Lasertec develops, manufactures, sells, and provides services for semiconductor-related equipment (photomask inspection systems, mask blank inspection systems, wafer inspection systems), large photomask inspection systems for flat panel displays (FPD) manufacturing, confocal scanning laser microscopes, and inspection and measurement systems for lithium-ion batteries. Using the latest applied optical technology, it develops and markets original inspection and measurement systems. The company is a manufacturer, but it has adopted a fab-lite strategy that involves investing about 10% of its sales into R&D and concentrating its internal resources into development. About 70% of the company’s employees are engineers, allowing it to conduct prototyping internally. However, actual product manufacturing is outsourced to several partner companies, with the company choosing the most suitable partner company for each of its products.
Lasertec’s primary customers are major semiconductor manufacturers that are at the top of their respective fields, which involve semiconductor foundries, logic devices, and memory devices. It aims to develop cutting-edge products that are one step ahead of its competitors by sharing valuable technology and product development information with such global industry leaders; the company also collaborates with its customers whenever necessary (e.g., manufactures customized products or makes products available for certain customers ahead of official launch). Through building such strong relationships with customers, Lasertec is able to maintain its superiority in its line of business.
Lasertec has a global niche strategy, under which it seeks to capture 100% of niche markets. The company targets markets where it can distinguish itself from rivals and where customers are seeking high value-added products. These markets should be small enough to discourage large companies, yet difficult for small- and medium-sized companies to enter without sufficient experience or technological expertise. In terms of semiconductor manufacturing equipment, the company has secured particularly high market shares in inspection and measurement systems and has obtained 100% of the global share in semiconductor mask blank inspection systems, EUV mask blank inspection and review systems, and EUV mask backside inspection and cleaning systems. The mainstay semiconductor mask inspection systems account for more than 40% of the company sales, with an 80% share of the global wafer fab market.
The company intends to pursue business growth by developing products that utilize its applied optical technology. With the development of confocal scanning laser microscopes, which use lasers to increase resolution, Lasertec has elevated its technological capability to the level at which it is able to apply the confocal optics technology, which enables the provision of omnifocal 3D images, to build its business. The company then developed deep ultraviolet (DUV) and extreme ultraviolet (EUV) optics technologies, which have applications in semiconductor lithography, as well as optical interference (aka interferometric) technology for accurately measuring optical phases with applications in ultrahigh-resolution lithography. These three applied optical technologies are what differentiate the company from competition. Lasertec’s stock of these technologies provides a core support that allows the company to continue developing products by combining existing technologies with peripheral technologies, such as electronics, and applications.
In FY06/21, the company reported consolidated sales of JPY70.2bn (+65.0% YoY), operating profit of JPY26.1bn (+73.1% YoY), recurring profit of JPY26.4bn (+74.9% YoY), and net income of JPY19.3bn (+77.9% YoY). Sales were up 69.9% YoY to JPY58.4bn for semiconductor-related equipment, down 69.1% YoY to JPY3.6bn for other equipment, and up 35.7% YoY to JPY8.2bn for services. Orders for the company’s mainstay semiconductor-related equipment overall were up 47.6% YoY to JPY103.6bn, with the order backlog expanding 45.8% YoY to JPY135.8bn.
For FY06/22, the company is forecasting full-year consolidated sales of JPY83.0bn (+18.2% YoY), operating profit of JPY27.0bn (+3.6% YoY), recurring profit of JPY27.0bn (+2.1% YoY), and net income attributable to owners of the parent of JPY21.0bn (+9.1% YoY). The company believes that the global economy will remain unstable in FY06/22 due to the reemergence of COVID-19 caused by the spread of mutated strains of the virus and the continued escalation of friction between the US and China. However, it expects to see continued strong capex in the semiconductor industry, its main customer base, on the back of strong demand for semiconductors, and thus it continues to forecast higher sales and profits.
The company has formulated a medium-term business plan comprising three phases (Phase 0–2), to which it added a new, fourth phase (Phase 3) spanning the three-year period between FY06/19 and FY06/21 in August 2016. It views Phase 3 as a period for setting itself on a growth trajectory through new businesses. In 2H FY06/19, the company established a product lineup that was suitable for EUV exposure, which is currently the most advanced semiconductor manufacturing process, and has been building up orders from major customers. FY06/21 marked the final year of Phase 3.
