Talking about a takeover...note the date though:
February 17, 1997, TechWeb News
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Fab-gear business moving into period of consolidation
By J. Robert Lineback
New York - The U.S. semiconductor production equipment industry appears
to be heading straight into a period of unprecedented consolidation.
Merger and acquisition talks are quickly spreading among U.S. suppliers
as they attempt to position and reposition themselves for the next round
of industry growth.
There are several reasons for this growing activity. Many wafer fab
suppliers have accumulated huge amounts of cash through public offerings
and record sales growth in recent years. As a result, they are now able
to buy up competitors or expand their markets through strategic
acquisitions.
But at the same time, the current market slump is expected to weaken
many small U.S. suppliers, turning them into takeover targets this year.
The need to create larger suppliers with global support of chip makers
is also playing a role, according to analysts and industry managers.
"The pressure is definitely on to consolidate," commented Brad Mattson,
president and CEO of Mattson Technology Inc., in Fremont, Calif. "The
big companies are advocating it and so are some of their customers,"
added Mattson, who started up his company in 1988 after founding
Novellus Systems Inc., San Jose.
"M&A is certainly the buzz word here today," noted John F. Rein, vice
president and chief financial officer of Veeco Instruments Inc., in
Plainview, N.Y. In late January, Rein joined dozens of other CFOs and
chief executives at SEMInvest 1997 in New York to promote their
companies and the semiconductor capital equipment business before Wall
Street analysts. While parading their financial figures and bottom
lines, equipment makers were also taking a close look at one another.
"People keep knocking on the door and we keep looking at other
companies, but we have not come up with the right chemistry," said
Vincent Coates, chairman and CEO of Nanometrics Inc., in Sunnyvale,
Calif., which supplies automated systems to measure and inspect circuit
elements.
Coates and other equipment executives are also considering strategic
partners as an alternative to mergers or acquisitions. Clashes in
corporate cultures and entrepreneurial egos are among the top concerns
for those considering acquisitions or merger.
Discussions of acquisitions and industry consolidation have intensified
since January's merger agreement between KLA Instruments Inc., in San
Jose, and Tencor Instruments Inc., in Milpitas, Calif. The $1.3 billion
deal is expected to be completed this summer, creating KLA-Tencor with
more than $1 billion in revenues in the fragmented but fast growing
market for fab tools to detect defects in deep-submicron wafer
processing.
"You just have to be bigger and better," said Bruce R. Wright, senior
vice president and CFO at Tencor. "It is becoming expensive to provide
global support and critical mass is a key issue. I've been talking up
the consolidation theory for three years now. It is finally beginning to
pick up momentum."
The merger is widely viewed as a defensive move to keep giant Applied
Materials Inc., Santa Clara, Calif., from expanding in inspection tools
following its acquisitions of Opal Inc. and Orbot Instruments Ltd. last
fall.
Cautious semiconductor executives are keeping an eye on the
consolidation moves and how they could affect their supplier bases.
"There is some concern, but there is more concern about the R&D spending
required to move beyond today's leading-edge technology-300 mm wafers
and next-generation processes," said Tom Engibous, president of Texas
Instruments Inc. in Dallas. "The worst thing that could happen to our
industry is to see technology slow down. That's been our growth driver."
Feelings are mixed about whether or not the large equipment suppliers
are the best source of leading-edge technologies. "Innovation in
technology most often come from smaller, more focused companies," noted
Mattson of Mattson Technology.
"Not many acquisitions in this industry worked well, but we'll probably
see more," he said. "The problem is there are not that many good
candidates available for acquisitions. The successful companies don't
want to merge because they don't think they need each other."
Each cycle of acquisitions and mergers usually end up creating a wave of
new companies when managers and technologists are displaced by
consolidation, explained capital equipment analyst Dan Hutcheson,
president of VLSI Research Inc., in San Jose. "What does senior
management do-go out and retire? It's rare that they leave the industry.
Many start up new companies.
"Today," Hutcheson noted, "there are more companies in the equipment
industry then there were 15 years ago-despite all of the
'consolidation.'
As far as Hutcheson is concerned, previous attempts to build "one-stop
shops" for fab processing systems have generally failed. "The last time
that was tried was in the early 1980s-Eaton and General Signal, for
example."
Nevertheless, Hutcheson sees the current consolidation wave continuing.
"Chip makers are seeking larger suppliers with greater resources to
deliver next-generation gear," he said. "Global support is an issue and
companies are looking for ways to simplify support of their fabs." |
