition Services: The Company has finished the installation of a state-of-the-art Applied Materials Centura deposition/etch process equipment. The Centura will be used to support research and development and to create proprietary products and additional custom services and products to customers. The Company expects to achieve a profit margin of 65%.
3. GreenGas (G2) Chamber Equipment: The Company has received a patent-pending for a chamber upgrade kit that will be installed into existing multi-chamber equipment with minimal downtime. The technology will substitute the use of the current gases with relatively benign process-gas chemistries that will meet increasingly stringent EPA greenhouse gas emissions regulations and eliminate costly gas abatement systems. The Company expects to penetrate 5% of this market within five (5) years, thus putting potential revenues in the proximity of $5 billion USD.
4. Planarization Technology: In semiconductor wafer manufacturing, it is very imperative that the wafer surface is extremely "flat" or planar. The current process used in performing this step is called Chemical Mechanical Planarization or "CMP." CMP grinds the thin film layers flat using a combination of mechanical pressure, abrasive slurry, and chemical etchant. The Company has developed a patent-pending concept of planarizing the layers without relying upon pressure or chemical abrasives, which would allow the use of low-k materials (dielectrics). The Company's concept provides a stress free process. The Company expects to penetrate 5% of the total market within 5 years with licensing, putting revenues in the range of $125 million USD.
5. Consumable/Spare Parts/CVD Wafer Handling Hardware: Every semiconductor processing system uses spare parts that are affected by the gases and other materials within the process chamber. These consumables must be replaced regularly. The Company plans to use its R&D/test laboratory to design and manufacture replacement parts. The market for consumable parts is estimated to be more than $400 million annually. The Company expects to achieve a gross profit margin of 50%.
· CVD Wafer Handling Equipment:
All CVD chambers in a multi-chamber processing tool use a handling system to support and heat the wafer inside the chamber. Through a combination of thermal stress and exposure to corrosive gases over time, these wafer handlers fail during production and need to be replaced. The Company has developed a new wafer handler incorporating different metallurgy, which will provide superior reliability at a significantly reduced cost. Each major semiconductor company spends a minimum of $5 million USD annually on wafer handling systems, with the total market exceeding $100 million annually. The Company expects to achieve a gross profit margin of 50%.
Patents
The Company has received two patents and is awaiting a third. The first patent was issued on April 28, 1998 (U.S. Patent No. 5,744,400) for an ion beam planarization process that has advantages over the existing Chemical Mechanical Planarization. The process is dry, slurry-free, environmentally safe, adaptable to standard cluster deposition/etch tools and is cost effective with rapid planarization rates. The second patent was issued on September 1, 1998 on a CVD wafer handling system, or susceptor (U.S. Patent No. 5,800,623). It incorporates distinctive metallurgy to offer greater reliability and longer durability at a significantly reduced cost. The Company has a patent-pending (docket no. 08/730849) product known as GreenGas (G2) ™ chamber upgrade kit. This product offers a solution to concerns about greenhouse gas production in the semiconductor industry.
The Company's objectives are as follows:
¨ Develop long-term partnerships with our customers to improve fab productivity and profitability through the Company's single-source solution of knowledge, manpower, and service.
¨ Provide quality tested systems and spare parts to the semiconductor equipment market.
¨ Fulfil the niche market of specialty engineering and refurbishing of advances multi-chamber semiconductor equipment, systems, and components.
¨ Develop and market new products such as semiconductor equipment consumables, GreenGas chamber kit, CVD wafer handler, and non-CMP planarization products/services.
¨ Provide test wafers for semiconductor manufacturers using in-house wafer deposition operation.
¨ Create an e-commerce platform for spare parts/consumables.
¨ Diversify the Company's core business of refurbishing semiconductor process equipment that is currently focused upon Applied Materials. Companies such as Lam Research, Novellus Systems, and TEL are prime candidates for the refurbishment of their process equipment.
¨ Establish and build relationships with Chinese companies and government.
¨ Establish training programs to diversify Company talent across broader manufacturer product lines.
Strategies
The Company plans to achieve these objectives by:
Ø Staff the Company with proven semiconductor equipment professionals both in management and staff positions.
Ø Establish market leadership by expanding market share, product capabilities, and exploitation of new technologies.
Ø Provide customers with refurbished semiconductor process equipment that exceeds OEM specifications with full-service technical support.
Ø Expand current facilities to establish a Consumables and Process Test Laboratory.
Ø Implement drop-ship capabilities with computer driven inventory controls.
Ø Use the expertise and knowledge gained in its core remanufacturing business to enter into product lines that are synergistic to the core business, and lessen the Company's reliance on one product/service line.
Ø Establish a worldwide presence for its product lines though strategic alliances and partnerships. In particular, develop the China market.
Ø Strengthen its position in remanufacturing, pursue the establishment of a strategic relationship with AMAT while simultaneously undertaking efforts to minimize its reliance on AMAT should a stategic relationship not be achieved.
Ø Establish strategic partnering relationships, licensing agreements and mergers/acquisitions with other companies involoved in product/service lines similar to those offered by the Company.
