Semiconductor Equipment - Berenberg Bank

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Applied Materials Inc Technology Hardware Company background AMAT was the biggest semiconductor equipment supplier worldwide by revenue in 2012 according to Gartner data (see Figure 25). It supplies semiconductor fabrication equipment, FPD fabrication equipment and solar PV manufacturing systems. AMAT’s customers include manufacturers of semiconductor chips, LCDs, solar PV cells and modules, and other electronic devices. Figure 25: AMAT revenue split 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Source: Gartner Data 2008 2009 2010 2011 2012 Deposition Etch Clean&Planarization RTP&Oxidation/Diffusion Ion Implanter Process Control Automation&Control Wafer-Level Packaging Source: Gartner data AMAT operates in four reportable segments: Silicon Systems Group (SSG), Applied Global Services (AGS), Display and EES. Figure 26: Segments SSG Description Supplies semiconductor equipment used in chip fabrication processes including: - Deposition, - Etching, - Cleaning & Planarization, - Rapid Thermal Processing, Oxidation, Diffusion, - Ion Implant, - Process control, - Wafer level packaging. AGS Helping customers to lower cost, improve equipment and fab performance and maximise return on asset. - Provides semiconductor, display and solar customers with solutions that maximize output and efficiency - Largest supplier of software for automating semiconductor, display and solar factories Display Suppliers TFT-LCD equipment and services, which help make flat panel TVs more than 20% larger each year without price increases EES Supplies PV equipment used in: - Produce crystalline-silicon (c-Si), Solar PV cell and modules, - Help accelerate global PV adoption by delivering cost-effective solutions to improve productivity and increase cell efficiency Source: Company data 112
Applied Materials Inc Technology Hardware Compared to other major semiconductor equipment companies, AMAT has the broadest product portfolio, used in different chip fabrication processes (see Figure 27). Figure 27: product portfolio of equipment vendors Semiconductor Equipment AMAT LAM ASMI ASML TEL KLA Lithography Y Photoresist Processing (Track) Y Deposition Y Y Y Y Etch, Clean, and Planarization Y Y Y RTP and Oxidation/Diffusion Y Y Y Ion Implanter Y Process Control Y Y Manufacturing Automation and Control Y Wafer-Level Packaging Y Y Y Y Die-Level Manufacturing Equipment Y Y Test Equipment Source: Company data Acquisitions AMAT has been active in M&A during the past decade, acquiring Varian in 2011 and Semitool in 2009 – and although it attempted to acquire ASMI in 2008, it was not successful. None of the companies that AMAT has acquired in the past few years operate in the same segments as AMAT – thus there is no overlap with AMAT in terms of market share. All the acquired companies have a dominant market share in their respective segments. We believe that AMAT’s strategy is to expand its total addressable market through acquisition, and to grow organically in the areas in which it currently has a position. Figure 28: M&A deals 2011 Acquire Name Amount Description Synergy for AMAT Varian Semiconductor Equipment Associates, Inc $4,900mn - Gain exposure to ion implantation market, where it do not Leading supplier of ion have any share before and Varian had 75% share, implantation equipment to -Enhance AMAT's Baccini Solar product portfolio with c-Si the semiconductor and products, solar industries - Supply chain synergy of $50-60mn in annual cost from end of 2nd year. 2009 Acquire Semitool Inc $346mn 2008 Rejected ASM International $800mn Supply equipment used in chip packaging Semiconductor equipment vendor specialised in ALD deposition tool -Get exposure to advanced packaging and memory industry's conversion to copper interconnect. - Enhance its deposition product portfolio further, - Benefit from ASMI's comprehensive IP portfolio on ALD equipment. Source: Company data, Berenberg, Bloomberg data AMAT shareholder structure AMAT has approximately 1,203m outstanding ordinary shares listed on the NASDAQ stock exchange. The free-float percentage is 99%. The shareholder structure in June 2013 is shown below. 113
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