Transcript of Cymer Conference Call, Part 3
This is the remainder of the Q&A, and Akin's closing remarks. I'm glad I'm not a stenographer; I'd hate to do this for a living.
Steve Connell - Capital Group
Bob, I just wanted to ask you - the customer that apparently tried to reduce their shipments, and then you convinced them to take them, am I understanding you correctly there?
Answer
Ah, yes. They pushed-out some orders and in part, to resolve this issue, we asked them to take some of those units that they had otherwise pushed-out to help load-level the situation so there wouldn't be a big decrease now and a big increase shortly after.
Steve Connell
Right. Was this an attempt by that customer, in a broader context, to reduce overall work in process?
Answer
We are not aware of that. I mean I want to say something that I mentioned to a few people in private conversations on the telephone on Friday, and that is that although we are in with our customers on a day by day basis, because we also ship product to their competitors, when it comes to the day to day rationale behind their manufacturing flow, whether it's are they getting enough parts, solving technical problems and so forth, they are especially guarded about that because they don't want, obviously all of our customers are extremely concerned that the rest of the world not have intimate knowledge about the trials and tribulations about building Deep-UV steppers. If rumors were to get out as they are now, that are perhaps unfounded about a companies capability to produce units, that could have an impact on their order rate from chip makers and chip market shares, so huge dollars are in the swing here. We don't have that kind of information, so we have no basis with which to confirm or deny your speculation there, Steve.
Neil Miller-Fidelity Investments
Thanks for your openness here. I guess my question was on the consumer execution side of it, which I think you covered quite well. As a follow up I am just wondering is it the Horais German company. My understanding is that there is a patent dispute which is in the brouhaha stage, and Corning maybe is impacted by that. Any comments on where that stands or if that is the case?
Answer
There is a patent issue in the works. As you know Chinitz Quartz?? is a sister company/licensee of Horais so those companies are used to cooperating, and as far as I am aware that patent dispute does not impact the two of them, but basically it is them potentially versus Corning. Those companies, all three of them, have a history of licensing this kind of patented manufacturing technology, so I don't think it is an issue of one of them not being able to compete in the future, it is more or less an issue of impact on the bottom line of those businesses and/or the time involved in disputing that kind of a patent. But as far as I am aware right now it is not the issue which is gaining any of the three companies a ramp up. That is more or less a straight forward manufacturing technology and factory set up kind of a problem.
John Karns- Granite Street Advisors
Just a couple of questions. Given that this push out was business as usual and that you were able to resolve it without any real impact, looking forward as this many happen around companies again, do you think you would do the same thing?
Answer
Let me handle the first part of that and then I will turn the rest over to Bill Angus. I want to mention that, yes, in some ways you are absolutely right, this is business as usual, that is a good way to describe it. Especially the part with only the timing of things which causes the problem. What was the rest of the question?
Would you withdraw from the conference again, given the same situation? And knowing what the impact is going to be from it.
Bill Angus
Most likely not, quite frankly. I think we have been spoiled here, because basically we have been operating on the issue that everything we could possibly get out the door the customers would take and so that was never an issue, if you will. Now, we have to make sure we remember our own guidance, potentially we are going to get push backs etc., but there are also ways to deal with those things and work them out. Quite frankly, in the future, I think if this thing were to come up again we most likely would not have done that.
Bob Akins
I will add to that because of those issues and the confidentialities, no one should be surprised if from time to time Bill or myself find ourselves in a conference where we are being less than completely straight forward about questions like "Has anything come up that could impact this quarter, uh at the last minute", or so on an so forth because again resolving these kinds of issues is becoming more or less business as usual.
John Karns
Sure, I guess that would also take place more when a conference is more near the end of a quarter and there could be a flow over between the two quarters. Second question, Has there been any change in the order rate from your customers?
Answer
No, to the best of our knowledge there has been no change in the order rate.
