With or without the merge with Novellus, Lam presents a solid
investment opportunity for a long haul( 3 to 4 yrs). HOwever,
from the marketing point of view, Lam would have a tremendous
advantage if it merges with Novellus. Applied strength always
has been the size of the company, not necessarily superior performance
of the product. Having a complete line of product, Applied can
offer a "total solution" for a semi manufacturing process. This is
a huge marketing advantage. If customers ask for a feasible process
solution for their device requirement, Applied can say " it will work
if you purchase our PVD deposition system for metal layer, CVD tools
for the passivation layer, Etchers to etch these layers, CMP for
your dual damescece needs, and finally you can inspect our process
performance with our metrology machines...." In this way, they can sell machines in the area where they might not be technically strong
becuase they are packaging the process machines.
Look what happen to LAM two years ago when Applied ate away Lam's Market shares in all etch segment with this type of marketing
strategy. Even then , LAM arguably had a more superior process technology. Now Applied is doing the same in CMP market. Three years ago, Applied presence In CMP segment was virtually zero now it is the leader in CMP. Lam is now engaged in its own marketing tactics to package its process solution with etch, CMP, and cleaning. This is having some success. However, Lam can compete more effectively if they had a deposition business. On the other hand, Novellus desperately needs Etch and CMP business to be able to offer a complete solution.
I remember listening to the conference call when Lam announced the
merger with Ontrak and invited Bagley for a CEO position. I remember
Bagley saying in that conference call Lam needs a metal deposition business. Bagley knew the importance of having the metal and dielectric deposition business in making LAM more competitive in
semiequipment industry. Because of this down turn, LAM exited the
CVD business. Now it has no business that overlaps with Novellus.
Novellus, on the other hand, is now free to enter etch and CMP market as of April 1 after the agreement it had with Applied for patent
infringement settlement. From this perspective, it is no wonder
there is a rumor floating around for merger between LAM and Novellus.
it became a rumor in the past because Novellus was legally unable
to do any acquisition. But now it has a good chance of being a
reality.
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