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Having listened to the conference call covering last night’s announcement that Lam Research was acquiring SEZ, the main thrust for the move by Lam was to quickly put in place the infrastructure on a global scale to better serve its two new products that cover the plasma-based bevel-edge cleaning system called Coronus and its linear single wafer cleaning platform that has yet to be officially launched! 

SEZ has that space well covered, and also the engineering talent specific to cleaning, especially in the field of polymer removal. SEZ had also made its initial move into the FEOL cleaning market a year ago with a dedicated platform in an effort to address a much bigger market, FEOL cleaning, which often comes before and after the etch process.

Apparently, the two companies had been talking about working together on different levels for most of the year but only ‘realized’ the potential for an acquisition a few months ago.

Lam is attempting to outgrow the equipment market average several times over per year, and its FEOL single wafer cleaning systems would have come head to head with the dominant wet bench tool fraternity as well as the entrenched views of chip manufacturers concerning the extra costs associated with single wafer and the level of customization expected to win the business.

Leveraging SEZ’s installed base and similar customer footprint would seem to have been a key catalyst for the deal’s creation. Lam can now look at gaining access to customers that have already adopted single wafer tools but can utilize SEZ’s engineering and process expertise to potentially combine etch and clean tools into a single package.

Few customers baulk at the opportunity to reduce the number of platforms in a fab, especially when the combined platform can often achieve greater process performance as well as better productivity.

As is typical today, both sets of executives noted the lack of overlap between the product ranges while highlighting that both companies seemed to have the same views on addressing the industry going forward. All types of words such as ‘complementary,’ ‘synergistic’ and ‘unique opportunity’ were bandied around.

But is this a marriage made in heaven?

A question from the floor brought back to my mind one that I had contemplated late last night when the news broke. SEZ has been burdened with poor operating margins for a few years as it developed its FEOL platform and coped with the typical industry cycles. Compared to Lam, SEZ has very low margins, so I would expect Lam to tackle that issue as a priority.


The response to the question intrigued me as Lam’s CFO acknowledged the difference but said as the company aims to be a $4 billion revenue company by 2010, it was acceptable to have operating margins in the 30 percent range rather than its historical 40+ percent!

I am not sure how the investor community will take that one but it was new to me all the same.

Linked to this aspect is the fact that Lam is one of the most asset-light equipment suppliers in existence (hence high margins), meaning that it has been aggressively outsourcing components, sub-systems and assembly aspects for some years. SEZ has not!

Indeed, SEZ has undertaken an outsourcing strategy to some degree in the last 18 months, but the bulk of its platform build is undertaken in Austria. This led me to believe that if the economies of scale from a sales, marketing and servicing perspective do meet Lam’s expectations over the next year or so, I would not be surprised to hear that a major outsourcing strategy for the new wafer cleaning division of Lam is now underway.

I am also concerned about the two cultures, contrary to what the executives said in the conference call. Silicon Valley and the Austrian Alps are as far apart as they get, so that will be interesting to observe if we get the chance!

SEZ has been pushing hard to get into the FEOL clean business, which is double the market space by revenue of the market in which it currently plays. Lam need to do the same to push for tool and process integration to get its foot in that door and quickly. From that perspective it’s a good fit, especially when I would expect the founders of SEZ to retire and let the younger executives handle the transition.

For now, Lam picks up a market leader and can claim single wafer cleaning leadership. SEZ can attempt to grow with the FEOL market penetration, a task that has been set for the new division being set up by both companies.

Wet bench suppliers – look out!