AMAT, Samsung settle spat over leaks

November 30, 2010 – Applied Materials and Samsung Electronics have come to a settlement agreement over allegations earlier this year that the equipment maker may have been leaked to rival Hynix.

Terms of the deal, which resolves potential civil claims and litigation over "alleged acquisition, misappropriation and misuse" of sensitive chip manufacturing data, include "volume-based rebates" on chip tool purchases and upgrades for three years for Samsung and affiliated companies, including for new areas of work (including joint development) in which they aren’t currently partnered. The settlement does not cover, however, any actions Samsung is pursuing against individual employees of AMAT and other involved companies, including current proceedings in Seoul courts.

To recap: back in February, news broke that dozens of memory and other chip technologies were allegedly obtained during equipment installation/maintenance at Samsung, pilfered by AMAT Korea and Samsung employees; some of that technology allegedly found their way to Korean memory rival Hynix. Samsung estimated the leaks could cost it in the hundreds of millions of US dollars (directly), and possibly indirectly in the hundreds of billions.

The financial impact of the settlement, AMAT says, will depend on how much Samsung purchases from it over the three-year period — the chipmaker represented about 10% of AMAT’s $5B net sales in FY09 — but the company expects a dent of only a single percentage point in the low end of its chip tool division’s operating margins (currently a range of 33%-38%). Deutsche Bank’s Peter Kim thinks it could be up to 2% of the SSG group’s margins (translating to ~$100M/year for three years).

But ultimately it’s not so much about the money lost, as a customer regained. Samsung is AMAT’s biggest customer and arguably the biggest and most important chip tool purchaser (alongside Intel). Clearing the litigious air means the two can get back to business, and the newly attractive pricing means Samsung might expand its use of AMAT tools, thus giving AMAT some share gains at this key account.


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