by Griff Resor, Resor Associates and SST Editorial Advisory Board member

Rick Wallace, CEO of KLA-Tencor, launched BACUS 2007 with his keynote speech highlighting the technical and business challenges facing mask toolmakers. An early leader in mask inspection equipment, KLA-Tencor at first relied on technical innovation, he noted. In its middle years, 24 x 7 production reliability was the top priority. Now a new business model is needed: collaboration with key customers and supplier, Wallace explained.

Remarkable progress made while chasing Moore’s Law has led to ever increasing complexity in KLA-Tencor’s mask inspection tools. Wallace used Google Earth images of the Monterey Conference Center to show how dramatically resolution capabilities have improved. Early defect detection tools were similar to a low-resolution view of Monterey, CA, from outer space — today’s tools find detail as fine as a parking stripe, and users are asking to see finer detail. Optical resolution, computing speed and memory capacity must constantly improve, and this requires a lot of R&D on many fronts.

IC markets have shifted strongly to consumer products, Wallace noted, and consumer markets have accelerated the rate of change, including in the mask business. More mask changes and quicker inspections are required, increasing the pressure on mask inspection tool R&D, he said.

Also, there has been consolidation from over 60 mask shops to just 15 (including in-house mask shops), into what is in 2007 a ~$3.0 billion industry, just about 1% of the IC business, he pointed out. Only a fraction of mask revenue is applied to mask equipment, and just a tiny portion of that goes into mask equipment R&D. This has always been a tough business model, and things are getting tougher. Wallace expects his R&D costs will increase 14.5X from the 90nm node to the 32nm node, while at the same time he expects unit sales to drop 10X.

To meet this challenge, KLA-Tencor must change the way it does business, he emphasized. To have the very best technology, the company will use sole-source suppliers, the best global partners, and a close working relationship (i.e., collaboration) will be essential, he said. Wallace showed that he expects KLA-Tencor will move from 90% locally based suppliers at the 90nm node to just 5% at the 32nm node — a dramatic shift for a company that began by doing all its innovation in-house. — G.R.