Veeco came, saw, acquired
majority of the AFM market

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Oct. 8, 2002 — When Veeco was founded in 1945 by a pair of Manhattan Project researchers who invented a helium leak detector, the company’s name was an acronym for Vacuum Electronic Equipment Company.

Today, the name of the Woodbury, N.Y.-based Veeco might stand for Very Enormous Electronics Company. With $450 million in sales (2001), Veeco provides a wide array of process equipment and metrology tools to assist in the manufacturing, measuring and testing of microelectronic components.

In recent years, Veeco has grown by leaps and bounds as a result of strategic acquisitions. Its most recent merger with FEI Co. will make it the sixth largest semiconductor equipment company and the third largest metrology equipment company in the United States.

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Before 1997, Veeco was primarily a process equipment company, supplying ion beam etch and ion beam deposition for the data storage industry and other industrial customers. Five years ago Veeco expanded into metrology when it acquired Wyko, a manufacturer of optical metrology tools.

Since then, Veeco’s acquisitions have revealed a strategic move toward nanotechnology and MEMS. Most notable are Veeco’s purchases of three companies that manufacture atomic force microscopes (AFMs) and a number of key process equipment suppliers for the semiconductor industry that enable nanocoatings and MEMS device manufacturing.

Atomic force microscopes are a key tool for researchers in the fields of bioscience, life science and materials science. They play a fundamental role in nanotechnology processes, and Veeco earns nearly a third of its revenues from AFM sales and support, making it the market leader in nanocharacterization.

Veeco purchased the AFM divisions or AFM-related intellectual property from Digital Instruments in 1998, from IBM in 2000, and from Thermo Microscopes in 2001.

“Veeco is now the market leader in scanning probe microscopes,” said Ramon Compano, who has been witnessing a consolidation in the market since taking the helm of the European Commission’s nanoelectronics project management office.

Veeco has indeed “cornered the market” said Risto Puhakka of VLSI Research Inc. AFM use in the semiconductor industry is expected to grow, and Veeco intends to capitalize on this trend by providing the kind of support that other AFM suppliers couldn’t.

“Earlier vendors did not have the worldwide customer support necessary,” said Veeco spokesperson Fran Brennen. “Both our semiconductor and nanotechnology customers, depending on what part of the globe they are, require 24/7 sales and support often not available from smaller AFM suppliers.”

Chip manufactures use AFMs to analyze the surface of wafers to make sure they’re defect free before going to the next step in the production process. The market opportunity is driven by productivity improvement demands in semiconductor automation applications, which use the AFM for surface profiling and defect management, and is projected to grow from $181 million to $800 million in 2007.

According to Puhakka, using AFMs and related tools in a preventative measure is a major trend driven by the need to reduce waste, cut costs and improve quality all the way along the line. The AFM is expected to become increasingly important as a key tool for those who are exploiting nanotechnology.

An AFM enables researchers and engineers to not only observe but also manipulate matter at the nanoscale. John Roy, an analyst for Merrill Lynch & Co. Inc., said atomic force microscopes are “the foundation for doing any type of manipulation.” He said Veeco hopes to change the perception of AFMs from that of “tools to test silicon fabrication systems,” to “part of the actual silicon fabrication process. So, instead of etching into the wafer using x-rays or whatever, you will now use atomic force microscopes to align the atoms as you please.”

Since cornering the market in AFMs, Veeco has set its sites on nanomanipulation tools. This year, it announced a merger with FEI, the Hillsboro, Ore., based manufacturer of process management systems that incorporate ion and electron beams to scan submicron structures. With FEI under its belt, the Veeco sales team can now offer researchers an entire package of tools, such as those used to do nanomanipulation.

Veeco isn’t touting its focus on nanotech, preferring to describe its acquisition strategy as a way to “add enabling technologies in core target markets,” such as semiconductor, data storage and telecommunications, said Brennen. However, according to the Veeco spokesperson, “Veeco and FEI both recognize a sizeable growth opportunity to be a key supplier for nanotechnology researchers. Both companies have had a long-term commitment to nanotechnology.”

One reason why Veeco isn’t waving a nanotech banner above its corporate headquarters may be that it doesn’t want to be seen as ignoring near-term opportunities in favor of chasing after long-term possibilities. The “story is already complicated enough without confusing Wall Street with talk of nanotechnology,” said Debra Wasser, vice president of investor relations for Veeco, adding that “the Street tends to see nanotechnology as a future market.”

(Small Times Correspondent Valerie Thompson contributed to this report.)


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