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Analysis: Photomask faces market slowdown

Posted: 14 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:photomask market? IC industry? tool vendor?

For years, there has been an impression that the photomask business model is broken.

This is especially apparent in today's gloomy IC environment. Even during good times, the business climate in photomasks is shaky at best and no one can argue with the ominous trends.

The death of the photomask industry is highly exaggerated, but annually, the mask business is staggering. Tool orders are having some halts right now. Photomask vendors continue to scale, but capital spending is soaring to develop a next-generation mask line. Equipment prices are out of control, but overall tool throughput is slowing.

Mask complexity is also rising, but photomask costs remain somewhat flat. Or, are they? Some believe an upgraded 65nm mask set could run about $1 million. An advanced 45nm mask set costs $2 to $2.2 million in the initial stages. Some estimate a 32nm mask set could start at $4 million, putting this technology out of reach for most chipmakers.

At 28nm, a mask set could soar from $7 to $8 million, said Lip-Bu Tan, founder and chairman, Walden International, at an event.

Annually, during the SPIE Photomask Technology conference, the photomask community usually discuss about everything, except mask prices.

It's a sensitive topic and vendors refuse to talk about it for several reasons. Merchant mask makers face dwindling margins on their trailing-edge products. The real problem is that mask makers want to charge more for their leading-edge products, but customers refuse to pay it, leaving a chip on their shoulders.

Slowly moving
Adding salt to their wounds is the current slowdown in the marketplace. "Business is pretty slow," said Franklin Kalk, chief technology officer, Toppan Photomasks Inc., one of the world's largest merchant mask makers. "It's a tough environment right now."

Toppan Photomasks is a subsidiary of Toppan Printing Co. Ltd, a diversified global company with revenue in excess of $13 billion in fiscal 2007.

The mask market was expected to grow in the low-single digits in 2008, possibly around 4 percent. Now, the current expectation is that the photomask industry could see flat-to-down growth in 2008. "We've heard some early numbers for 2009, which don't look good," Kalk told EE Times.

On the business side, there are other ominous trends for the mask industry, which is a $2.83 billion business. "Global IC tape-outs, the key indicator for the photomask industry, are dropping year-over-year," he said. "Activity is slowing at the high-end," he added

Competition remains fierce. Merchant vendors not only are competing for business, but they are also knocking heads against the captive suppliers. For example, Taiwan Semiconductor Manufacturing Co. Ltd has its own photomask firm and claims that it offers advantages over the merchant players in terms of cost and quality. TSMC has also recently expanded its photomask offerings.

At the same time, Toppan and its main rival, Dai Nippon Printing Co. Ltd (DNP), are racing each other to roll out the most advanced masks. "It's a firefight and it's very competitive," it said.

According to a survey from Sematech, DNP has regained the lead in terms of overall market share in the photomask industry, topping Toppan. DNP leads the market with 23 percent share, followed by Toppan at 19 percent and Photronics Inc. at 11 percent, according to the survey.

For some time, Toppan was the world's largest merchant mask maker. In 2005, Toppan completed the roughly $650 million acquisition of DuPont Photomasks Inc., thereby propelling it into the lead position.

Kalk disputed the new market share figures, saying Toppan did not break out its mask sales. Another Japanese conglomerate, DNP, also did not disclose its photomask revenues. According to sources, the respective photomask units of Toppan and DNP are struggling amid the downturn.

Photronics, the last U.S. merchant mask maker, is a publicly held firm that has been struggling for some time. Rumors were rampant that it was up for sale, but some believed that Photronics will survive in the end. Others aren't so sure.

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