SAN FRANCISCO -- Financial analysts who follow chipmaking equipment vendors have been linking cash-rich Applied Materials with other companies, including lithography leader ASML Holding NV, arguing that the struggling sector needs to consolidate, according to a Reuters article published Saturday (August 23, 2003).
In the article, analysts and investment bankers said that the Applied, the world's largest chipmaking equipment vendor, has more than $5 billion in cash and short-term investments, and would be a good vehicle for a reshaping of the industry.
It was also observed in the article that although Applied is the global market leader in chipmaking equipment it has no presence in lithography equipment, often considered the most critical piece of equipment for making semiconductor chips and the one with the highest price tag.
"I think ASML is proceeding down the avenue of being a pretty dominant player in their lithography business and they continue to gain share. That would be definitely something the size that Applied seems to feel comfortable with," the article quoted Mike Kelly, vice chairman of technology investment bank Broadview International, as saying.
However, the article said European semiconductor analysts believed ASML would resist any takeover attempt, and could disrupt any bid from Applied Materials. The article said that, according to Mark FitzGerald, the chip equipment analyst for Banc of America Securities, Applied Materials has approached ASML about a takeover before.
"Lithography is the last big segment they don't participate in. It would make sense for them to buy growth, and at some point do an acquisition that could really change the composition of the company," Reuters quoted FitzGerald as saying.
The article also quoted Ulrich Pelzer, a semiconductor analyst for Lehman Brothers, saying: "Applied is fairly big in everything outside of lithography, so if they want to grow they have to crack lithography, but in order to crack lithography, you have to go to the Japanese, and there you have a huge cultural barrier, or you have to go to ASML."
The reference to the Japanese is to Nikon Corp. and Canon Inc., the only other manufacturers of semiconductor lithography equipment, although the article acknowledges that the acquisition of either of these Japanese companies would be almost impossible due to their complex corporate structures.
The article says that spokespeople at Applied Materials and ASML were contacted but declined to comment.
The article also suggests that KLA-Tencor could be a target for an acquisitive Applied, helping the company to get into the wafer inspection and measurement sector.