ASMI Sees Bright ALD Future, Defends Margins
By David Lammers
ASM International executives said they are confident that sales beyond the current quarter will be bolstered by volume adoption of atomic level deposition (ALD), but defended the company’s gross margins against pestering questions by European stock analysts Wednesday.
In a conference call following release of the company’s fourth quarter and 2011 full year results, ASMI (Almere, Netherlands) CEO Chuck del Prado said ASMI made “strong inroads” with its plasma-enhanced ALD technology, which he said is being adopted by two Asian memory vendors as they implement spacer self-aligned double patterning. On the logic side, ASMI – the leading vendor of ALD equipment – expects that several of its customers will move into high-volume manufacturing with 28nm technologies which include ALD for high-k/metal gate deposition.
Having achieved “process tools of record” at several logic customers, del Prado said he expects “volume shifts at 28nm and beyond.” He deflected a question about competition in the ALD sector from Applied Materials, which unveiled an integrated high-k solution at last July’s Semicon West based on ALD technology.
“As for the Applied tool, we never underestimate our competition. We run into them, but we do not look for them to change things in any meaningful way,” he said.
During the conference call, several gross margin-related questions were posed to del Prado and Wai Kwong Lee, in charge of the ASM Pacific Technology affiliate (52 percent owned by ASMI) which handles the company’s extensive back-end businesses.
Del Prado said front-end equipment sales, led by ALD and PE-ALD, saw a sales increase of 55% year-on-year in 2011, with front-end sales and operating profit reaching “record levels.” A 2011 downturn in the industry-wide assembly and test sector hit ASMPT’s sales, but he said the back end of the semiconductor industry is showing signs of strength recently. For the full year, ASM International’s sales increased to 1,634.3 million Euros ($2.14 billion), up from 1,222.9 million Euros in 2010.
Source: ASM International
In the fourth quarter, front-end gross margins were 33.9 percent, down from 40.7 percent in the final quarter of 2010 and down from a 39 percent gross margin in the third quarter of 2011. Comparisons in the back end are complicated by ASMI’s acquisition of Siemens’ assembly equipment business early last year, but the overall back end business had gross margins of 28.3 percent last quarter. That left the consolidated company with a 30.2 percent gross margin for the fourth quarter, and 35.6 percent for the full year (down from 44.9 percent in 2010), relatively low for a company with a highly successful ALD operation.
In the final quarter of 2011, ASMI engaged aggressively with front-end customers to accept and pay for tools within the quarter, which the executives said had a 3 percent impact on gross margins. Another 2 percent gross-margin hit came from seeding customers with a relatively high number of evaluation tools, while product mix issues also hurt gross margins.
“We had many seeding projects in ALD and PE-ALD, which we are pretty confident will result in growth over the next 18 months. That will become very visible,” del Prado said.
On the back end, Lee said ASMPT has been talking to its lead frame customers about a flexible pricing model that would peg lead frame prices in part to the price of copper, gold, silver, and palladium on the London Metal Exchange. The “floating price” model, Lee said, “will bring the lead frame business back into profitability.”
“Our back end gross margin target is to do better than a 30 percent gross margin level. In a few years, as we become more efficient, we could go past the 40 percent level,” Lee said.
Tags: ALD, Applied Materials, ASM International, PE-ALD