EUR 850.00 For Business Accounts Only

Morningstar | ASM Benefits From Impressive Logic and Foundry Demand for Its ALD Tools; Raising FVE to EUR 50

ASM International is a semiconductor equipment vendor that specializes in atomic layer deposition, or ALD, tools, which are used by chipmakers to produce thin and conformal films on wafers with precise control of thickness and composition at an atomic level. Traditionally employed only when absolutely needed because of how costly the equipment is (and lengthy process times), ALD tools are now increasingly being used as a result of continued scaling in line with Moore’s law. Specifically, 3-D architectures in nonvolatile memory and advanced logic and foundry require layers that are highly uniform.Although ASM is the market share leader in ALD equipment, the increased use of atomic layer processing has caught the attention of larger competitors such as Lam Research, Tokyo Electron, and Applied Materials. Each of these firms has greater scale and resources than ASM, allowing advantages in research and development spending as well as pricing. However, ASM has focused its efforts on developing differentiated, leading-edge equipment that should benefit from advanced technologies adopted by chipmakers. While its leadership position will probably be pressured by aggressive competition, the growing opportunity for atomic layer process equipment in future nodes should allow for a rising tide that benefits all parties, albeit to varying degrees.ASM holds a meaningful stake in major back-end semiconductor equipment player ASM Pacific Technology. The front end of the chipmaking process is where integrated circuits are fabricated onto silicon wafers, while the back end is where the individual chips are assembled, packaged, and tested in end-use form. In 2017, ASM reduced its stake in ASMPT from 40% to 25% to shift more resources to its front-end business. Despite major competition, ASMPT is the top player in the back-end equipment industry and has been able to maintain strong profitability even amid cyclical downturns, abetted by its low-cost operations in Asia, which supports our favorable view on ASM's remaining stake.