Gunner Miller-Paine Webber
A very quick question here to get the lay of the land here. With three or four customers it must be pretty easy to get a view on the total number of expected steppers in the industry - Deep-UV steppers for 97 and 98 - and I guess just as a follow-on with this customer taking more of this load-leveling inventory, does that indicate that perhaps they'll have built some inventory, significant inventory of lasers?
Answer
As I mentioned before, our desire to push back was to load-level so that we would not have a month of shipments to that customer that was down and a short time later a month that was high as we tried to manage our peak capacity. But as far as where we are right now our 1997 and 1998 expectations are certainly in line with the most recent VLSI forecasts.
Gunner
If I could just do a quick follow up. Is there any significant performance or unit shipment difference between steppers and scanners for Deep-UV for your customers?
Answer
That is a good question. As you know, the scanners are far more complex, so they are not as fully developed right now and of course they demand more from the laser. They are far more sensitive to laser specifications. The scanners are capable of doing things steppers cannot, higher resolutions with higher depth of focus, over larger field sizes, so they are hard compare apples to apples. Yes, the scanner can do things the stepper simply cannot do. I'll also point out that when it comes to competitiveness and reliance on laser, the scanner requires a lot more from a laser. It's not as efficient so it requires more average power and because it writes the image with a moving line of light, the pulse repetition rate and pulse to pulse stability have to be considerably higher than for a stepper, in order to receive accuracy of dosage control. These are the directions as we have been discussing at recent conferences that Cymer is pushing its next generation laser to maintain a very competitive position. We expect that by the beginning of 1999 most of the tools shipped will be scanners requiring these higher performance lasers than steppers.
Gunther
Would a faster than expected change in customer mix between steppers and scanners result in a change in your expected bill plan?
Answer
Is your question, if scanners emerged more quickly than anticipated would that have an impact on us?
Gunther
Exactly.
Answer
I think it certainly could, but I certainly don't expect that to occur. I mean scanners are again complex enough tools that I don't think an accelerated emergence of those would be possible. If it did occur, then we would fall back to our development plan for a next generation laser and ramp that up and I think that that would certainly put additional pressure on the other lithography tool suppliers to accelerate their programs as well. I will point out that in more recent times, what has happened is that Cymer's technology program has become much more aggressive. And I think that in many ways that is becoming the dominant driver in the industry.
Susan Barney, Emerging Growth Management
I missed the first portion of the call, so forgive me if this has been covered, but I heard from another research house that at the present time Nikon was shipping its products with Komatsu lasers in Japan with yours in the US and North America and with Lambda Physik in Europe. (Background laughter from Cymer participants heard here). I have also heard that these products are not ready yet. I am a little confused so I called somebody at Nikon USA and he confirmed that that was his belief as well. Can you clarify that for me?
Answer
Yes, and the lasers going into Australia are being built by Lasers Down Under Inc. (laughs)
Susan
Really (laughing)?
Answer
(laughing) No, believe me I don't want to start any rumors here. No, as far as we are aware there is no truth to those facts, those speculations at all. Certainly, about 3 years ago, Nikon was quoted as saying that they had a desire, if possible, to use Komatsu in Japan and Cymer elsewhere. When confronted with that, it was unclear where that quotation came from. It actually got traced to Nikon Precision Inc. not from Nikon in Japan. That was about three years ago. There has never been any official statement of that kind that we are aware of from Nikon Headquarters. But no, all that is happening now between Nikon and Lambda Physik and Komatsu is receiving a very small number of units on an annual basis on the order of two or three or so per year from those companies for evaluation purposes. Otherwise, everything that ships anywhere in the world on a Nikon machine is Cymer's excimer laser light source.
Brett Otis
Susan, I'm sure who you spoke to at Nikon, but in direct discussions with two different high level management people at Nikon, what we were told was that they are not shipping any production systems anywhere except for with Cymer lasers. That they are not shipping Komatsu or Lambda Physik. So I'm not sure what your contact source was but I just wanted to interject that.
Susan
Thank you.