The company’s strengths are its high shares in the fields of semiconductor manufacturing processes and cutting-edge technologies, its ability to conduct rapid development, and its balanced pursuit of technology and profitability. Its weaknesses are its susceptibility to the silicon cycle, its relatively small scale, and the need it faces to convert tacit knowledge into explicit knowledge.
|Gross profit margin||53.1%||47.0%||48.2%||55.8%||58.1%||54.8%||56.5%||55.3%||54.0%||52.6%|
|Operating profit margin||25.0%||18.9%||22.8%||31.1%||29.0%||28.4%||26.8%||27.6%||35.4%||37.1%||32.5%|
|Recurring profit margin||24.1%||22.3%||23.2%||30.5%||29.9%||28.7%||26.9%||27.2%||35.5%||37.6%||32.5%|
|Shares issued (year-end; '000)||11,786||23,572||23,572||23,572||23,572||47,143||47,143||47,143||94,286||94,286||-|
|EPS (fully diluted)||39.8||17.8||21.8||32.7||35.8||39.2||48.4||65.7||119.9||213.3||-|
|Dividend per share||13.3||12.0||6.8||11.5||12.8||14.0||17.0||23.5||58.0||75.0||82.0|
|Book value per share||327.0||175.1||193.3||221.7||241.6||271.2||299.8||344.7||434.2||611.8||-|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||4,674||4,028||6,190||6,614||8,031||9,806||10,176||13,186||24,723||27,918|
|Total current assets||13,124||12,470||14,304||16,299||18,800||25,439||29,388||39,841||70,003||101,726|
|Tangible fixed assets||6,672||6,569||6,512||6,440||6,524||6,677||6,602||8,055||7,914||9,919|
|Investments and other assets||978||872||871||850||498||730||1,597||1,697||3,034||4,011|
|Total current liabilities||4,502||3,342||3,997||3,422||3,839||8,329||10,779||18,433||42,059||62,984|
|Total fixed liabilities||1,494||749||227||188||222||211||289||515||560||553|
|Total net assets||14,778||15,820||17,463||20,011||21,808||24,479||27,054||31,108||39,176||55,188|
|Total liabilities and net assets||20,774||19,911||21,688||23,621||25,870||33,019||38,122||50,056||81,794||118,725|
|Total interest-bearing debt||1,885||1,179||0||0||0||0||0||0||0||0|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||2,575||603||3,910||1,032||3,083||3,549||2,917||5,800||16,487||10,489|
|Cash flows from investing activities||-53||-138||-84||-83||-369||-618||-684||-995||-2,039||-3,703|
|Cash flows from financing activities||-2,168||-1,303||-1,720||-611||-1,038||-1,151||-1,805||-1,715||-2,800||-4,243|
On November 29, 2021, Lasertec Corporation announced that it had entered into a commitment line agreement.
Lasertec announced that at a Board of Directors meeting held on the same day, the company reached a resolution to enter into a commitment line agreement.
With a view to strengthening its financial management by securing a flexible and stable means of financing to meet the increased capital requirement needed for future business development, the company entered into a syndication-type commitment line agreement in the amount of JPY40bn. The effective date is December 27, 2021, and the agreement period is three years, with no collateral and no guarantee. The arranger is MUFG Bank Ltd., and participating financial institutions are MUFG Bank and Sumitomo Mitsui Banking Corporation.
Lasertec Corporation announced earnings results for Q1 FY06/22; see the results section for details.
The company unveiled two new FPD photomask inspection systems, the CLIOS G834Advance and CLIOS G800LITE.
The new additions to the company's lineup of FPD photomask inspection systems are the CLIOS G834Advance, designed for inspection of high-end photomasks, and the CLIOS G800LITE, designed for inspection mid-range photomasks produced in large volumes.
The new inspection systems introduced by the company are aimed at facilitating the flat panel display (FPD) industry's growing move towards higher resolution panels for mobile device applications that require greater energy efficiency and better image quality (higher contrast), but also mean finer circuit patterns and smaller contact holes. To meet customer needs in this area, the company has broadened its FPD photomask inspection equipment lineup to include models for handling high-end as well as mid-range photomasks, meeting customer demands for higher maximum detection rates while at the same time bringing down costs and speeding up the inspection process. (See company press release for further details.)
