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Lam buys rival Novellus

Posted: 19 Dec 2011 ?? ?Print Version ?Bookmark and Share

Keywords:IC equipment maker? etch systems? deposition technologies?

Lam Research Corp. has announced it will acquire Novellus Systems Corp., its rival semiconductor capital equipment maker, in an all-stock deal valued at about $3.3 billion.

Rumors about a possible Lam-Novellus deal have been circulating for years. The companies' strengths within the capital equipment market are complementary. Lam is especially strong in etch systems and cleaning tools and Novellus' expertise lies in surface preparation and deposition technologies. According to Risto Puhakka, president of VLSI Research Inc., the two companies have virtually no products that compete head-to-head.

"It's a good fit," Puhakka said. "It's two really good companies getting together. It was just time to happen."

"It's hard to believe that after 18 years the big bang has finally happened," said Richard Hill, chairman and CEO of Novellus. "This merger is not a synergistic transaction but rather a seismic transaction. We're combining the Park Place and Boardwalk of the semiconductor capital equipment industry."

According to Puhakka, the timing of the deal is consistent with consolidation trends that have emerged over the past couple of years. "The playing field is narrowing down to two key suppliers for each [equipment] segment," Puhakka said. "This makes sense because Lam becomes a lot larger and gets huge economies of scale."

Lam, the No. 4 vendor in semiconductor equipment by sales in 2010, is likely to solidify its hold on that spot but unlikely to move higher in the vendor rankings. The combined revenue of Lam and Novellus in 2010 was about $3.55 billion. The top three vendorsApplied Materials Inc., ASML Holding NV and Tokyo Electron Corp.had revenues of $5.95 billion, $5.04 billion and $4.12 billion, respectively, in 2010, according to VLSI.

Puhakka said the deal might boost Lam's chances of doing more business with No. 1 semiconductor supplier Intel Corp., a longtime Novellus customer. Despite being the No. 1 vendor in etch systems, Lam has famously been unable to crack the Intel account with its etchers, he said.

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