Applied CEO Talks About Downturns, Strategy and Partnering
-- Semiconductor International, 1/1/2000
James C. Morgan has been CEO of Applied Materials (Santa Clara, Calif.) since 1977 and chairman of the board since 1987. Prior to this, he was a senior partner with WestVen Management, a private venture capital partnership affiliated with Bank of America Corp. In 1996, the president of the United States awarded Morgan the National Medal of Technology for lasting contributions to America's competitive position and standard of living. Morgan has served on the Commission on United States-Pacific Trade and Investment Policy, advising President Bill Clinton and Congress on achieving additional market access and improving trade relationships in the Asia-Pacific region. He also served on the National Advisory Committee on Semiconductors, advising then President George Bush and Congress on ways to strengthen the U.S. semiconductor industry's competitiveness. He has a BSME and MBA from Cornell University.
SI: Now that we can really say the downturn is over and things are heading up the sine wave again, what can the industry do to minimize these cycles?
Morgan: There are several things taking place that I believe have some bearing on this. For one, I think the number of players who have unlimited funds to invest and control are fast dwindling. This should probably lead to a more rational investment pattern. Also — and more importantly — there's a significant broadening in chip applications. This will certainly help, because there won't be as much focus on the one application — PCs. There's also been a move toward better supply chain management, resulting in large inventory reductions along the supply chain. If this continues it should help dampen the amplitude of the cycles the industry has experienced since practically its inception.
SI: So you see a shift in the traditional chip markets ? |
| James C. Morgan, CEO and chairman of the board of Applied Materials. (Source: Applied Materials) |
Morgan: Clearly, if our development strategies are to make a lot more sense we need to get not only commitments from our customers, but a more complete view of their plans. The 300 mm false start we experienced some time ago was disastrous in that we, as equipment manufacturers, were essentially forced into making very significant investments without anybody on the chip side committing to go into production with the equipment we were developing. That kind of circumstance tends to put you in a very precarious, high-risk situation. It's important for our customers to think through their collective industry strategies and work much more closely with us than they have in the past, because we've such enormous investment requirements when we move to new technologies and new approaches. It really has to be more of a partnership; it must go beyond just a relationship between vendor and buyer.
SI: So you don't discount cost sharing as a possibility?Morgan: Not necessarily. Somehow the end user must at least help pay for our wraparound costs. This can be done by either ensuring we get a market share that's large enough to make us sufficiently successful to reinvest in our own resources to gear up for the next technology node, or through some shared funding. However, I cannot emphasize sufficiently the importance of getting a collective decision and some commitments. The practice in the past has been that everyone pushed the responsibility on to the equipment and materials people, without any commitment on their part; they were under no obligation to go forward. Meanwhile, we had to shoulder the couple of billion dollars' worth of investment and development.
SI: There aren't that many companies large enough to make such an investment. Do you see the current trend of companies buying other companies as fulfilling a sort of Darwinian imperative imposed by the fact it's getting increasingly difficult to foot the bill of doing R&D in a sufficiently competitive fashion and still stay in business?Morgan: Clearly, the investment requirements are enormous, so pooling resources can be helpful. Yet having more products is not helpful unless you have the leading products. This makes acquisitions risky because you might not get stronger. Fortunately, our products lead in most applications.
SI: So you believe it is getting more difficult to grow as a company?Morgan: Not at all; in fact, our growth is accelerating.
SI: Applied is often referred to as the "500-pound gorilla," and this is true to a certain extent You have most of the semiconductor processing sectors covered, except for a few important ones, such as lithography. Is that something you're considering?Morgan: We focus on those areas in which our customers ask us to participate. They've asked us to help with some of the enhancement of lithography applications because there's an increasingly closer working relationship being required between all segments of the market as we move to process module architectures. Our customers are encouraging the lithography people to work more closely with us and us to work more closely with them, which we are doing.
SI: Your customers seem to expect a closer relationship with, and more from, Applied, particularly in characterizing processes. One of your responses has been the EPIC effort. Wouldn't the acquisition of lithography technology be a logical next step?Morgan: [Smiling] Everybody seems to keep proposing that. So far, however, the industry's been satisfied with our serving it the way we are. However, we naturally look for areas where we can add new and significant differentiating values to our marketplaces.