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||% of Est.||FY Est.|
|Gross profit margin||56.4%||58.5%||57.0%||54.0%||52.0%||51.7%||50.6%||52.6%||58.6%|
|Operating profit margin||25.8%||40.0%||34.6%||35.4%||34.4%||37.4%||35.8%||37.1%||22.2%||32.5%|
|Recurring profit margin||24.8%||39.8%||34.8%||35.5%||33.4%||36.7%||36.5%||37.6%||23.5%||32.5%|
|Gross profit margin||56.4%||59.3%||51.6%||49.5%||52.0%||51.5%||48.8%||58.3%||58.6%|
|Operating profit margin||25.8%||45.5%||15.5%||36.5%||34.4%||39.5%||33.1%||40.9%||22.2%|
|Recurring profit margin||24.8%||45.6%||17.1%||36.5%||33.4%||39.0%||36.2%||40.9%||23.5%|
Operating environment: The semiconductor industry continued to see strong demand for advanced chips used 5G smartphones and other communications equipment and, thanks to the growing prevalence of remote work arrangements and online conferencing, also saw strong demand for advanced processors for PCs and servers such as those used in data centers. Against this backdrop, logic and memory chip manufacturers continued making aggressive investments in semiconductor manufacturing and processing equipment that use extreme ultraviolet lithography (EUV) technology.
Sales were down 30.8% YoY. According to the company, the sales decline was attributed to the timing of customer inspection of delivered products. GP
During the three-month period of Q1 FY06/22 (July–September 2021), the company booked a record-setting total of some JPY108.3bn in orders, an increase of 344.4% YoY. This put Q1 orders at 67.7% of the full-year target for orders, substantially exceeding the company's expectations for Q1. The company said Q1 orders included some of the orders it had expected to receive in Q2 and Q3. Shared Research thinks these orders came in earlier than expected as customers placed orders ahead of schedule and hurried to establish production infrastructure out of concern for parts and materials shortages. The company's mainstay lineup of semiconductor manufacturing-related equipment led the way with orders rising 361.6% YoY to JPY105.6bn.
By product, demand for EUV-related equipment from Asia was particularly strong, with sales of mask inspection systems such as ACTIS and MATRICS X8ULTRA up. Sales of other equipment and services grew largely in line with plan, with the former coming in at JPY223mn (+20.9% YoY) and the latter at JPY2.5bn (+88.6% YoY). Aided by the jump in orders for semiconductor manufacturing-related equipment, the company's overall order backlog continued to grow, rising 125.2% YoY to JPY235.0bn as of the end of September 2021.
|R&D to sales ratio||18.0%||11.4%||12.8%||12.5%||12.7%||7.2%||9.0%||7.7%||8.1%||6.3%||7.1%||8.1%|
|R&D to sales ratio||18.0%||7.6%||18.1%||11.4%||12.7%||5.2%||15.1%||5.9%||8.1%||5.0%||8.3%||11.2%|
The company's R&D spending, included under SG&A expenses, consists largely of payments to outside contractors and relatively little in the way of spending on internal R&D personnel, and that is why R&D spending as a whole tends to vary greatly from quarter to quarter. Looking at R&D spending from the perspective of return on investment, the company takes the risk of putting money into the development of equipment aimed at new markets and then sets prices for these new models at levels where it is able to recoup its investment in R&D from the marginal profit earned on the first production run. In the case of new types of equipment and other equipment with long development times, the company ends up booking much of the cost of R&D spending well in advance of the time it will be able to realize any revenues from related sales; as a result, the profitability in quarters when new equipment models are hitting the market appear to be higher than they actually are. In Q1 FY06/22, R&D expenses were JPY2.1bn (+91.6% YoY), largely in line with the company expectations at 28.6% of the full-year budget of JPY7.5bn.
Results for the three-month period of Q1 FY06/22.
In Q1 FY06/22, despite steady growth in orders and production, sales fell YoY. The company said this was largely attributed to the timing of customer inspection of delivered products, and made no change to its full-year sales target. The company said that orders with relatively favorable contract terms (in terms of price negotiations and those including the provision of EUV-related and other optional equipment), especially those for EUV-related mask inspection systems accounted for the majority of sales mix. In the semiconductor-related equipment category, the company made capital investments in Q1 FY06/22, as it did in the previous fiscal year, with the aim of maintaining and strengthening its competitiveness in EUV-related equipment, which resulted in an approximately JPY4.0bn increase in intangible fixed assets.
In Q1 FY06/22, orders and sales were largely within expectations, with laser microscopes making up the majority of sales mix. The company expects to book sales of FPD photomask inspection equipment in Q2 or later. It said that Q1 orders included those for CLIOS series of FPD photomask inspection equipment launched on October 29, 2021.
Thanks to an increase in the cumulative total number of the company's equipment in operation, the services category grew steadily centered on services for MATRICS X8ULTRA and other equipment with high operating rates.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Act.||FY Act.||FY Est.|
|Cost of sales||8,279||11,302||19,581||15,564||17,732||33,296|
|Gross profit margin||58.5%||50.0%||54.0%||51.7%||53.4%||52.6%|
|Operating profit margin||40.0%||31.3%||35.4%||37.4%||36.9%||37.1%||32.5%|
|Recurring profit margin||39.8%||31.7%||35.5%||36.7%||38.4%||37.6%||32.5%|
The company believes that the global economy will remain unstable in FY06/22 due to the reemergence of COVID-19 caused by the spread of mutated strains of the virus and the continued escalation of friction between the US and China. However, it expects to see continued strong capex in the semiconductor industry, its main customer base, on the back of strong demand for semiconductors, and thus it continues to forecast higher sales and profits.
