By Dr. Phil Garrou, Contributing Editor

APPLIED / TEL Deal OFF

Eighteen months after announcing a deal to Tokyo Electron, Applied Materials has announced that the $7B deal will not go through due to regulatory concerns [link]. The two companies said the decision for terminating the deal came after the U.S. Department of Justice told the companies that their proposals for a combined business were not good enough to replace the competition lost from a merger.

The Korea Times has also reported that “the Korea Fair Trade Commission (FTC) disapproved the proposed merger between Tokyo Electron and Applied Materials in line with the latest objections by Washington.”

As IFTLE has mentioned many times in the past few years, the decline in the number of semiconductor firms that can afford to have their own chip fabrication plants has reduced the customer base for the industry.

The termination of AMAT-TEL merger will affect AMAT’s position in the etch and deposition equipment segments. Although Applied has a larger  deposition market share (47%) than TEL (~12%), the new company, preliminarily named ETERIS, had opportunities to fill out its product portfolio by the merger. Applied is clearly behind in the deposition segment after LAM merged with Novellus in 2012 to gain a substantial presence in the segment. The Applied / TEL merger was expected to close the gap with LAM but now that will not happen.

2013 semi equipment market share leaders are shown below.

Samsung Invests Big
Samsung has announced a $14.7B plan to build a new wafer fab south of Seoul.  Slated to begin production in 2H17, will add to Samsung’s current fabs (listed below) [link].

Samsung has spent at least $10 billion per year on semiconductor capital since 2010 and has accounted for 17-21% of total industry capital expenditures each year since then.

Samsung did not identify what type of chips will be manufactured at the new fab.
Samsung is expected to give strong consideration to foundry operations at the new fab.  Despite losing the Apple A8 processor business to TSMC (a $2 billion foundry customer), Samsung reportedly is committed to growing their foundry business.  Its leading-edge manufacturing capabilities make it an attractive option for several fabless and fab-lite logic IC companies.

IC Insights Compares Market Sizes and Forecasted Growth Rates for Systems, ICs

IC Insights reports that total production value of electronic systems increased 5% in 2014 to $1,488B. Cellphones expanded their lead over PCs (desktops and notebooks) as the largest electronic systems market in 2014 after overtaking standard PCs for the first time in 2013.

Cellular handsets accounted for 25% of IC sales in 2014, while standard PCs represented about 21% of the total.  IC revenues generated by these 11 end-use systems categories represented nearly 80% of total integrated circuit sales worldwide in 2014.

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