The market serviced by the Company consists of all facilities in North America (approximately 378) manufacturing integrated circuits. In addition, the overseas market, particularly China, Taiwan, Japan, is potentially very lucrative.
Considerations
· The Company will require additional financing to achieve growth in operations and to support its working capital requirements.
· The nature of the Company's service and product is such that changes are continually made to the tools and machines.
· The Company faces competition from many sources, including the original equipment manufacturers.
· Delays in completion and shipment of products
· Difficulty in acquiring critical product components of acceptable quality and in the required quantity
· Increased competition
· The effect of marketing efforts
· Growth rates in the Company's markets and adverse changes in economic conditions
· The Company's volume may be affected by changes in conditions in the semiconductor industry.
Competition
Although there is a certain amount of competitive pressure for new versus refurbished systems, the Company's primary competition comes from those companies participating in the secondary refurbish market.
The Company's major competitors consist of several companies that includes:
· BEST - has total sales of approximately $9 million US dollars per year. The competitor currently re-builds for the Applied Materials Etch 8100- and 8300- product line. The Company has very limited experience with refurbishing the Precision 5000. Its greatest asset is secondary market parts procurement and is a major player in the spare parts for the Precision 5000.
· Applied Materials - has created a used equipment refurbishment capability in house. Their management, however, is reluctant to fully support this business due to perceived competition with new equipment sales. As such, progress has been slow and sales limited. Due to Applied Materials' concern over cannibalizing their new equipment sales, we believe the growth of this segment will be stunted and, in fact, they are currently prohibited in performing upgrades, which is the major growing niche.
· Tractec Technologies - specializes in providing quality refurbished, remanufactured and tested Applied Materials Precision 5000 semiconductor processing equipment. The competitor also is involved with secondary markets for equipment and spare parts. Total sales are approximately $3 million per year.
· TechLink - provides cost-effective semiconductor equipment, service, spare parts and support to wafer fabs worldwide. Techlink is a considerable competitor and has sales of approximately $15 million per year.
Outlook and Investment Opinion
Given the recent downturn in the entire technology sector and boom-bust inventory cycle of semiconductors, we believe Accord Advanced Technologies, Inc. (AVTI) represents a solid investment opportunity for investors that seek to commit risk capital to a 18 to 24 month time horizon. Factors such as a positive macro-economic climate, increasing momentum for electronic goods consumption, rising profits, and strong semiconductor capital spending, the current industry environment is expected to further continue its growth cycle for more than three years.
The process of manufacturing semiconductors, or integrated circuits (commonly called ICs, or chips) typically, consists of more than a hundred steps, during which hundreds of copies of an integrated circuit are formed on a single wafer.
The three waves expected to drive the industry through 2001 are as follows: (1) continued wafer fabrication upgrades to 0.18 micrometers and below; (2) use of new materials such as copper and low k dielectrics; and (3) a shift from 200mm to 300mm wafer size. These technological advancements are expected to increase peak productivity and lower operating costs dramatically. We believe that AVTI's business model, technological innovations, and experienced management, has the potential to become a leader in the niche semiconductor refurbishment and services market. Potential risks include competition from others, including front-end manufacturers, and advances in technology that may make the Precision 5000 obsolete. Thus, it is important the Company continues to diversify the scope of its refurbishment services to include additional equipment models. Additionally, the Company needs to aggressively expand to emerging overseas markets.
We are initiating coverage of Accord Advanced Technologies, Inc. with a Speculative BUY. We believe that given the Company's business model, products, and services, Accord Advanced Technologies, Inc. represents a strong investment opportunity at these price levels.
Disclaimer:
The material contained in this report is believed to be accurate and was derived from company information, interviews with management, information available to the public, and other sources believed reliable. However, iBanc Group, Inc does not represent that this report contains all material facts, or does it guarantee its accuracy. This report is for informational purposes only and should not be construed as being a solicitation to buy or sell securities of the company discussed. Any recommendation contained in this report may not be suitable for all investors as these securities may be speculative in nature. Any projection, estimates, or opinions herein made assume certain economy and industry conditions and are solely those of iBanc, Inc and subject to change without notice. In addition, there is no assurance of disinterestedness. iBanc, Inc., its affiliates, and/or employees may make a market in the securities discussed herein. To accommodate the objectives of its trading account, iBanc may hold long or short positions in the securities herein discussed, which position(s) may be inconsistent with the advice given herein. iBanc, its affiliates, officers, directors, and/or employees may (1) be buying these securities from customers or selling them to customers on a principal basis or as a market maker; (2) make purchases or sales of these securities while this report is in circulation; (3) have an interest in options, warrants, or other instruments connected with the securities mentioned; and (4) have been compensated for preparing this research report. Any investment opportunity contained in this report contains a high degree of risk and prospective investors are encouraged to review in detail the Company's Prospectus and/or other documents on file with the Securities and Exchange Commission (SEC) for additional information. We recommend investors contemplating purchase or sale of these or any securities also consult with their stockbroker or other qualified investment professional. |
