by James Montgomery, News Editor, Solid State Technology
July 31, 2008 – KLA-Tencor’s proposed acquisition of Vistec Semiconductor Systems’ inspection business, while so far short on details (at least until the company’s quarterly results call later today), seems to follow KLAC’s recent strategy of scooping up smaller entities to bolster its technology portfolio and extend into new complementary areas.
Looking at the two company’s strengths, it appears the biggest motivation for this deal is probably in photomask metrology and inspection. Bob Johnson, research VP at Gartner, pointed out to SST that KLAC and Vistec MIE are the respective “900-lb gorillas” in the markets for mask inspect/review (>85% share of $463.7M) and metrology (>78% of $76.6M), and this deal is the logical way to span those related markets and “become the equipment provider of mask metrology and inspection.” VLSI Research’s Risto Puhakka also agreed that the significant impetus for this deal is in mask metrology.
A specific key to the deal might be emerging litho technologies. Johnson noted that Vistec has publicly stated that its registration/pattern placement technologies have been used to measure first-prototype EUV and nanoimprint lithography templates.
Meanwhile, both analysts pointed to some overlap between Vistec and KLA-Tencor in the wafer inspection sector (i.e. possible opportunity for improvements/upgrades), though it’s not certain to what extent the technologies could be merged to pose a bigger threat to someone like Rudolph Technologies. VLSI’s Puhakka pegged KLA-Tencor’s process diagnostics equipment sales (including reticle inspection) at $2.3B in 2007, while Vistec tallied just $100M as the fifth-largest supplier in that segment. Johnson noted that Vistec’s systems sport a newer design than the KLAC Viper.
Such a move is certainly in KLA-Tencor’s recent history of behavior, having done similar deals to get into sectors and technologies it didn’t have: bare wafer manufacturing (ADE in early 2006), process control metrology (Therma-Wave on the cheap in Jan. 2007), and vision capabilities (ICOS Vision Systems in Feb. 2008).
As to why Vistec would want to cleave off its inspection business? The usual canned response probably applies here, that the smaller participant in M&A wants to achieve better economies-of-scale and minimize costs/risks in an increasingly competitive/expensive industry. But the issue might be more accurately phrased as why Vistec’s owners — Golden Gate Capital, aka private equity — would want to do it. Private-equity owners’ ultimate endgame is to buy a company, take it private and clean it up, and resell for a profit — often with expectations that are well beyond today’s growth projections for the semiconductor equipment industry, Johnson noted. Minus the MEI business, what seems to remain as Vistec is some e-beam lithography technology, but nowhere near the revenue scale of MEI, Johnson noted.
Under the deal (no financial details were disclosed), KLAC will take on Vistec’s microelectronic inspection equipment (MIE) business based in Weilburg, Germany, one of three Vistec business units. In a PR, KLA-Tencor’s CEO Rick Wallace noted that the Vistec unit provides “an opportunity for growth into new segments of the mask and wafer markets,” notably its mask registration measurement system. For Vistec’s part, hitching to KLAC’s wagon is a means “to accelerate our advanced technology development,” noted Gerhard Ruppik, the business unit’s GM. — J.M.