Fred Wolf - Addis(?), (Something), and Hill
Could you just update us on the progress of your retrofit program and also is that going to enable your customers to basically assemble lasers more quickly? Will that help them at all? Because some of them have had very long assembly times for their steppers.
Answers
I don't know if I understood the last part of that question but we have of course developed the solutions, the upgrades kind of a package and gone out and discussed it in detail with our direct customers and the leading edge chip makers who are putting this technology in place. We have put these changes on the lasers in our own factory and with our direct customers, so that they have been able to evaluate not only the effectiveness of the changes but also to verify the number of hours that it takes to perform them on each machine, and so on so forth. This is not a retrofit package per se, this is a continuous improvement implementation and it is just starting to happen at our direct customer's factories and, in the very near future, the chipmakers themselves. Again, the intent is to have these improvements in place prior to the really heavy-duty cycle usage beginning in 1998, and we see every reason to believe that that will occur. As far as the ability for our customers to build lasers, could you say that again? As far as the ability of our customers to build lasers, could you say that again?
Question again.
Could the customer upgrade package assemble, uh help them assemble the steppers more quickly or is it just an issue of laser specs and not relating to how long it takes them to assemble their products?
Answer
No, the lasers meet all specifications. Always have. And when we ship them to our customers they meet all the specification and they are able to integrate and that's why Mr. Shimomura at Nikon said that the lasers or their technical performance is not a limitation on their ability to ramp up steppers. What this impacts is principally cost of ownership as the tools run especially under high duty cycle usage, this will increase the likelihood that the lasers will, assemblies and modules of the lasers, will see longer lifetime under that kind of usage and mean that the MTBF will be expected to improve and cost of ownership will be expected to decrease. I will point out that this is a decision that we have made to take charge of our own destiny and take responsibility for the lasers ourselves. We initiated it and we are doing it on our decision. Nobody invited us to do this and nobody forced us to do it and we are raising this competitiveness bar in our minds by implementing this kind of a program.
Mack (or Max) Prey, Privik (?) Investments
Hi. Four quick questions. First, when you define a push-out, by the way you've been answering some of the other questions, I've been taking that as it's really a temporary delay, it's not the whole schedule shifts out for a customer.
(Sounds like) Brett Otis
That's right Max. As I've tried to explain, its basically now with the customer's work in process pretty much filled up at the stepper manufacturer, he's got a valve, of lasers, or a flow, of lasers, coming into his factory. And he speeds up and slows down depending on the levels and needs and his shipment schedules in his factory. So it has in the past been totally routine.
Ok. The second one is, through, I guess, the end of the second quarter, since you can't talk really about this quarter, how many total lasers have you shipped, and .
Brett: So far this year?
Mack/Max: Actually I was just looking at a total, and my follow-up to that is how many do you know approximately that are in fabs today?
(sounds like) Akins
Ok. Well, lithography lasers through the first two quarters of this year total 197, and last year, for the whole year, we shipped about 135, don't hold me to that number exactly. So you've got 135 plus 197 since we started this ramp-up. Now, total installed in the end-user installations, we're showing from time inmemoriam [sic] here, a total installed base of roughly 236.
Ok, that helps. And then, two other quickies. Are you taking any reserves today? On lasers that you're shipping today?
That we're shipping today? Only our standard warranty reserve. Because we've cut over in production the current batch of continuous improvement issues. So they've been cut over in production.
Very good. And the last question I have is the capacity that you have today, I guess a per month basis? Or yearly, however you measure it?
Brett Otis (maybe)
Capacity for shipping new lasers is basically still gated by test bay availability. And you've got a 16-day dwell time, and so that . uh, I'm trying to work this out in my head as we're going here.
(Akins, I think, interrupts): If you work it out, and I don't have the numbers in front of me, quite frankly, we could discuss this in an independent conversation afterwards, if you'd like. But if you work it out, looking at the number of test bays we'll have online in Japan and here at the new expanded factory in San Diego, we'll have a final test bay capacity of a little over a thousand lasers per year by the 4th quarter of this year.
