By Mark LaPedus
Japan’s two industrial equipment behemoths — Canon Inc. and Nikon Corp. — are going in opposite directions in fab gear, cameras and other areas, according to a new report.
Canon has not been a factor in the high-end semiconductor lithography market for years, as it exited the 193nm scanner business some time ago. Canon is quietly making a run in the nanoimprint arena. But at the same time, Canon faces a slowdown in the 248nm, i-line and LCD stepper segments, according to David Rubenstein, an analyst with Religare Capital Markets, an investment banking firm.
In contrast, Nikon has moved into the black in its semiconductor equipment business for its most recent fiscal year, which ended March 31, 2012, Rubenstein said in the report. But like Canon, Nikon faces a slowdown in its LCD stepper business, he said. Nikon did not respond to inquiries about the report.
“Canon lost market share in SLR cameras to rival Nikon in 2011, owing to supply constraints following the earthquake,’’ he said. “We estimate that Canon’s share fell to 44 percent from 46 percent in 2011, while Nikon raised its share to 32 percent from 30 percent.”
Nikon’s litho unit moves out of the red
It’s the story of two giants in Japan. Established in 1917, Nikon — known as Nippon Kogaku — started by supplying binoculars, microscopes, telescopes and other products. Today, Nikon is about 20 percent the size of Canon in market capitalization. In contrast to previous years, Nikon’s camera business has become the company’s earnings engine. But unlike Canon, Nikon’s lithography tools still represent a large swing factor in its earnings, according to the analyst.
Nikon’s equipment division, which sells lithography gear for fabs and LCD plants, is projected to be 27 percent of the company’s overall sales and 40 percent of its operating profit in fiscal year 2012, which ended in March 31, according to the report.
Nikon forecasts that it will ship 21 193nm immersion lithography scanners in fiscal year 2012, compared to 22 units in fiscal 2011. It’s the worst kept secret in the industry, but Nikon’s largest lithography customer is Intel Corp. “We estimate that (Nikon’s) IC litho business suffered losses three years in a row (from fiscal year 2009 to 2011), but is in the black this year. However, we project that profits will approximately halve next fiscal year as volumes decline,” Rubenstein said.
“Capex is the key driver for Nikon’s IC steppers. We believe that bookings will decline in 2012, continuing the downturn that began in the summer of 2011. We project that capital spending will fall 12 percent year-over-year in 2012,” he said. “Strategic capex for logic chips in smartphones/tablets and ultrabooks is still firm, but overall the softness in memory appears to be the overriding factor for total equipment spending.”
In total, 193nm immersion shipments are slated to fall to 80-90 units in 2012, from 120 units in 2011, according to the report.
Nikon faces other challenges, namely market share. At one time, the company was the dominant supplier of lithography gear. In 2011, Nikon had a 22 percent share in 193nm immersion tools, meaning that rival ASML Holding NV has a staggering 78 percent share.
“Nikon also faces the threat of extreme ultraviolet (EUV) lithography,” Rubinstein said. Nikon has developed two alpha EUV tools, including one within the company’s headquarters and one at Selete. But unlike rival ASML Holding NV – which has an aggressive EUV roadmap – Nikon shows no signs of developing pre-production or production EUV tools in the near term.
“ASML has taken the lead in EUV, investing over $1 billion in the past several years. Originally the adoption by chipmakers of EUV was projected to be 2013, but this appears to be delayed until 2015 or beyond, which is good news for Nikon. Nikon stands to lose market share in IC litho if EUV is adopted for production,” Rubinstein said.
Both Nikon and Canon face challenges in the LCD stepper market. Overall LCD stepper units were 109 units in 2011, but the market is expected to fall by 40 percent in 2012, the report said. Nikon claims to have 75 percent market share in LCD steppers, with Canon holding the rest.
“LCD panel makers have been in the red since 2010, symbolized by record losses at Panasonic, Sharp, Sony, and others. Thus, capex for large panels for LCD TVs is virtually non-existent. In small panels for mobile applications, capex was robust last year, but has been toned down somewhat in recent months,” he said.
Canon goes nano route
According to the analyst, Canon was established as Precision Optical Instruments in 1933. The company developed a 35mm camera in an apartment room in the Roppongi area of Tokyo in 1934. In 1935, this camera was named the Hansa Canon.Today, Canon is the largest technology company in Japan with a ¥4.7 trillion ($57 billion) market capitalization, according to the analyst.
On the other hand, Canon’s lithography equipment business is much smaller than Nikon’s and has little material impact on its total earnings. “Canon does have a decent market share in lower-priced KrF and i-line IC steppers, but typically struggles to stay out of the red in the division,” he said.
But now, Canon is quietly making a run in the nanoimprint lithography business. The company has an agreement with Molecular Imprints Inc. (MII) under which Canon sells MII’s tools in Japan and other markets. MII has sold a nanoimprint tool to Toshiba.
Others, reportedly including Intel and Samsung, have obtained MII’s tools. But to date, nanoimprint remains a niche in lithography. MII would like chip makers to adopt nanoimprint in the next-generation lithography (NGL) race, but the technology still suffers from throughput, defectivity and infrastructure issues.
The key products for Canon are SLR cameras, laser printers, and copiers. “We believe that camera sales and profits will rebound sharply this year as Canon gains back market share lost last year,” he said.
“A threat to Canon’s profitable SLR camera business is new competition from Nikon, Sony, Samsung, Panasonic, Olympus, etc. in the form of mirrorless and other cheap SLR cameras,” he said. “Mirrorless cameras have already gained 30 percent market share in Japan. This increase in mirrorless SLR camera share has been accompanied by a decrease in average selling prices of SLR cameras.”
SLR cameras use a mechanical mirror and prism to direct light to a viewfinder on the back of the camera. Recently, several rivals including Nikon, Sony, Panasonic, Olympus and Samsung have introduced mirrorless SLR cameras, which employ a mirrorless structure that downsizes the camera body, making it lighter.