Outlook for Nanochip and Nanotech Capital Equipment Companies

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Outlook for Nanochip and Nanotech Capital Equipment Companies

Ed Wijaranakula, Ph.D.
Chief Investment Strategist, Infotix Systems, Inc. - November 05, 2004

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Most of the nano-based products from nano-chemical sensors for environmental monitoring, food safety and security applications, nano-based biomedical devices which, for example, can automatically monitor blood sugar levels for diabetics, to carbon nanotube-based portable fuel cells used in mobile devices, are presently in development stages in research laboratories worldwide. We expect that nanotech capital equipment will see a sharp rise in demand as these nano-based products emerge in the consumer mass market.

FEI Company (NASDAQ:FEIC) - Hillsboro, Oregon-based FEI Company is one of the worldwide leading manufacturers of ion beam systems (Microelectronic Division) and electron microscopes (Electron Optics Division). FEI's product portfolio includes transmission electron microscopes (TEMs), secondary ion mass spectrometers (SIMS), focused ion beam (FIB) instruments, scanning electron microscopes (SEMs) and Dual Beam systems that combine a FIB column and a SEM column on a single platform.

The ion beam systems and electron microscopes are used to analyze, diagnose and design modifications of nanostructures in semiconductors, data storage components, and biological and industrial compounds. Early this year, the company announced that for the first time, sub-angstrom resolution ( > 0.1 nanometer) was achieved using the commercial FEI Tecnai F20 ST transmission electron microscope. This new microscope will help accelerate the development and commercialization of nanomaterials such as carbon nanotubes and nanospheres.

FEI's third quarter 2004 earnings rose to $US 3.3 million from $681,000 a year ago. Excluding charges, the company earned $4.2 million, $US 1.05 million below Wall Street's forecast. FEI however, increased its revenue forecast for the fourth quarter above analysts' estimations. Prior to the earnings report, Wall Street estimated this year's earnings to grow 43.6 percent and 75 percent next year. Amsterdam, The Netherlands-based Koninklijke Philips Electronics N.V. (NYSE ADR:PHG/AEX:PHIA) owns 25.6 percent of the total FEI common shares outstanding.

FEI's competitors include Tokyo, Japan-based JEOL Ltd. (Tokyo Stock Exchange TSE:6951) and Chiba, Japan-based SII NanoTechnology, Inc, a subsidiary of Seiko Instruments Inc. (TSE:8050) and Tokyo, Japan-based Hitachi, Ltd., (NYSE ADR:HIT/TSE:6501). Analysts surveyed at Thomson First Call have a "neutral" rating on FEIC with a 12-month median price target of $US 23.50.

Cymer Incorporated (NASDAQ:CYMI) - In nanoelectronics, light sources that deliver high spectral purity and extremely high power are essential to project the image of a miniaturized circuit from a master image onto a photosensitized silicon wafer. San Diego, Ca-based Cymer, Inc. is the world's leading supplier of excimer light sources to major deep ultraviolet (DUV) photolithography system manufacturers including ASM Lithography

(NASDAQ:ASML), Tokyo, Japan-based Canon, Inc (NYSE ADR:CAJ) and Nikon Corp. (TSE:7731). These companies, in turn, supply wafer scanners and steppers to chipmakers such as Intel (NASDAQ:INTC), AMD and Taiwan Semiconductor Manufacturing Company (NYSE ADR:TSM).

Scanners are photolithography tools that project the image of a circuit from a master image onto a small portion of the silicon wafer surface. The wafer is then moved using steppers until the entire wafer is exposed.

Excimer (Excited dimer) laser light is generated by combining noble gases Argon (Ar) or Krypton (Kr) with a halide gas such as Hydrogen Chloride (HCl) or Fluorine (F). In the excited state, the combined gases form a metastable compound called a "excited dimer", ArF or KrF. After applying a high voltage pulse to the active medium, ultraviolet light with 193 (ArF) or 248 (KrF) nanometer wave lengths is emitted.

Last July, Cymer unveiled the XLA 200, the world's first excimer ArF (193 nm) light source designed to support immersion photolithography applications at the 45-nm node. Immersion photolithography is the technique in which space between the projection lens and the wafer in the exposure tool is filled with liquid rather than air. This will allow the lens to be designed with a numerical aperture greater than one and thus creating the ability to produce smaller features.

Early this year, Cymer received $US 20 million in funding over the next three years from Intel to accelerate the development of an extreme ultraviolet (EUV) lithography light source. EUV lithography, which utilizes invisible light (13-nm wavelength) from a laser produced plasma (LPP) source, is the next-generation lithography solution path in imaging critical dimensions at the 32-nm node and beyond. It is positioned for commercial deployment in 2009.

Cymer's third quarter 2004 income was $15.4 million, compared to a loss of $8.5 million last year. Due to a slowdown in orders, Cymer is cutting 14 percent of its workforce and reduced its revenue forecast for the fourth quarter by 10 percent. Prior to the earnings report, Wall Street estimated the company's earnings to grow as much as 600%, and 58% for next year. Analysts surveyed at Thomson First Call have a "neutral" rating on CYMI with a 12-month median price target of $US 33.50.

Other competing nanolithography technology to conventional UV lithography are x-ray lithography, e-beam lithography and nano-imprint lithography. Austin, TX-based privately held start-up Molecular Imprints, Inc. (MII) is currently developing and commercializing a proprietary Step and Flash Imprint Lithography (S-FIL�) technology, in which features as small as 20-nm have been patterned.

The technique uses a fused silica template with a circuit pattern etched into it. The fused silica surface, covered with a release layer, is gently pressed into a thin layer of low viscosity, silicon-containing monomer. When illuminated by a UV lamp, the surface is polymerized into a hard material. Upon separation of the fused silica template, the circuit pattern is left on the surface. MII is financially backed by venture capitalists and companies including Alloy Ventures, Harris & Harris Group, Inc., Motorola, Zeiss, Lam Research and Lux Capital.

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About the Author: Dr. Ed Wijaranakula is presently the Chief Investment Strategist at Infotix Systems, Inc. Prior to Infotix Systems, he has worked with Intel, Hewlett-Packard, Micron, Motorola and Texas Instruments and has held senior as well as managerial positions in semiconductor manufacturing companies. He has published over 80 technical papers and holds more than 12 U.S. and foreign patents. His portfolio holds long position or control in AMD and Intel.