Jan. 17, 2003 — Two small tech equipment makers had hoped that by merging they could offer researchers a package of tools. But as Veeco Instruments and FEI Co. blamed last week’s breakup on bad economic timing, one nanotech analyst said such a marriage just wasn’t meant to be.
“I think the tool market is going to fragment; there won’t be a one-size-fits-all approach to tools,” said Neil Gordon, a partner with Montreal-based Sygertech.
“There are so many needs, and so many disciplines. … I don’t see nanotech as having a PC tool set where everyone will have a nanobox on their desk to analyze materials — not in our lifetime.”
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Veeco and FEI first announced the $1 billion deal in July, and it had been set to take effect at the end of 2002. But in December, with regulatory and shareholder approvals still pending, both firms announced the merger would not meet the year-end deadline. Based on combined 2001 sales of $825 million, the two companies together would have constituted the sixth largest U.S. semiconductor equipment company and the third largest U.S. supplier of metrology equipment.
Both companies offer metrology equipment for measurement and imaging, but each focuses on different areas. Veeco specializes in atomic force microscopes for submicron surface profiling. FEI makes ion and electron beam tools for failure analysis, fab production process control and other tasks.
Still, the small tech market they aimed to serve jointly remains part of each company’s business plan.
“The more products you have to sell, the better. Both companies have noncompetitive scientific research products, but it’s just not the right time (to merge),” said Debra Wasser, Veeco’s vice president of investor relations and corporate communications.
“Each company is a significant player in nanotech and the small tech area. … We’ll continue to go down our separate paths, looking for growth in those markets.”
FEI said it will continue to develop nanotech tools, including three-dimensional metrology devices for nanofabrication. Officials have said those efforts have helped the company grow in good economic times and stay afloat in bad.
“Just because the merger didn’t happen doesn’t mean that certain collaborations aren’t possible — or similar collaborations or marketing agreements with other companies,” said Jay Lindquist, FEI’s senior vice president of corporate marketing.
“We’re very actively looking for other partners out there. We seek some kind of business relationship where we can grow our business in nanotech.”
Gordon said that regardless of future mergers or acquisitions, there are plenty of toolmakers to serve current small tech needs.
He cited an industry report released last year that identified more than 125 companies worldwide making software, visualization, production and other equipment for the MEMS and nanotech markets. He said the number might even be as high 350, when the smallest and most secretive firms are counted.
A great majority of the firms are small and focused on a particular niche, capitalizing on technology spun out of an academic or government lab. He believes that’s key to understanding the future direction of small tech.
As the markets mature, he said, the need increases for specialty tools. Some companies, such as NanoOpto Corp. and Zyvex Corp., are developing tools for their own needs. Other startups are tapping research centers, which typically have unused capacity and seek customers.
“There will always be a need for these mainstream products; Veeco and FEI’s sales will increase over time,” he said. “But because the market is growing and moving in different directions, there’s room for these startups.”
Lindquist agreed that most companies are not in the business of providing “a one-off kind of tool.” But that hasn’t stopped FEI from taking on customers who came with a tool developed in-house and wanted a toolmaker to license the technology and turn it into a workable, marketable product.
For example, FEI worked with the University of Maastricht in the Netherlands to develop the Vitrobot, an automated tool for preparing biological samples in a frozen state for imaging by a transmission electron microscope.
“Many smaller organizations can develop a single tool, but once tools get to the point where there’s a broader market for them or many need to made … they go to someone who can that technology and turn it into a tool,” he said.
“To me, it’s all part of the evolution of developing tools and capabilities for new market. Over time it’s going to coalesce. It has to, to be able to deliver real products and solutions that are reliable, manufacturable, and that you can count on being here a year from now.”