Having made no changes to its full-year guidance at the time of its Q1 results announcement (on October 28, 2021), the company is forecasting full-year consolidated sales of JPY83.0bn (+18.2% YoY), operating profit of JPY27.0bn (+3.6% YoY), recurring profit of JPY27.0bn (+2.1% YoY), and net income of JPY21.0bn (+9.1% YoY).
The company forecasts the order backlog will increase 41.7% YoY to JPY160bn. This includes JPY145bn (+40.0% YoY) for semiconductor-related equipment comprised of 85% mask inspection, 10% blank inspection, and 5% wafer inspection. Lasertec anticipates strong MATRICS series orders, driven by X8ULTRA and ACTIS. Orders for other equipment are forecasted to increase 306.7% YoY to JPY3.5bn (60% FPD and 40% microscopes and others) while services orders are projected to increase 35.7% YoY to JPY11.5bn.
Sales are forecast to increase 18.2% YoY to JPY83.0bn, including a 17.3% YoY increase in semiconductor-related equipment (sales mix comprising 80% mask inspection systems, over 10% blank inspection systems, and nearly 10% wafer inspection systems). The company looks for full-scale sales of EUV-related mask inspection equipment ACTIS from FY06/22. It expects recovery in FPD-related demand in the other equipment category, and projects sales of JPY3.0bn (-17.5% YoY; sales mix comprising 60% FPD photomask inspection equipment and 40% laser microscopes and others). Services sales are forecast to increase 40.1% YoY to JPY11.5bn.
On the profit front, the company expects the gross profit margin (undisclosed) to temporarily dip owing to high costs of initial ACTIS lots in semiconductor-related equipment. Operating profit is forecast to increase 3.6% YoY while the operating profit margin is expected to decline 5.1pp YoY to 32.5% as the company plans to maintain the high level of upfront expenditures (spent some JPY4.0bn in Q1 FY06/22) seen in the previous year to strengthen its competitiveness in the EUV-related business. In addition, labor costs and personnel expenses are expected to rise in Japan and overseas as the company expands its workforce to strengthen the services business.
The company expects R&D expenses of JPY7.5bn, capital expenditures of JPY4.5bn, and depreciation of JPY3.2bn. In Q1 FY06/22, R&D expenses came to JPY2.1bn (28.6% versus plan), capital expenditures JPY4.6bn (102.2%), and depreciation JPY848mn (26.5%). R&D expenses and depreciation were largely in line with plan, but capital expenditures in Q1 were well above the company's initial expectations, exceeding the full-year projection. The company said capital expenditures may increase even further in full-year FY06/22.
|Equipment market forecast by region||CY2017||CY2018||CY2019||CY2020||CY2021||2022|
|Rest of the World||3.2||-9.9%||4.0||25.9%||2.5||-37.5%||2.5||-1.6%|
|% of total sales|
|Rest of the World||5.7%||6.3%||4.2%||3.5%||-||-|
|(Taiwan, Korea, and China)||66.6%||63.5%||67.8%||73.0%||-||-|
In 2009, Lasertec announced a medium-term business plan that splits the nine-year period between FY06/10 and FY06/18 into three separate three-year phases (Phase 0–2). The main point of this plan was to gradually develop pillars of profitability for new businesses while working to strengthen core businesses. In August 2016, the company added a Phase 3 (FY06/19–FY06/21) to this plan in response to issues it had encountered prior to FY06/16, with the new goal of enhancing its global services. The Phase 3 of the plan takes into consideration the fact that 80% of its sales were already to overseas customers and its anticipated growth and an increased cumulative number of units sold. Accordingly, the company has entered the fourth and final phase of the business plan that divides the twelve-year period up to and through FY06/21 into four three-year phases (Phase 0–3).
