A high-stakes contest between US electronic-chip-machine makers
Boston — One of the hottest battles in American business boils down to a high-stakes hair splitting contest.
The battle is over the rapidly growing market for machines that spit out integrated circuits, the complex electronic chips that provide intelligence for a host of products ranging from automotive ignition systems to video games.
The winner in this battle will be the company that can give chipmakers a machine offering the best combination of speed and accuracy in printing complex circuits on fingernail-size silicon chips. Individual lines on the circuits can be as small as 1.5 microns in width, or 25 times thinner than a human hair.
The stakes are high both for individual companies and for the nation. The world market for chip printers will grow from $368 million last year to $959 million in 1985, according to Nick Galluccio, an analyst at Lehman Brothers Kuhn Loeb Inc.
''Those estimates are conservative,'' comments William Witter, president of William D. Witter Inc., and one of the founders of the National Semiconductor Corporation.
The struggle's significance is larger than the size of the chip-printing market. Chip-printing equipment ''is a critical part of the semiconductor industry,'' says John Geraghty, an analyst with Dean Witter Reynolds Inc. Semiconductor sales were an estimated $16.7 billion last year and are expected to grow to $53 billion by 1988.
The US needs state-of-the-art chip producing technology if it hopes to counter a strong Japanese thrust in the semiconductor industry. Japan already has grabbed 40 percent of the world market for memory devices. And in the newest chips, the so-called 64k rams, Japan has a commanding 60 percent market share. A 64k ram is a memory device that can store more than 64,000 bits of data.
By contrast, chipmaking machinery is an area where the US is still ahead. ''The US is in the lead although there are Japanese companies working in the area,'' Mr. Geraghty says. The Japanese market entrants include Canon, Nikon, and Hitachi.
For the US companies involved in the struggle, ''the whole ball game will be sorted out in the next six months to a year,'' says Noel C. MacDonald, marketing director for semiconductor operations at Perkin-Elmer Corporation. Perkin revolutionized chip production in the 1970s with a relatively rapid printing machine.
But now, the Norwalk, Conn., company is fighting off a strong challenge from GCA Corporation in Bedford, Mass. GCA's printing method is slower than Perkin's but lets chipmakers print finer lines. With chipmakers struggling to put more circuits on each piece of silicon, each line on the chip needs to be thinner. As a result, GCA's position has strengthened.
''We don't see Perkin as a competitor at all,'' snaps GCA vice-president Warren R. Davidson.
Most analysts agree that GCA has an edge in the competition but consider the battle far from over.''It looks to me like the 500 (Perkin's newest machine) will provide a significant amount of competition'' for GCA, says Michael A. Gumport, an analyst with Cyrus J. Lawrence Inc., a New York securities firm.
Whoever comes out ahead, US manufacturers say they have a good chance to keep most of the domestic chip-printing business for themselves, despite increasing Japanese interest in chip printers. A key reason is the high level of service chip companies seek from their capital goods suppliers.
''They would have to come into this country and put in a service network which they do not have. They would have to bear additional costs and take severe margin pressure,'' argues GCA corporate development vice-president Richard D. Stewart.
'' A lot of semiconductor companies would be less than enthusiastic about having people from Nikon running around their shop,'' Mr. Witter adds.
US firms are trying to hold on to customers in Japan, too. Late in 1981, for example, GCA formed a joint venture with Sumitomo Corporation of Tokyo to assemble and manufacture GCA's chipmaking equipment.
In the domestic market, the battle in the near term will be fought out between Perkin-Elmer and GCA. Nipping at their heels will be TRE Corporation, General Signal Corporation, and Eaton Corporation.
Most of the recent market entrants are offering technology similar to GCA's which is called ''step and repeat'' printing.
In a GCA ''Wafer Stepper,'' a light is passed through a master pattern onto a silicon wafer, the disc from which individual chips are cut. The mechanism exposes only a small area of the wafer at one time and is capable of producing a line as small as 1.2 microns. But the process is slow, exposing only 40-to-50 wafers an hour as opposed to the 100 wafers per hour the latest Perkin Micralign can spit out.
In the Perkin device, copies of the master circuit pattern are made for each of the up to 14 layers of a chip. The light is shot through the pattern as it sweeps over the wafer. An offset to the system's speed is the difficulty it has producing lines smaller than 1.5 microns.
Over the long term, the trend in the industry is toward greater curcuit density on each chip and thus toward finer lines. Already Nippon Electric has announced that in 1983 it will offer a device storing more than 256,000 bits of memory on a chip. The 256k chip is expected to require lines 1.5 microns or thinner, making life difficult for Perkin.
And manufacturers note that on some of the more difficult layers of 64k rams, required circuit sizes are easier to reach with GCA equipment. ''GCA steppers played a key role'' in Motorola Inc.'s production of 64k rams, a Motorola spokesman says.
Studies commissioned by Lehman Brothers found ''the cost per hour in critical layers with GCA machines is substantially lower'' than with competing technology , says Lehman analyst Nick Galluccio.
These lower costs are one reason Lehman predicts stepper sales will grow at a 39 percent annual rate through 1985 vs. a 19 percent growth for the Perkin technology.
Perkin contends that analysts have failed to factor in the improved resolution characteristics of its latest model, the Micralign 500 which offers a 1.5 micron line. Until four months ago, ''we couldn't demonstrate it. I assume most projections are based on that,'' Perkin marketing manager MacDonald says. ''Customer response has only started to gell in the last four to six weeks.''
After the current recession in the semiconductor industry bottoms out, both GCA and Perkin expect orders to begin flowing. And while one technology may gain market share more rapidly than the other, manufacturers are still likely to need both. ''Companies are going to find both machines useful, but the GCA machine will be more useful in more sophisticated products,'' Geraghty says.
Two semiconductor industry suppliers at a glance GCA Corporation Perkin-Elmer Corporation 1981 sales: $218.5 million 1981 sales: $1.1 billion 1981 net income: $21.9 million 1981 net income: $78.1 million Employees: 2,500 Employees: 15,400 Headquarters: Bedford, Mass. Headquarters: Norwalk, Conn.