A high-stakes contest between US electronic-chip-machine makers
One of the hottest battles in American business boils down to a high-stakes hair splitting contest.Skip to next paragraph
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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.