|Phase 0||FY06/10–FY06/12||Get ready for new chapter||Focus on select business areas where Lasertec excels|
|Reinforce financial strength|
|Phase 1||FY06/13–FY06/15||Take on new challenges||Strengthen core business|
|Create a pillar of new business|
|Phase 2||FY06/16–FY06/18||Establish solid foundation of new businesses||Core businesses||- Enhance competitiveness|
|- Increase market share|
|New businesses||- Establish foundation for EUV/wafer inspection business growth|
|- Find new opportunities leveraging microscope business|
|Phase 3||FY06/19–FY06/21||On growth trajectory with new businesses||Core businesses||- Further enhance competitiveness|
|- Achieve overwhelming market share|
|New businesses||- Achieve large sales growth|
|- Find new needs and applications|
|Services||- Enhance global service (added in Aug. 2018)|
Lasertec’s strategy is to gain top shares in multiple niches through the following measures:
1) providing optimal solutions in response to customer needs in markets and specific areas that are difficult for large companies to enter (and targeting areas of large markets where it has advantages);
2) capturing significant market share in those markets;
3) expanding to adjacent markets and areas;
4) capturing significant market share in those adjacent markets and areas as well.
In other words, Lasertec aims to focus on markets and areas in which it can leverage its strengths, differentiate itself from the competition, and its value is recognized. Under the global niche strategy, Lasertec has continuously developed never-before-seen products using its original technology. The company’s existing products, such as mask inspection systems, mask blank inspection systems, and FPD mask inspection systems were a result of efforts to create products that are one step ahead of its competitors. Lasertec has established its current position through the development of products like these.
There are two points of view behind these business strategies.
First, the company understands that if it does not focus on markets with stringent technical requirements related to inspection and measurement, in which it can leverage its strengths and differentiate itself, it will end up facing price competition.
Second, it recognizes that if it does not focus on markets that value accurate inspection and measurement, it will be unable to capture added value or profit.
Furthermore, in terms of business development, the company targets markets with a high potential for future investment. For this reason, it aims to be the company that customers will approach first. The company thinks that it is gradually attaining this position.
In Phase 2, completed in FY06/18, the company kept existing products (existing businesses) as core businesses to continue technological development, thereby maintaining and expanding its market share, while capturing new markets with new products (new businesses). Shared Research believes the company’s progress was generally favorable in FY06/18.
As a result of these initiatives, during Phase 2 the company achieved record orders, sales, and profit.
In existing businesses, it succeeded in maintaining and expanding market share of its key product groups through ongoing technological development.
In new wafer-related business, although there is some variation in market strength between the company’s various products, its SiC/GaN wafer inspection systems, which are expected to experience growth, have achieved a top share globally and became the industry standard in Japan.
In new EUVL-related business, Lasertec received orders for both mask and mask blank inspection systems (with sales to be booked during Phase 3).
In new territories, although the company has not disclosed details, it won semiconductor-related orders of about JPY16.0bn in FY06/18.
Shared Research believes that progress in the development of technology and products aimed at supporting rapid new-product growth (wafer inspection and EUVL-related products) in Phase 3 was especially important.
In the extreme ultraviolet lithography (EUVL)-related business, Lasertec received orders for two mask blank inspection systems (about JPY4.0bn each). In Q3 FY06/18 (final year of Phase 2), it received orders for mask inspection systems, and in Q1 FY06/18 it received orders totaling about JPY16.0bn in new territories (details are not disclosed except for “semiconductor related”). These large orders will result in sales booked during Phase 3 and may lead to additional orders in the future.
Further, in EUVL, the company is jointly developing a mask blank inspection system with EIDEC, and as of August 2015, fundamental development was complete. Although there are a limited number of mask blank manufacturers with the ability to use EUVL, prices will rise in line with performance, creating a significant effect for the company’s results. As of FY06/19, Lasertec has received orders for four units at about JPY4.0bn per system and expects to book sales in FY06/20 or later.
In Phase 3, while maintaining the core of the medium-term plan, Lasertec intends to build on the successes of Phase 2. In addition, it will continue responding to issues that appeared during Phase 2 (such as the need to enhance overseas service), while actively conducting research and development that will carry it forward beyond Phase 3. To put its new businesses on a growth trajectory, the company plans to conduct the following initiatives to substantially grow sales during Phase 3: 1) core businesses (strengthening sales systems): further strengthen competitiveness to capture overwhelming market share; 2) new businesses (reaping benefits): develop new applications and products that will lead to higher sales; and 3) services (response to issues identified in Phase 2): conduct initiatives to enhance global service.
Lasertec has not disclosed specific earnings targets, but its thinking for the various areas appears to be as follows. In existing businesses, it expects demand for semiconductor mask inspection systems (hereinafter, mask inspection systems) to continue as the earnings driver. In new wafer-related business, it expects demand to grow, especially for SiC/GaN wafer inspection systems. In new EUVL-related business, it expects to book sales in FY06/20 for mask blank inspection systems (hereinafter, blank inspection systems; going for about JPY4.0bn per system x four orders) and to begin shipping mask inspection systems (replacing existing products at a price about 20% higher) from FY06/19. In new territories, the company will book sales on an order backlog of about JPY16.0bn from FY06/20 onward and expects R&D spending to fall after it books sales.
