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Date: 25-09-13

Applied Materials and TEL merger, bigger they get to smaller the node

The U.S. based Applied Materials and Japan based Tokyo Electron have agreed to merge their businesses to form a new company valued at US dollar 29 billion. Both Applied Materials (rank 1) and Tokyo Electron (rank 3) are leading semiconductor equipment suppliers. They make equipments for photolithography etching, vapour deposition, thermal processing, and plating. Applied Materials offers broader services than the Tokyo Electron. Applied Materials is also into development of manufacturing equipment for solar PV panels.

Both these companies have core-expertise in precision mechanical engineering, chemical engineering, and electromechanical machine design. They only have the domain knowledge of electronics, semiconductor and VLSI design industry to understand the requirements of semiconductor chip designers. However they use the chips made by the current line production equipment supplied by them at chip fabs in designing the embedded computer and controller boards inside next version of their semiconductor equipment. They help electronic engineers to realise their silicon designs on physical device by supplying the equipment to process the semiconductor and other required materials in chip fabrication.

The leading semiconductor companies such as Intel and TSMC able to make 14 nm and 16 nm node chips due to the innovation in semiconductor equipment achieved by companies such as Applied Materials and Tokyo Electron.

Sometime back many experts in the chip industry have predicted further integration of silicon chips going to hit a wall. In fact the industry has hit a wall at the nodes of 20 nm in two dimensional scaling of chips. The industry turned from two-dimensional scaling into three-dimensional scaling to make even smaller MOSFETs. They could create nm scale wall like structure called fins over the gate of the MOSFET, which is called finFETs. Using FinFET technology, they could cross over the present wall. The industry is optimistic to build chips down to 7 nm scale. It is expected the industry might go for germanium semiconductor material and extreme ultraviolet lithography at the nodes of 7 nm. This next 7nm challenge throws a big business opportunity for semiconductor equipment companies.

To make money in semiconductor business, it's all about technology lead and the speed of development and implementation. In this extremely technologically challenging situation, individual companies have limited resources to innovate at faster speed. The best option is collaboration, even more better option is merging of businesses of similar kind. So in that sense the merging of Applied Materials and Tokyo Electron are expected to speedup the availability of 7 nm chips in the market, and also innovative to reduce the cost per chip by developing 450 mm wafer process.

Applied Materials has developed material deposition equipments which can deposit semiconductor, insulator, and metal layers in atomic scale thickness. They have also developed nonvisible laser light sources in helping to print patterns of few nanometer width.

Applied Materials is also innovating on designing semiconductor equipment for other non-silicon semiconductor materials. Germanium stands up as the next best material. Both silicon and germanium or used inside a single die to build faster and smaller chips.

The merged business to have a new name with dual headquarters in Tokyo and Santa Clara. Tetsuro Higashi will serve as Chairman, and Gary Dickerson will serve as Chief Executive Officer. Bob Halliday of Applied Materials will serve as Chief Financial Officer.

In the innovation driven business, however big these corporates grow, there is enormous scope for start-ups in high-tech area. One cool example is fabrication of carbon nano tube -based devices and building a simple computer out of it by Stanford University researchers. They could develop carbon nano tubes devices using their university fabrication facility.

There are plenty of small and mid-sized semiconductor equipment and material suppliers with unique product offerings. From making bulk silicon to final packaging of chips there are hundreds of companies involved in the supply chain of semiconductor chip manufacturing. US, Europe, Japan and Israel house majority of these companies.

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