I think that it's unlikely that AEIS would be acquired by AMAT, LRCX or NVLS. AEIS is one of a newly emerging group of public companies: the COMPONENT suppliers to the semiconductor capital equipment manufacturers. Typical component suppliers include ASTX (Applied Science and Technology, Inc. for microwave, RF and ozone), BRKS (Brooks Automation for wafer handling), HELX (Helix Technology Corp. for pumps), RFP (RF Power Products for RF) and TYGN (Tylan General for gas handling), in addition to AEIS. Look at AMAT's recent acquisitions - they extended AMAT's product offerings to their existing customer base and were thus a way for them to expand their business and get closer to their customers. As the industry matures, all companies will be driven to get closer to their customers and do more for them. (In the end, AMAT will be building the fabs and operating them for the semiconductor manufacturers, eg Intel and Motorola.) Said another way, companies will want their suppliers to do more so that they can focus on where they add value and meet their own growth objectives. Backward integration (buying your supplier) doesn't usually make sense. The component suppliers are a stronger group because they tend to work broadly in the industry. If AMAT bought AEIS or any of the other component suppliers, they might gain a momentary advantage over their competitors, but in the end the supplier would be greatly weakened because their sales would be significantly reduced and the R&D investment they could afford to make would also be significantly reduced. It would be equivalent to AMAT hiring a group to do the work internally, which is the way it used to be. The component suppliers were started and grew because they filled a real need and could do a better job than the capital equipment manufacturers. IBM and TI used to build their own semiconductor production equipment but now buy it from companies like AMAT and LRCX. Having AMAT and LRCX now depending on a supplier base for major technology pieces is the same kind of evolution.
What is more likely than acquisition of the component suppliers by the capital equipment manufacturers is a consolidation among the component suppliers, where these smaller companies would join together to create a stronger global infrastructure, reduced costs, and better leverage against the strength of the capital equipment manufacturers. Certainly these companies are undervalued today, if one looks at market cap to sales ratios and compares this to what AMAT is paying for their recent acquisitions (about 3X revenues). I think this all represents excellent opportunities for investors. |