However, there is a possibility that sales may peak in FY06/20, during which the company expects to book sales of EUV blank inspection systems (about JPY4.0bn x four orders) and sales from new business areas (about JPY16.0bn in FY06/20–FY06/21).
Reference: Phase 0 and Phase 1
Phase 0 (Final year: FY06/12)
In light of deteriorating performance due to the global financial crisis set off by the US subprime mortgage loan crisis that started in 2007, Lasertec formulated its medium-term business plan with the basic goal of concentrating its business resources in growth areas to allow it to use those resources to leverage its strengths. In the three years of Phase 0 (Step 1), the company focused on select business areas where it excels and worked to reinforce its financial strength. It turned over low-margin products to its Taiwanese agent and received licensing fees, allowing it to focus its business resources on the semiconductor business.
Upon the completion of Phase 0 (Step 1), the company felt that it had met its goals. Progress on the Phase I (Step 2) goal of increasing share in the photomask inspection system market was favorable, though the challenge of establishing new semiconductor wafer-related businesses remained. However, Lasertec capitalized on the evolution of the semiconductor process rule (circuit line width), the expansion of related technologies and applications, and a better customer support structure to effectively capture opportunities. In addition, the company enhanced its product planning functions by establishing a new marketing division in 2011. Through speedy product development based on its applied optics technologies core strength), Lasertec worked to beat competitors, such as U.S.-based KLA Corporation (NASDAQ: KLAC).
Phase 1 (Final year: FY06/15)
Goals for Phase I were the following:
Reforming the business structure to center on semiconductors;
Strengthening core businesses (mask-related and microscopes);
Create pillars of new businesses.
Advances in reforming the business structure to center on semiconductors
The composition of semiconductor-related sales increased from 31% (end-FY06/09; before the start of the medium-term plan) to 71% at end-FY06/12 (the end of Phase 0), and stood at 77% during FY06/14. This share decreased to 67% during FY06/15 due to weakness in sales of semiconductor mask inspection systems and strong growth in sales of CLIOS for FPD applications, but Shared Research understands in light of earnings results thereafter that CLIOS is a strategic product that was in a growth stage, and there was no cause for alarm.
Results in strengthening core businesses
During Phase I, the company introduced products such as the MATRIX X810 (semiconductor mask inspection system; announced November 2012), MAGICS M6640S/6641S (semiconductor mask blank inspection system; announced April 2012), and MAGICS M8350/8351 (semiconductor mask blank inspection system; announced April 2014). These products lie in the company’s core business area of mask and mask blank inspection systems, and Lasertec’s market share in this field has increased from 15% in FY06/09 to 50% in FY06/15. In the market for mask blank inspection systems, the company has maintained a 100% share.
Lasertec’s market share increased to 75% during FY06/14 due to deliveries to major foundries, but this high market share was a reflection of the effects of sales activities to Tier II customers—excluding leading firms—and these conditions were also a contributor to stability in the company’s business results despite the semiconductor production equipment industry being in a transitional phase as production shifts to a new generation of products.
Some delays in creating pillars of new businesses, but room for optimism
Although progress was steady for the first two goals, there were delays in gaining ground for the third goal. For this reason, sales in new businesses in FY06/16 were on par with FY06/15. However, the LX330 lithography process inspection system, SICA wafer inspection system, EUVL-related systems, and other products with potential for future growth made steady progress over the three-year period.
The Lasertec group’s business comprises a single segment that is responsible for designing, manufacturing, and marketing inspection and measurement systems. Hence, the group does not disclose information broken down by segments but instead discloses data on orders, production, sales, and order backlogs by product and service categories.
The company broadly divides its offerings into two categories: products and services. The products category includes two sub-categories: semiconductor-related equipment and other equipment (confocal scanning laser microscopes and FPD-related systems). In FY06/21, the products category accounted for JPY62.0bn of sales (+69.9% YoY; 88.3% of overall sales), broken down into JPY58.4bn for semiconductor-related equipment (+69.9% YoY; 83.1%) and JPY3.6bn for other equipment (+69.1% YoY; 5.2%); the services category accounted for JPY8.2bn (+35.7% YoY; 11.7%) of total sales.
Mainstay products in the semiconductor-related equipment include photomask inspection systems, mask blank inspection systems, and wafer-related inspection systems. The other equipment includes large photomask inspection systems for manufacturing FPD, confocal scanning laser microscopes, and inspection and measurement systems for devices such as lithium-ion batteries. The company’s business involves developing, manufacturing, and marketing these products, as well as providing associated services.
