Analyst: Metrology/inspection sector did better in 2007, but still underperformed

Analyst: Metrology/inspection sector did better in 2007, but still underperformed
May 6, 2008 – The semiconductor metrology/inspection equipment market grew 7.2% in 2007, according to calculations from market research firm The Information Network. Good news: That’s double the ~3% growth it expected at mid-year. Bad news: it’s still well below the 11% growth for the frontend wafer processing side of the equipment sector.

“As we move into the 65nm and 45nm technology nodes, one would think that more money would be spent on metrology/inspection tools as a ratio of overall equipment buys,” said the firm’s president, Robert Castellano, in a statement. However, he said, the metrology/inspection sector underperformed the overall sector for the second year in a row, skewing away from a 12-year average spread of only 2.4%. In 2006 this sector saw 13% growth, vs. 28% for the total frontend equipment sector.

“2006 was a disaster,” he writes, “but 2007 was still bad.”

Castellano projects the metrology/inspection market will flip with the overall frontend equipment segment in 2008, with sales dropping 11% vs. a 15% drop in total frontend.

Breaking down 2007 marketshares in the metrology/inspection field, Castellano pegs KLA-Tencor still dominating with 50.5% share, followed by Hitachi and Applied Materials (whose combined sales barely total half of KLAC). Best growth among top-10 vendors goes to Nanometrics, which moved from 1.8% share to 2.5%. Heading the other direction, Rudolph Technologies sunk from 3.5% share to 2.1%.

Within the sector, times were particularly tough for macrodefect inspection, which sunk 11.5% — after enjoying growth rates of 63% in 2005 and 26% in 2006.

Castellano told WaferNEWS that this market has been “oversold” the past few years — its 63% surge in 2005 flew in the face of a -1.5% revenue decrease for the overall inspection/metrology market and -9.5% decrease in overall frontend equipment. “Now the tools are in place, and coupled with slower demand for inspection tools, the sector suffered,” he said.

He also cited competition as a factor that can lead to price erosion, pointing to revenue declines at both KLA-Tencor and Rudolph (while Nikon’s sales in this segment rose 30%). And in small market sectors, purchasing decisions by one or two customers can really screw up someone’s market share, he noted. “Rudolph still led the market, but its share dropped from 48% to 40% between 2006 and 2007,” he noted. Since macro tools represent two-thirds of that company’s frontend revenues, “a drop in that sector really affected their total revenues and share.”


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