ASML takes world number one spot with SVG buy

The fall implied a deal price nearer euro 1.72 billion. ASML is the world’s second largest maker of scanners and steppers, machines which map out the circuitry for computer chips, although it has been quickly catching up market leader Nikon and nearing it this year.

By buying up the fourth largest maker it will capture the number one spot. The combined market share for 1999 was 43 per cent. A Nikon spokesman said increased capital expenditure by Japanese chipmakers this year would increase its sales after last year’s dip and help shore up its position.

According to Dataquest, the lithography equipment sector is growing at a compound annual growth rate of 30 per cent and is expected to reach euro 8.7 billion ($7.7 billion) by 2002. While some observers are nervous about a dip, ASML chief executive Doug Dunn affirmed the sector’s strength. "There isn’t a week that goes by when a customer doesn’t call me asking for more orders," he told a conference call. Pro Forma sales and net income for the 12-month period to June 30, 2000, were euro 2.55 billion and euro 255 million respectively. SVG holders will own about 10 per cent of the combined company.

ASML’s Dunn said the boost to market share was secondary tothe main rationale for the deal — to combine the technological strengths of the two as the industry pushes for continually more advanced tools.

The lithography industry is undergoing a steady shift to finer resolution as well as to larger 300 millimetre silicon wafers. The deal combines the high volume production capacities ofASML with the SVG’s strengths in optical technology and early introduction of machines.

Dunn told the conference call the two companies wouldcontinue producing their current 193 nanometre wavelength models, but would combine forces as the technology sharpened to 157 nanometres and beyond.

The deal will also add SVG’s photoresist track and thermal product lines to ASML’s offerings, but perhaps most significantly it should add one key customer, Intel. "The most important part is that SVG is one of the suppliers of Intel. This should make it easier for ASML to get in… Intel has two key suppliers — SVG and Nikon. ASML has tried to get in but it hasn’T been easy as Intel tend to copy their factories," said Eric de Graaf, analyst at ING Barings, referring to the world’s number one chip maker Intel.

Of SVG’s sales 68 percent come from the United States and much of that from Intel. Dunn said Intel were "in general terms supportive" of the move. The Nikon spokesman acknowledged the merger would makecompetition tougher.

Other analysts also welcomed the deal and said the price,although high, could be justified. "ASML is buying a company with excellent tools for the nextgeneration… SVG is strong in the optical part of the machines. ASML is strong in the mechanical part and the alignment. It makes the quickest machines in the industry," said Frits de Vries, analyst at Rabo Securities.