By David Lammers

KLA-Tencor executives said their company enjoyed a record burst of orders in recent weeks and is scrambling to fill them.

“The big story in December is that we saw a resurgence in bookings, up 95 percent compared with the September quarter,” CEO Rick Wallace said in a conference call Thursday, following release of fiscal second quarter results. Many of the orders for the December-ending quarter came in the final two weeks of the quarter, resulting in $950 million in bookings for the quarter, the second-highest in the company’s history. Revenues for the December-ending quarter were $642 million.

“We begin 2012 with great optimism,” Wallace said, adding that “our biggest challenge now is meeting demand.” Vendors are maxed out and “factories are full and trying to keep up,” he said. CFO Mark Dentinger added that KLA-Tencor is hiring again but plans to increase the work force by only 1 percent or so.

KLA-Tencor recently announced a suite of new and upgraded wafer inspection tools, covering the brightfield, darkfield, and e-beam wafer inspection sectors. The new tools coincide with foundry customers scrambling to figure out how to boost yields for 28nm wafers, he said.

Foundries face high expectations from customers in the smart phone and tablet markets, many of which are introducing 28nm SoC processors with larger die sizes than in previous generations. The larger die, and the challenges of finding defects and controlling processes at the tighter design rules, are proving challenging for foundries. That is driving them to buy more wafer inspection and metrology tools.

““Expectations for 28nm are overheated right now. It is imperative for the foundries to go after yield improvements, and we have the tools which can help them with that,” Wallace said.

After several years in which SoC die sizes have remained relatively constant, die sizes are increasing for logic ICs used in smart phones and tablets. And yields improvements are critical. That puts KLA-Tencor “right in the sweet spot” of where foundries are spending, Wallace said, noting that foundries accounted for 57 percent of the company’s business for the December quarter. NAND vendors also are spending more on metrology and process control, particularly as the NAND devices move to more vertical structures.

For logic, about half of KLA-Tencor’s bookings are from customers building PC and server processors, and half from foundries driven largely by smart phones and tablets. While the types of defects are similar to those seen in the 40nm generation, defects are smaller and often require new tools, he said.

One analyst asked if investments in process control will increase sharply as a percentage of total wafer fab equipment spending. Wallace said his company expects its served market opportunity to increase slightly this year to 14 percent of an expected WFE of roughly $30 billion this year. WFE capex for 2012 could be flat to down 10 percent for this year, with the macroeconomic picture making forecasting more difficult than usual. Process control and metrology will outperform the rest of the equipment industry this year, as it did last year, he said.

KLA-Tencor has about a billion dollars in orders which have not yet shipped, and one analyst asked if the company’s backlog could stretch out this year. Wallace said that, depending on the product, it takes from three to nine months for tools to ship after an order is placed.

Tags: 28nm, foundries, KLA-Tencor, metrology, NAND, process control, semiconductor manufacturing

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