SI: So where do you see Applied's next big growth areas?Morgan: Well, just remember that the markets in which we already are, are by themselves areas of potentially large growth. Obviously, there's always market share to be gained. Then, there are several new markets that we're just starting in, such as process diagnostic and control, and CMP, that are becoming important segments for us. In addition, the thermal processing market is opening to us as the industry moves to single-wafer processing. Electrochemical plating, ion implantation and in situ cleaning are other areas of opportunity.
SI: What do you think we, as an industry, should pay closer attention to?Morgan: We're all making large investment bets, and we need to be sure — in a collective way, in a partnership fashion — that they're made very carefully. All of us need to work more closely together. The trends in foundries require a different approach to supporting their needs, and fortunately we were early into the foundry business, when nobody thought it was going to be a market. There's no question the whole area of process modules is an issue the industry must consider — what those are and what should be incorporated in each process module. We're working very hard to try to be as responsive as we can to all this.
SI: Is your strategy for Applied well set for the next three years or will there be changes to it?Morgan: Things are fairly well set. We've just gone through a significant transformation to focus on process modules. You need to be able to manage individual systems and process modules. Being able to manage both sides simultaneously is key. Trying to get everybody to change is a challenge. So what we've focused on is how to deal with this next step the industry is taking toward process modules. Our task is to meet that need and guarantee the output. Higher ramp-ups, lower risks and higher outputs are what we're focused on.
SI: What do you see as our industry's ongoing problems, and how would you like to see them solved?Morgan: The biggest challenge is always to have as much information as the customer does about his business outlook. During this last downturn we were able to double our revenues from no insignificant level to an even larger one. This shows we have tremendous flexibility in our ability to manage issues, but better planning enables us to do a better job. Hopefully, our customers will realize this even more and work more closely with us.
SI: Do you find that your customers' reluctance to reveal what they consider proprietary information puts a damper on this free exchange?Morgan: I don't think so. This certainly isn't an issue with those who know what good partnering can accomplish for them; we just need more of them. They have to understand that when they share their advance knowledge and strategies with us, we'll protect those and at the same time advance the equipment to meet their (and the industry's) needs.
SI: Any acquisitions on the horizon?Morgan: [Smiling] None that we would talk about. We have a very broad and rich spectrum of technology capability and do much of our development internally, with an occasional acquisition to augment all that.
SI: Any advice for the industry?Morgan: Stay lean and flexible. To succeed in the next millenium, you have to become a lean, knowledge-based, global operation. This is why we've invested so heavily in our information technology on a global scale. One of the things you have to decide as a CEO is what are your opportunities, because this directly affects your plans and strategies. To me, Moore's Law still has legs left in it for quite a few years. That means there's a significant demand for chips. The challenge we face is how to continue to provide the technology and the productivity to support the industry's requirements. This is both an enormous responsibility and opportunity. •— Alexander E. Braun
Collaboration Produces Trenches 25 nm Wide
A collaboration between Trikon Technologies (Newport, UK) and the Resist Test Center of International SEMATECH (Austin, Texas) has developed advanced optical lithography, photoresist and etching techniques to enable production of trenches only 25 nm wide. These trenches (see Figure, p. 28) were produced with the use of an advanced, 193 nm deep UV, CARL photoresist system developed by workers at Infineon Technologies (Erlangen, Germany). The system includes a unique chemical biasing step for the definition of very small trenches and contact holes. The photolithography was carried out using a 193 nm micro-stepper of numerical aperture 0.6 and a standard binary reticle. Dry development of the resist was carried out in Trikon's Omega 201 ICP system, and the oxide was subsequently etched using an Omega 201 M0RI tool.
