As the next step to accelerate the development and
commercialization of EUV lithography tools,
) has made a bid to acquire light sources provider
). When ASML roped in
), Samsung and
Taiwan Semiconductor Manufacturing Company
) earlier this year by selling a 23% stake in the company, we did
wonder how this cash would be used. Since Cymer has been
collaborating closely with ASML over the past year, the deal
appears to make sense.
Except for the fact that ASML is paying a 60%+ premium to
Cymer's closing price on Monday, which fixes the deal value at
around $2.5 billion ($20 cash and 1.1502 ASML shares per Cymer
share). ASML investors were concerned, sending shares down 6.6%
yesterday, although they started to stabilize after-hours.
ASML says that the deal would not be accretive for another two
years, which coupled with the recent weakness in its results and
outlook, also disappointed investors. However, it intends to run
Cymer as a separate division based in the U.S., so we may be able
to track the progress.
Cymer shares shot up 49.4%.
Why EUV acceleration is necessary
The chip industry has grown in accordance with Moore's Law
(simply put, this means a doubling in chip performance every two
years). The law is named after Intel founder Gordon E. Moore, who
was the first to notice the trend. It is now expected that
performance enhancements (number of transistors per integrated
circuit and higher speeds of the transistors) will slow down in
2013 and chip performance will double in three years instead of
This will slow down innovation, not only in the chip industry,
but also many related industries, particularly computing and
consumer electronics. With developed markets saturating and
developing markets requiring lower price points, the only way to
drive demand is by lowering costs.
However, cost reduction at the component level will only be
possible when devices become smaller and more efficient. A
failure to do this will lead to an inevitable drop in demand,
which will in turn affect the semiconductor and related
Semiconductor production has reached the stage where further
innovation hinges on more advanced tools. This is the main reason
that the companies are coming together to speed up research so
these tools may be available at the earliest.
The EUV Roadmap
ASML provided some details in its press release. The company
currently has 6 EUV systems (NXE:
) in beta, with satisfactory resolution performance at 22nm.
However, the successor system, NXE: 3300B, which is intended for
14nm production currently requires closer integration with light
sources to drive targeted levels of efficiency.
Joint laboratory testing of the NXE: 3300B by Cymer and ASML
shows ability to process 18 wafers per hour. The companies intend
to take this to 69 wafers per hour for 2014 chip production.
For this purpose, ASML intends to have 11 NXE: 3300B systems
installed at customers for testing in 2013, with production-ready
shipments at targeted efficiencies starting in 2014. The company
has received four commitments so far and expects another four to
eight in the next six months.
The deal should be cleared by regulators, despite certain
anti-competitive concerns related to Nikkon (an ASML competitor)
because of the value it creates in innovation.
We are currently neutral on the cyclical semiconductor sector,
as enthusiasm for ongoing significant innovation for future
growth is tempered by current low growth prospects.
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