Executives from Applied Materials, Inc. and Varian Semiconductor Equipment Associates Inc. (Gloucester, Mass.) said their agreement to merge, announced today (May 4), will accelerate the development of new transistor architectures and the adoption of implantation techniques in the solar, flat panel display, and LED industries.

Though discussions between Applied and Varian have occurred several times over the past decade, this time was different, the executives said. Gary Dickerson, CEO of Varian, said as device manufacturers move to new transistor architectures, with complex interactions between the implant and other process steps, Varian often found it would take a month or more to ship test wafers to customers for processing of the non-implant steps and get them back to the Varian laboratories in Massachusetts.

Working at Applied’s Dan Maydan Center will shorten those learning cycles, said Randhir Thakur, the general manager of Applied’s Silicon Systems Group. “The key is that we are now able to accelerate the cycles of learning. With 3D architectures at the 20nm and sub-20nm generations, we need faster learning cycles. And we have to combine that with the high-k and double patterning and other steps. From the 65nm to 22nm nodes, the number of implant steps has doubled, and we all see the need for further optimization,” said Thakur, an executive vice president at Applied.

Dickerson noted that Varian has been successful in working with customers to reduce leakage and improve contact resistance, two challenges facing the industry as device scaling continues. With “the challenge of new transistor structures” such as FinFETs and fully-depleted SOI, Dickerson said the combined resources of Applied and Varian will bring “more creativity and resources” to future technical challenges.

“Applied can accelerate the learning cycles, which is of tremendous value,” Dickerson said in a conference call following the announcement of the $4.9 billion acquisition.

The deal comes just a week after Varian announced all-time record revenues ($330 million) and net income ($82.3 million) for the second quarter of its fiscal year 2011, sharply up from year-earlier results. Mike Splinter, CEO of Applied Materials, cited those stellar results when he described Varian as “one of the best and largest acquisition opportunities in the semiconductor space.” He said the executive teams were able to establish an atmosphere of trust and shared vision during the negotiations. Dickerson declined to comment when asked if other suitors had approached Varian recently.

Splinter and Applied CFO George Davis noted that the two companies have similar long-term strategies regarding solar, LEDs, and other emerging markets. Varian has gained early traction with implant systems optimized for solar panels, Varian Solion product line. The solar implant tools use a dual-magnet ribbon beam implant architecture to deliver what Varian calls “Precision Patterned Implant” at the junctions of solar cells to improve solar cell conversion efficiencies.

Dickerson said that Applied’s relationships with all of the large solar cell manufacturers, and its worldwide support network, will aid in the adoption of the Solion product line.

While the executives said Varian will operate as a business unit of Applied’s Silicon Systems Group, and continue to be based in Gloucester, they added that cost savings will come by consolidating operations outside of Gloucester and leveraging Applied’s worldwide supply chain.

Dickerson, regarded as a superior manager, has agreed to remain with Applied for at least six months to run the Varian business unit, and Splinter said talks are continuing to convince Dickerson to accept a long-term position as an Applied senior manager.

Under the terms of the merger agreement, Varian shareholders will receive $63 in cash for each share of Varian stock they hold at the time of closing, a 38 percent premium over the recent Varian stock price. Davis said the amount is a 16x price-earnings multiple, saying “the timing is actually good” even though the industry is in the midst of an up cycle. The closing of the acquisition will require regulatory review by U.S. and international regulators, but Splinter said because the two companies have largely complementary product lines he did not foresee holdups in the approvals process.

Robert Halliday, Varian’s chief financial officer, said the total available market for implant tools is about $1.3 billion, with an additional $450 million in services and parts. Dickerson said the long-term opportunity in solar “is in the hundreds of millions of dollars.”

Dean Freeman, equipment analyst at Gartner Inc., said Applied paid a fairly high price to acquire Varian, with the acquisition priced at roughly four times 2010 implant industry revenues. “This is a very interesting acquisition. I can see why Applied wants the deal — the bottom line is that AMAT is back in the implant market.”

Varian has a strong position in plasma doping, in which the wafer is immersed in a boron plasma to dope the p+ areas. Freeman said “it is possible that Varian has the immersion PLAD technology IP wrapped up so tightly that this was the only way AMAT could get it.”

Tags: Applied Materials, plasma doping, solar, Varian

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