"The small trenches can be filled with metals for interconnect use or with dielectrics for isolation, making ever smaller circuits with greater function possible in the future," said Gerhard Cross, director of lithography for International SEMATECH. • — Brian Dance
SISA to Focus on Supplier Value Chain
SEMI/SEMATECH, the 12-year-old chip industry supplier association, has renamed itself Semiconductor Industry Suppliers Association to ensure the name clearly depicts the organization's mission. SISA will direct its focus on semiconductor supplier infrastructure requirements. It aims to help focus the supplier infrastructure, which Ed Graham, incoming SISA president, said can be stratified into OEMs, subsystems, components, automation and material suppliers, as well as software houses. Graham is a 32-year veteran of Sandia National Laboratories.
"In addition to our traditional role as the primary liaison between supplier companies and SEMATECH, we will continue to play a leading role in driving both evolutionary and revolutionary improvements in the supplier value chain," Graham said.
SISA's renewed focus on strengthening the supplier chain was warranted by the supply chain's increased participation in development of chip-making technology, materials and equipment. SISA will emphasize expanding value chain integration and engineering programs. Specific efforts will help suppliers improve communication and share information, standardize quality assessment and communication protocols, develop lean manufacturing strategies, and implement best business practices as benchmarked against other world-class industries. SISA will continue SEMI/SEMATECH's mission of enabling members to be the leading suppliers to the worldwide semiconductor industry.
Software improvement is another critical initiative to SISA. This project will provide both tactical software development and strategic software applications. All of these efforts will be guided by industry expert councils, which will serve as a steering committee to direct resources in accordance with chipmakers' changing needs.
Paul Peercy, outgoing president of SEMI/SEMATECH, said the new name, SISA, is consistent with the evolving role of the semiconductor industry supplier base. "Today, these suppliers are absolutely essential to the continuing rapid advancement of semiconductor technology," he said. "They are the enablers of each successive technology transition, providing the materials and equipment needed to execute device shrinks and develop new processes, equipment and technology for decreasing feature sizes and increasing wafer size. Equally critical is their role in meeting capacity ramps when escalating consumer demand could result in product shortages."
The idea behind SISA's focus on what it calls value chain integration (VCI) is to "facilitate opportunities between member companies to define a balanced set of supplier priorities, develop industry-unique solutions, and improve communications throughout the supply chain." SISA's value chain programs are designed to engage member companies from all levels in the supply chain in joint pre-competitive projects to improve quality, performance, cost, and reliability of products and services. VCI promotes a common language, understanding of requirements, and coordination between suppliers and customers.
The first Value Chain Optimization Conference was held March 30, 1999, in Santa Clara, Calif. The conference focused on forecasting, cycle time and inventory management issues, and early design participation. Experts were invited to discuss industry best practices and success stories relative to each topic. A panel discussion gave attendees opportunities to ask questions, clarify definitions and understand customer expectations. In addition to industry presentations, working sessions presented in-depth concepts and applications. The working sessions also focused on defining critical communications, training and educational needs, and next steps required for efficient integration of the semiconductor equipment supply chain. The next conference is to be held Jan. 19, followed by another March 30.
The SISA board of directors will oversee all these activities. Board members include: Richard A. Aurelio, Varian Semiconductor Equipment Associates Inc.; George W. Chamillard, Teradyne Inc.; Papken Der Torossian, Silicon Valley Group Inc.; Joel Elftmann, FSI International; Richard J. Faubert, SpeedFam-IPEC; Edward C. Grady, KLA-Tencor Corporation; Richard Hill, Novellus Systems Inc.; Arthur T. Katsaros, Air Products & Chemicals Inc.; Walden C. Rhines, Mentor Graphics Corporation; Sasson Somekh, Applied Materials Inc.; Dave Toole, GaSonics International; Mitchell G. Tyson, PRI Automation; Christine B. Whitman, CVC Inc.; Curtis Wozniak, Electroglas Inc.; and Arthur Zafiropoulo, Ultratech Stepper.
SISA is a non-profit consortium with more than 130 members who are majority U.S.-owned-and-controlled suppliers of equipment, materials, software and services to the worldwide semiconductor manufacturing industry. Graham said SISA is reinforcing connections to current members and actively recruiting new ones. Visit SISA online at www.semi.sematech.org or call Graham at 512-356-3223. •
— Peter H. Singer
