Novellus bets on copper
It's those make or break decisions for which CEOs are best remembered. For
Richard S. Hill, CEO and Chairman of Novellus Systems Inc., San Jose, cutting
the company's exposure to stillborn 300-millimeter wafer technology and
gracefully switching focus to copper-interconnect equipment is the decision he'd
like people to remember.
Hill, whose company makes deposition equipment for semiconductor
manufacturing, recalls how "the industry laughed" when he started pushing
semiconductor makers to switch from aluminum interconnects to copper. Nobody
is laughing today, however. Market analysts and chip makers alike now
acknowledge that the speedy, low-power dissipation copper technology is catching
on, especially in handheld products that live or die on the length of their battery
life.
Sales of copper deposition equipment are expected to see
compound annual growth of 37% through 2003, according to
Dataquest, San Jose. Novellus gained a head start in
developing copper gear through a 1996 partnership with
copper advocate IBM Corp., Armonk, NY. Ties to Big Blue
allowed Hill's company to put equipment--like barrier/seed
layer and electroplating tools--into production fast, ahead
of competitors. By 1998, Novellus was the clear leader in
copper deposition, says Robert N. Castellano, president of
the Information Network, a New Tripoli, PA, market
research firm. This year, sales of copper equipment will
account for close to 20% of Novellus' revenue.
But Hill's new strategic direction is taking Novellus
head-to-head in a dangerous confrontation with chip
equipment giant Applied Materials Inc., Santa Clara.
Applied announced its own copper electroplating tool in
April, making it the industry's only supplier to offer its
own machines for every process step in copper chip
fabrication. Already a leader in non-deposition and
ancillary deposition tools for copper, Applied is expected to grab significant
market share in electroplating in 1999, says Dataquest's Ron Dorseif.
Applied's aim is to offer customers a tightly integrated set of equipment for
copper processing, says Dan Carl, general manager of the company's Copper
Division. Carl says customers should "think of three different machines [in a
copper production line] as one machine."
Hill claims he's prepared for the Applied fight. In 1998, he announced a
marketing initiative dubbed the Road to Damascus, in which Novellus and other
suppliers work together to offer customers best-in-class equipment for every
step of the copper chip manufacturing process.
"The mixed-vendor approach is a good strategy for Novellus," says Susan Billat,
a securities analyst with BancBoston Robertson Stephens, San Francisco.
"Novellus has a lean, mean, outsourcing model. I consider Rick Hill a visionary."
Asked what he considers the biggest challenge facing CEOs of chip equipment
suppliers, Hill shoots back: "Creating a road map for the industry." The huge
cost of R&D required to develop next-generation equipment leaves scant room for
error. "In the case of 300mm technology, we didn't do a good job. There was no
compelling economic reason for chip makers to switch from 200mm to 300mm.
We were all dressed up for the dance and had no one to dance with."
Today, Hill finally feels safe saying the move to copper is real, even through the
industry still faces some daunting technical challenges. "Applied's competing in
our market space is good for us--it validates the market. Our concern now is to
figure out what comes after copper," adds Hill.
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