The company operates in the wafer fab market. Main customers for the company’s semiconductor manufacturing equipment are as follows: for semiconductor mask inspection systems, major semiconductor foundries and logic and memory device manufacturers in Taiwan, the US, and Korea, as well as logic and memory device manufacturers; for semiconductor mask blank inspection systems, mask substrate manufacturers, mask blanks manufacturers, and mask shops; and for FPD mask inspection systems, high-resolution flat panel manufacturers.
Lasertec has a global niche strategy, under which it seeks to capture 100% of niche markets. The company targets markets where it can distinguish itself from rivals and where customers are seeking high value-added products. These markets should be small enough to discourage large companies, yet difficult for small- and medium-sized companies to enter without sufficient experience or expertise.
Lasertec aims to develop products that are one step ahead of its competitors. The company will do this by working closely with global industry leaders and sharing technology information. The company will also improve its technology and specialized expertise, and win more patents to discourage competitors from entering the market.
Since July 2009, Lasertec has restructured its business, strengthening its focus on semiconductor-related equipment and concentrating business resources in this area. As a result, sales contributions of FPD-related systems (especially from repair systems for liquid crystal display panels), which accounted for over 50% of FY06/09 sales, have decreased, while semiconductor-related equipment increased its weighting to 77% in FY06/14 from 31% in FY06/09 and its sales expanded to exceed JPY10.0bn. In FY06/21, the company recorded JPY112.9bn in orders (+40.8% YoY), showing a high level of growth.
In FY06/21, EUV-related equipment (EUV systems ABICS and ACTIS, and DUV systems MATRICS X8ULTRA and BASIC) accounted for 65% of the overall sales mix, semiconductor mask inspection systems (MATRICS series, excluding X8ULTRA) accounted for 15%, and semiconductor mask blank inspection systems (MAGICS series) followed with a 10% share (product classifications to be changed starting from FY06/22). Results from EUV-related equipment drove overall equipment-related sales. Meanwhile, the services business has expanded along with an increase in the amount of company equipment in operation.
|Sales by product/service||FY06/12||FY06/13||FY06/14||FY06/15||FY06/16||FY06/17||FY06/18||FY06/19||FY06/20||FY06/21|
|% of total sales||71.4%||79.7%||77.0%||66.7%||65.6%||70.9%||72.9%||68.7%||80.7%||83.1%|
|% of total sales||18.6%||6.8%||10.1%||20.3%||18.8%||11.2%||8.5%||15.3%||5.1%||5.2%|
|% of total sales||10.0%||13.5%||12.9%||13.0%||15.6%||17.9%||18.6%||16.0%||14.2%||11.7%|
|% of total sales||85.1%||73.5%||73.4%||65.7%||70.7%||75.7%||81.2%||84.0%||87.5%||91.7%|
|% of total sales||6.0%||8.3%||15.4%||23.2%||13.2%||11.7%||9.1%||5.2%||4.4%||0.8%|
|% of total sales||8.9%||18.2%||11.2%||11.1%||16.0%||12.6%||9.7%||10.8%||8.1%||7.5%|
|% of total sales||95.2%||92.0%||78.2%||72.8%||80.4%||82.9%||86.4%||93.7%||94.3%||97.9%|
|% of total sales||2.2%||2.3%||17.4%||23.6%||15.3%||14.1%||11.7%||4.7%||4.2%||0.9%|
|% of total sales||2.7%||5.6%||4.4%||3.7%||4.3%||3.0%||1.8%||1.7%||1.5%||1.2%|
Semiconductor manufacturing process is broadly divided into front-end (creating integrated circuits on semiconductor wafers) and back-end (dicing integrated circuits into individual dies before packaging and inspection). The company’s mainstay inspection and measurement systems are used to check for defects such as debris or damage on mask blanks on which circuit patterns are written, as well as patterned masks. They are also used to check for similar defects on wafers before installing integrated circuits. Accordingly, these systems are associated with front-end semiconductor manufacturing process.
Many of the company’s inspection and measurement systems have high market shares. Markets shares of its products, including mainstay products, are outlined below. All the products below have high global market shares and high levels of profitability.
a) Semiconductor mask inspection system (MATRICS): In FY06/21, the company had an 70% share in the market for mask inspection systems for wafer fabs, which the company estimated was worth around JPY50.0bn.
b) Mask blank inspection system (MAGICS): The company had a 70–80% share in the market for mask blank inspection systems, which it estimated to be worth JPY4.0–5.0bn.
c) FPD mask inspection systems: The company had a 100% share in the market for masks for high-definition FPDs, which are used in smartphones and other devices. It estimated this market to be worth JPY500mn–3.0bn.
