Competitors crowd into photomask tool segments, setting stage for shakeouts

Competitors crowd into photomask tool segments, setting stage for shakeouts
MONTEREY, Calif. -- There's good and bad news in the photomask-equipment arena. While the business is expected to be growing over the next several years, the immediate prospects look pretty dim in some segments, particularly for suppliers of reticle-writing tools, according to vendors and analysts at this week's BACUS Symposium on Photomask Technology here.

One of the problems for suppliers of these tools--especially electron-beam and pattern-generation equipment---has been the rapid consolidation and budget cutbacks in their customer base, the photomask shops. Most--if not all--suppliers of photomasks have been hit hard by the current IC downturn and other factors, according to analysts.

As a result, there are simply too many photomask-tool vendors chasing after too few orders in the business right now, said analysts. And there are even more troubling signs in the industry, leaving some observers to believe that a shakeout is looming in this critical semiconductor equipment segment.

Suppliers certainly know the market has turned ugly. "It's not a pretty sight," said Jorge Freyer, who is the U.S. subsidiary president of Micronic Laser Systems AB, a Swedish-based supplier of pattern-generation systems for photomasks and displays.

"Historically, the mask-making industry lags behind the general semiconductor business," noted Freyer, who is based in Mountain View, Calif. "If history repeats itself--and the semiconductor industry recovers in mid-2002--does that mean that we won't see a recovery until the end of 2002?" wondered Freyer during an interview with SBN at the conference.

Given the dismal business climate, it could become the survival of the fittest for suppliers of reticle-writing tools going into the future, Freyer said. "There are simply too many competitors in the market right now," said the long-time, semiconductor-equipment veteran.

And there are also too few orders to go around for the amount of vendors in the business. On an average year, a grand total of only 30 mask-writing tools--including e-beams and pattern generators--are sold in the worldwide photomask business, according to Freyer.

About half of these 30 orders are for traditional e-beams, while the remaining portion goes to optical pattern-generation tools, he added. E-beams are high-resolution tools that develop the critical layers on a mask, but they are slow in terms of throughput and costly. Some of the newer e-beams reportedly cost between $15-to-$20 million each.

Optical pattern-generation tools are used to develop both the critical and non-critical layers on a mask. These systems are lower resolution tools, but are faster and less expensive than an e-beam. A pattern generator could cost about $10 million each--or more.

The mask-writer tool segment of this market, including e-beam and pattern-generation tools, is expected to jump 23% from $292 million in 2001, to $360 million in 2002, according to analysts. By 2005, this market will reach $489 million, analysts said.

At present, there are only two suppliers of pattern-generation tools---Applied Materials Inc.'s Etec Systems subsidiary in Hayward, Calif., and Micronic in Taby, Sweden. This market appears to be big enough to support two vendors, said Micronic's Freyer. "We would be happy to get six or seven orders per year," he said.

It's a different story for e-beam systems, however. At present, there are five major suppliers going after a finite amount of business: Applied's Etec unit, Hitachi, JEOL, Leica, and Toshiba.

New ballgame

And the landscape has changed to a large degree, especially for the world's largest supplier, Applied's Etec subsidiary. In January 2000, Applied moved into the e-beam photomask systems business by acquiring Etec in a stock-swap deal (see Jan. 12, 2000, story ).

Last week, Applied's Etec subsidiary rolled out its new electron-beam-based reticle-writing tool for 0.10-to-0.07-micron IC processes (see Sept. 27 story).

But many industry observers say Etec's new tool is about a year late to the marketplace, causing it to miss the 0.13-micron process window. The delays have opened the window of opportunity for Etec's e-beam rivals, such as JEOL, Hitachi, Leica and Toshiba (see July 27 story).

Some competitors maintain that Etec may already be out of the running in this market. "Etec missed the window," said Genya Matsuoka, senior engineer for Hitachi Ltd.'s Instruments Division, which develops e-beams and other products. "We are running neck-and-neck with JEOL and Toshiba in the e-beam market right now," Matsuoka said in an interview at this week's photomask conference.

And during the conference, Japan's Hitachi gave a sneak preview of its next-generation reticle-writing tool for high-throughput 0.10-to-0.07-micron IC applications (see Oct. 3 story).

But Etec executives believe that the company's demise is greatly exaggerated. "We've received a very good response for our new e-beam tool," said Frank Abboud, vice president and general manager of the Electron Beam Products Group at Etec in Hayward. "Now, we have to turn that into dollars," added Abboud during an interview at the conference.

Still others believe that there will be few--if any--winners in the e-beam market, especially given the current business climate. "The e-beam market is simply brutal," summarized John Whittey, director of sales and business development for Leica Microsystems Inc.'s Semiconductor Equipment Group. Based in Wetzlar, Germany, Leica is a supplier of e-beam systems, inspection equipment, and other products.

In the e-beam segment, Leica is struggling in the mask-writing side, but claims to be the leader in the small but profitable direct-write business for front-end chip processing applications.

In this area, the company focuses on selling tools to suppliers of gallium-arsenide (GaAs) devices and related compounds, Whittey said.

But still, the direct-write market is getting crowded. Hitachi and other e-beam suppliers are also going after that business as well.