Ok, That's what I need. Thanks very much.
Maryann Dolan, Palanter (?) Capital
I was just wondering - and this isn't really your problem - but could you just comment on the report from the brokerage on Friday about Nikon lasers having gas leaks or whatever, and it seemed to be such large quantities that he referenced, I was just wondering, do you have any idea where that came from?
Akins:
In general, I had taken the standpoint that it's probably not good to use this phone call to talk about specific nitty-gritty issues that the continuous improvement program may or may not address. But actually I will address this one, because gas leaks, depending on who hears it and who describes it, could be envisioned to be a safety issue. And it's simply wrong. To the best of our knowledge, there have been no gas leaks. I think that the analysts in question are confusing the term gas leak with gas life. And as you're aware, at least one analyst report talked about gas life, another gas leak. Gas life refers to the amount of time the gas can reside in the discharge chamber in the laser before it becomes somewhat contaminated, and must normally be computer pumped out and refilled again. Gas life has a very small impact on the cost of ownership of the tool, and is a very very strong variable of not only the duty cycle of a laser itself, but also the purity of the gas that you buy from your gas supplier and the purity of the gas lines with which it's distributed from the gas bottle to the laser. And that has a tendency to vary from chipmaker to chipmaker. Of course, the lasers have to meet stringent gas life specifications before they ever leave the factory. It becomes progressively more difficult for us to predict what that will be as it gets further and further from our factory over time. But again, there have been no gas leaks to the best this management team's attention, and that should simply be dispelled.
Steve Connell
Bob, I was kind of surprised when you said the scanners are going to require something that I guess you don't have developed yet. Because I know SVG is already shipping scanners. Does that mean the SVG scanner does not require such a high performance, high stability laser as will be required by ASM and Nikon?
Akins
Good question, Steve, and I should have characterized that when I went into it. Because of the unique design of the SVGI microscan scanner, it does not require an incredibly narrow bandwidth from the laser. It can take a wider color emission from the light source. And that makes life wonderful, for the laser. The laser can operate much more efficiently, much more robustly, with less sensitivity to the parameters of the laser which would otherwise create instabilities. So .. (3-second gap in recording of conference call). certain stability as consistent with stepper operation because of that. The machines that are now either on the market or being developed by ASML, Nikon or Canon, which use lens projection systems instead of mirrors, require the very narrow bandwidth operation and, in addition, a level of stability that is not characterized today, that doesn't characterize those narrow-band lasers. It's that narrow-bandedness which put the laser into a difficult operating mode.
Right. And just a follow-on to a question somebody asked earlier, how many end-customer chipmakers are today in volume production, and .25 er, ah, at least with Deep-UV steppers?
Answer
To the best of our knowledge, the volume production laser tool that we have, uh that we are shipping now is our 5000-series. And we have approximately 100 5000-series lasers that have been actually installed at the chipmakers. As far as we are aware, those lasers are in verification of the manufacturing process and higher-scale usage. But in general they are not yet in full-scale production.
So no chipmaker yet has Deep-UV lasers in volume production?
No. Samsung has a few systems in volume production as we speak. And they are unique in that regard.
Intel?
Excimer-powered Deep-UV? No. Intel of course has the Microscan Deep-UV bulb-based system for quarter micron fabrication. They do not have laser-based systems. I think it has been reported publicly that Nikon has delivered at least one system to Intel for evaluation purposes. Other companies are hoping to do so, but they have no machines that are excimer powered as we speak, in production today.
Akin's closing remarks:
I'd like to stress again that to the best of our knowledge, over the past twelve days, in reality, nothing has changed. This kind of even is business as usual. As one of you remarked earlier, the fundamentals remain strong. Deep-UV demand from chipmakers remains strong, as does the demand for our laser. And if it's all right with everyone, we're going to get back to building lasers. |
