Tokyo Electron takes aim at NAND etching leader Lam Research – Yole Group
Japanese chipmaking equipment maker Tokyo Electron is going after U.S.-based rival Lam Research with a groundbreaking new technology in 3D NAND flash memory channel etching that could ultimately net the company billions of dollars.
Lam, which dominates the field with a 100% market share, did not appear threatened when the new technology was announced.
“I think given where we are and where we’ve come from, we’re very confident about maintaining leadership and market share in this space,” said Lam CEO Tim Archer during a July earnings call. He was fielding questions about how a technological breakthrough announced by Tokyo Electron in June would affect the company.
The new technology is for 3D NAND flash memory, which can store data for long periods of time. Tokyo Electron developed a new method of etching channel holes, a step in the production process which involves inserting vertical holes quickly and deeply in the memory cells.
Memory capacity for 3D NAND can be increased by stacking layers of memory cells vertically. Cutting-edge products currently being mass-produced have over 200 layers, but demand for increased capacity is strong. As the number of layers increases, higher performance equipment is necessary.
Tokyo Electron says its new technology can etch holes to a depth equivalent to more than 400 layers and do so 2.5 times faster than conventional technology. The method can also significantly reduce the impact of the process on global warming, according to the company.
“We anticipate adoption of our 400-layer-level technology in two to three years,” said Tokyo Electron President and CEO Toshiki Kawai.
Lam currently has a 100% share of the market for NAND channel etching equipment. It is a high value-added process that requires a lot of equipment, and in terms of market size, accounts for the largest proportion of all etching equipment.
Tokyo Electron has projected that the NAND channel process market will expand from $500 million in 2023 to $2 billion in 2027. If Lam is unable to produce a product that can compete with Tokyo Electron’s breakthrough, the companies’ current market shares could be reversed.
This would be a major boost for Tokyo Electron’s bottom line. In the fiscal year ended March 2023, overall sales of new etching equipment were just under 580 billion yen ($3.9 billion), about a fourth of consolidated total sales.
“The new technology will significantly improve efficiency for customers. There is a good chance that Tokyo Electron will capture all of the market for NAND channel etching equipment,” said Kazuyoshi Saito of IwaiCosmo Securities.
If the market expands as the company estimates, that would equate to a sales increase on a scale of around 300 billion yen.
Tetsuya Wadaki at Mitsubishi UFJ Morgan Stanley Securities is similarly bullish. Last year, the etch equipment market surpassed $20 billion, and Lam controlled roughly half the market while Tokyo Electron was at second place at about 25%, according to Wadaki.
With the new technology in place, “Tokyo Electron is poised to overtake Lam’s position in the share of all etch systems within the next several years,” said Wadaki.
Tokyo Electron has long been committed to investing ample funds into research and development, not being swayed by cyclical market pressures. Investment spending over five years through March 31 has climbed by 77% over the previous five-year period.
That bests the 54% rise at Applied Materials, the largest competitor in the U.S., and the 55% gain at Lam. Tokyo Electron plans to spend 200 billion yen on development this fiscal year, a record despite a projected decline in profit.
The investments have paid off. Tokyo Electron’s total earnings before interest, taxes, depreciation and amortization plus development costs over the most recent five-year period is 7.3 times the development costs from the five years prior. This beat the same figure for Applied Materials, which came to 5.5, and Lam Research, which came to 6.2.
Tokyo Electron has also focused on efficiency. It improved its development process by listening to feedback from engineers at client factories. It used artificial intelligence to speed up the development of new manufacturing materials.
Tokyo Electron stock is now trading around 8% below its record high of 23,056 yen, logged in January 2022. Interest rate hikes and economic uncertainties around the world have been weighing on the price, but the company’s recent technological advancements could provide a much-anticipated lift.
NAND makers are expected to make their next major investments in NAND technology around 2025. Despite uncertainties over smartphone and computer demand, mass-producing equipment with new technologies could significantly boost Tokyo Electron’s earnings and market share.
Source: https://asia.nikkei.com/
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