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

To: Carl R. who wrote (2251)	6/2/1999 8:54:00 PM
From: SemiBull	Read Replies (1) \| Respond to of 3813

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.