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Technology Stocks : General Lithography -- Ignore unavailable to you. Want to Upgrade?

To: Mason Barge who wrote (1042)	6/3/1998 10:51:00 AM
From: Andrew Vance	Read Replies (1) \| Respond to of 1305

Actually I was being led to believe that performance issues at some of the Foundry companies in the Asian Theatre was a reason for some of the ASMLF issues. I posted this type of comment a number of weeks back as a result of some feedback from Engineers I know. They had just returned from a trip to the major Foundry houses they were talking to relative to implementing an advanced design. Every company they spoke to was leaning toward the Nikon system and were not too impressed with the reliability and lens issues with the ASMLF steppers. Not too many specific were given and this was a consensus of opinions. Since no one is really ordering systems in volume, it remains to be seen how this shakes out down the road. Bottom Line is that the market of ASMLF, Canon, Nikon, SVGL, and UTEK(ISI) probably can support 3 companies real well. When you consider that Canon, Nikon, and ASMLF make up the vast majoprity of the existing market, ASMLF becomes an attractive buy just for the recovery it will have when everyone starts clamoring for a system at the same time. As far as the remaining two companies are concerned: SVGL will more than likely be a niche player with most of its systems going to 2-4 customers. UTEK has a good chance to eat into some marketshare if they can mass produce the ISI system and get market acceptance. Their ace in the hole is the UT Austin - SEMATECH program which probably led to the need for a long term viability guarantee on ISI's part (accomplished with UTEK acquiring them) and the Ultrabeam, EUV, Polyimide system for process simplification, and or course the low cost mix/match stepper scenarios they can create in-house. UTEK could be a viable dark horse candidate for two reasons: 1. Cost effectiveness coming out of a severe industry donwturn where the market is looking for the best leverage. 2. There will be a huge run on DUV stepper deliveries as everyone comes out of this downturn. The very nature of the manufacturing cycle time to build and ship these systems coupled with the number of system orders that will be placed almost at the same time will cause leadtimes to extend out beyond p[revious levels. We have seen upwards of 18 month leadtimes for steppers in the past. Therefore, if a "crunch" does occur where the supply/demand curve shifts to heavy demand with supply being dictated by timeliness, you could theoretically see the stepper providers raise prices on their systems (ala the recent Volkswagon situation) to recoup from the downturn financial impacts. You will also probably see some companies forced to go to their second or third choice of stepper companies just to ensure they can get advnaced processes into production. this strategy could actually force the implementation of mix and match strategy much like UTEK has been trying to do over the past few years. Necessity may create new customers for the likes of UTEK. Let's not forget that ASMLF also has a new business unit that could be aplayer in this type of mix and match scenario. All in all, I see a mad dash to advanced steppers as we come out of this downturn. This rush will create more demand than there will be available (timely) supply. Therefore it may not make a difference who has the better quality, lenses, or reliability but rather who can systems be procured from in the timeframe needed. Once things settle down, these steppers can be relegated to mix and match strategy where they will be used for the non critical levels. I have seen this scenario play out 3 times in my career where we bought a second choice system just to get delivery and bring a new technology on line. Once we were able to get the delivery and installation of the systems we wanted we sold the unwanted systems on the used equipment market or relegated them to non critical device processing. Andrew