Maybe somebody should tell Jay Deahna that. ;-)
SEMInvest Speaker Bullish on Photolithography Sector of the Semiconductor Capital Equipment Industry
Morgan Stanley Dean Witter's Jay Deahna Sees Strong Revenue and Earnings Growth Potential for Photolithography Equipment and Materials Companies
NEW YORK, Feb. 17 /PRNewswire/ -- Companies that specialize in photolithography will be the big winners in the semiconductor equipment industry over the next few years, an industry analyst predicted today.
The prediction was made by Morgan Stanley Dean Witter analyst Jay Deahna at SEMInvest 99, an investor conference sponsored by Semiconductor Equipment and Materials International (SEMI). SEMI is a global trade association of more than 2,300 companies.
Deahna detailed a scenario in which he believes the share prices in companies forming the photolithography sector within the semiconductor and semiconductor capital equipment industries would likely outperform most other sectors.
"The semiconductor device and equipment industries are now in the early stages of a new cycle following a tough couple of years characterized by a major cyclical downturn in semiconductors generally, and capital equipment in particular. The combination of global overcapacity in most types of chip production and the Asian Financial Crisis has been hard on companies in the chip equipment business. However, we believe a multi-year expansion period is underway, especially for leading suppliers of photolithography-related solutions," said Jay Deahna, a vice president at Morgan Stanley Dean Witter.
"As a new semiconductor cycle accelerates and leading-edge process technology in semiconductor manufacturing advances at an accelerated pace, Morgan Stanley Dean Witter research suggests there is major opportunity for leading suppliers in the photolithography sector to experience above average revenue and earnings growth."
The photolithography sector includes suppliers of photolithography systems, often referred to as "steppers," photomasks, which are similar to negatives in photography, and laser light sources that illuminate photomask images and facilitate the transfer of those microscopic images onto the surface of a wafer by a photolithography system.
Other areas of the photolithography sector include photomask generation systems, photomask inspection systems, photoresist deposition systems that deposit photosensitive films on the surface of a wafer that absorb the images from a photolithography system and then develop the images after exposure, and suppliers of photoresist chemicals, among others.
Moore's Law, which was postulated by Intel's Chairman Gordan Moore in the mid-1960s, has been a semiconductor industry paradigm for the past forty years.
Moore's Law states the number of transistors (on/off switches) in a given space on a silicon wafer doubles every 18-24 months, which enables the creation of smaller, faster, and more powerful semiconductor devices. consequently, new types of electronics systems can be invented and commercialized. Over the past few years, remarkably, Moore's Law has accelerated, which means the time between major process technology generations has shortened.
The remarkable acceleration in Moore's Law has been made possible in a large part by advances in sophisticated photolithography technology. In fact, the photolithography segment is the largest and most critical segment of the semiconductor equipment industry according to Deahna. As semiconductor manufacturing technology continues to accelerate, and the semiconductor industry moves to larger 300mm (12 inch) wafers in the next few years from 200mm wafers today, the average selling prices of photolithography-related solutions will very likely increase at a much faster pace than the majority of wafer processing tools.
"Additionally, while many wafer processing tools can be used for multiple generations of chip manufacturing technologies, some type of new photolithography solution is required at each new generation to image increasingly smaller chip features," Deahna said. "The implication is that strong unit growth combined with exceptional average selling price expansion for photolithography solutions will likely drive above average revenue and earnings growth for photolithography sector suppliers, which should translate into superior long-term stock returns," the Morgan Stanley Dean Witter analyst concluded.
Background
Each new chip generation is defined by the ever-smaller feature sizes (also know as linewidths) of the chip's most critical internal dimensions. For example, the most advanced microprocessors have recently shifted from 0.25-micron linewidths to 0.18-microns, which is about 1/500th the width of a human hair. Smaller dimensions enable faster chip speeds and the ability to pack more circuit elements onto the same amount of space on a silicon wafer. This trend is responsible for the massive increase in semiconductor computing power over the past decades.
Photolithography is the technique where circuit patterns of specific chips are transferred onto the surface of a semiconductor wafer, so they can be etched into the surface. This process creates transistors and metal interconnect lines among other features to connect millions of transistors in a logical sequence to facilitate device functionality. At 0.25-microns to 0.20-microns, current photolithography tools called "step-and-repeat" systems that cost about $3-$4 million are nearing the end of their ability to resolve the smallest dimensions. As 0.18-micron and below process technologies accelerates into volume production over the next five to ten years, new photolithography tools called "step-and-scan" systems that cost $5-$10 million will proliferate. These systems use increasingly sophisticated laser light sources and extremely advanced photomasks to facilitate the imaging of features that for the first time are smaller than the wave length of the light source in photolithography systems. In addition, advanced photoresist material, photoresist deposition and development systems, and extremely sensitive photomask inspection technologies will also experience accelerated demand.
Some of the leading companies in the photolithography sector includes photolithography system suppliers ASM Lithography (Nasdaq: ASMLF) and Silicon Valley Group, and the largest laser supplier is Cymer (Nasdaq: CYMI). From a photomask perspective,
Etec Systems (Nasdaq: ETEC) is the largest and most dominant supplier of photomask generation systems, and DuPont Photomasks (Nasdaq: DPMI) and Photronics (Nasdaq: PLAB) are the largest two providers of photomasks. KLA-Tencor (Nasdaq: KLAC) is the largest supplier of photomask inspection systems, and Silicon Valley
Group (Nasdaq: SVGI) markets photoresist deposition and developing gear commonly referred to as "track" systems.
Based in Mountain View, Calif., SEMI serves more than 2,300 worldwide public and private companies participating in the $65 billion semiconductor equipment and flat panel display markets. SEMI maintains offices in Austin, Beijing, Boston, Brussels, Hsinchu (Taiwan), Moscow, Seoul, Singapore, Tokyo and Washington, D.C. |
