SEZ Group Now Lam’s Spin Clean Division
David Lammers, News Editor -- Semiconductor International, 4/24/2008 9:33:00 AM
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| Steve Newberry, CEO, Lam Research Corp. |
“The transition to single-wafer cleans, particularly for the front end of the line, means our customers are evaluating the DaVinci and Esanti spin clean tools as well as the Lam linear clean products,” Newberry said. “We are committed to both spin and linear clean.”
In a conference call following release of the company’s first quarter financial results, Newberry said Lam will apply its “strong operating discipline” to the new division, which will continue to manufacture its systems in Europe. He noted that Lam has reduced its costs by outsourcing subsystem manufacturing, and has bolstered revenues with a services and spare parts operation.
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| Lam Research Corp. combined the former SEZ Group’s spin clean tools and Lam’s own linear clean tools into a new clean group, including the newly created Spin Clean Division. |
SEZ’s DaVinci and Esanti products are high-throughput systems that target different FEOL clean applications than the Lam linear clean tools, which Newberry said operate in “short, robust steps to provide strongly uniform cleans.” He added that some of the Lam C3 linear clean technology can be incorporated into the spin clean tools.
“Single-wafer cleaning is going to gain in 2008,” Newberry said. “Already we see wet bench FEOL cleaning start the conversion.”
Lam completed the SEZ acquisition on March 11, putting just 19 days of the SEZ financial results on Lam’s books for the first quarter. Martin Anstice, chief financial officer at Lam, said SEZ booked revenues upon shipment of its tools, while Lam books revenues as systems are accepted by the customers. Lam will convert the former SEZ to the “revenue on acceptance” method. That shift means that little revenue from spin cleaning tool sales will show up on Lam’s top line until the fall.
“By going from the revenue on shipment to the revenue on acceptance method, there is a hole there before we catch back up,” Anstice said. “It takes two quarters to work back through that.” The spin clean division is expected to have a slightly dilutive effect on Lam’s overall earnings this year, he added.
About 95% of SEZ shares were acquired in the tender offer, but Anstice said it may take until the end of the year to bring that level to 100%.
Deteriorating macro environment
The bigger challenge facing Lam, Newberry said, comes from “a deterioration in the macro economic environment” facing the equipment industry, with DRAM customers in particular cutting equipment orders by “45 or even 50%.” Newberry said that orders from NAND flash vendors are increasing by ~10%, resulting in a 30% overall decline in spending by memory vendors this year. With foundry customers currently adding capacity in small increments, any large orders from foundries would come in the second half.
Newberry painted a hopeful scenario for the end of this year, saying that current weak spending by U.S. consumers could turn around, prompting chip vendors to open up their wallets later this year. “We are down 20-25% now, and I think we will bump along at that level for another quarter or so,” he said. “The effect of the U.S. consumer is evident, and we will have to see how it plays out. Even a 25% down scenario for this year requires a strong uptick over the last three or four months.” He added that if a rebound in consumer demand fails to occur, overall capital spending could decline by 30% this year. Lam expects to outperform the overall market.
When faced with the cyclical oversupply situations, memory customers typically reduce spending in a gradual manner aimed at a “soft landing,” Newberry said. This year, however, the hope for a soft landing toward the middle of this year “has not been successful,” leading to sharper investment cutbacks.
He estimated that the memory industry now has excess memory capacity of 60,000-80,000 wspm. Some capacity is flexible, and can be moved from DRAM to NAND flash production. Also, because DRAM prices are lower than cost, system vendors are adding more DRAM than they would in a more rational pricing environment. Once prices for 1 Gb DRAMs begin climbing, DRAM vendors will begin to invest again. “It may take 4-5 months to get DRAM moving in the right direction again,” Newberry said.