The reasons the company is able to maintain high market shares and margins are that it operates in niche markets (not worth the trouble to enter on the part of large companies and extremely difficult to enter for SMEs without adequate experience and technology) and that it continuously develops technologies in response to new demand accompanying technological advances and differentiates itself through its proprietary technologies and accumulated experience.
The market for mask blanks is becoming less susceptible to demand fluctuation as blank manufacturers now steadily make investments when there are technological advances. Mask blanks are inspected individually, and the number of masks used in semiconductor manufacturing process is on the increase as the design features become miniaturized and multi-patterning technology becomes widespread. Accordingly, Lasertec expects a certain level of demand for mask blank inspection systems to continue for the time being.
Mask blank inspection systems are used by blank manufacturers for inspection at shipping and by mask shops for inspection upon receipt. Lasertec's ABICS E120 EUV mask blank inspection system is used for inspection at shipping and the M8650/8651 or the newer M9650/M9651 in its MAGICS series are used for inspection upon receipt. For this reason, Shared Research does not believe there will be any significant decrease in demand for such equipment even after the shift to EUVL.
The size of the market fluctuates between JPY4.0bn and JPY5.0bn, according to company estimates. Lasertec had 70-80% of the global market share in FY06/21. According to the company, this is a niche market, discouraging large companies from entering, while difficult for small and medium sized enterprises to enter due to the experience and technology required. FY06/17 and FY06/18 saw a temporary dip in semiconductor capital spending. However, FY06/19 looks likely to see a rebound in capex, and Shared Research will closely watch orders the company receives for EUVL mask blank inspection systems. (For details, also see the section on EUVL-related equipment later in this report.) Lasertec will promote its M8650/8651 systems for the 7nm/10nm-generation (announced in April 2017), as well as its new M9650/M9651 systems for 5nm- and subsequent generations (announced in November 2018), to major mask blank manufacturers and mask shops.
Lasertec’s market share fell from 100% in FY06/20 to 70–80% in FY06/21. The company attributes this decline to an ongoing shift toward demand for EUV mask blank inspections that utilize corresponding EUV mask blank inspection equipment (such as ABICS from Lasertec). The company believes that, when accounting for performance from both ABICS and MAGICS (details below), it has a share of 90% or more in the entire market for blank inspection equipment.
A photomask, which is similar to a photo negative, is a plate with a circuit pattern used in the semiconductor manufacturing process. To create a photomask, the manufacturer needs a mask blank—a glass substrate covered with a light-shielding thin film that does not yet have a circuit pattern on it.
Integrating semiconductor devices as densely as possible improves performance, functionality, and reliability while reducing costs. For those reasons, the industry has tenaciously pursued research and development in this sector of the semiconductor field ever since integrated circuits (ICs) first appeared. High-density integration requires high-resolution, high-precision technology in order to draw fine circuit patterns on mask blanks. Furthermore, mask blanks must be high-quality and free of defects (e.g., polishing wear and tear, defective pinholes, phase errors, resist film loss), which generates demand among manufacturers for high-quality inspection systems. Considering such stringent customer demand and high technological hurdles, it can be said that inspection systems are high value-added products.
Lasertec estimates that the size of the wafer fab market was around JPY50.bn in FY06/21 (The market widely fluctuates.). The company had a share of about 70% in the global market in FY06/21 (compared with 90% in FY06/20, 80% in FY06/19, 60% in FY06/18, 75% in FY06/17, 50% in FY06/16 and FY06/15, 75% in FY06/14, and 15% in FY06/09). The company, although a pioneer in mask inspection systems, at one point allowed KLA Corporation (NASDAQ: KLAC; formerly, KLA-Tencor Corporation) to effectively control the market. However, Lasertec drastically increased its market share since FY06/14. Although the company captured a high share of major foundries in FY06/17, resulting in a high level of orders, the shrinkage in market share in FY06/18 is due to orders from these particular customers declining, and does not mean Lasertec’s market position itself has dropped. The company provides two main reasons for the decline of its market share in FY06/21. First, it points to stronger purchasing trends from two companies following comparative evaluations of semiconductor mask inspection equipment for advanced, next-generation production lines. Second, the company indicates that demand for previous generations of products that it has ceased to produce has increased because some of its customers have begun striving to increase production on legacy product manufacturing lines. This trend has led to growth in the market share of other companies’ products.
10nm-generation semiconductor mask inspection systems: Lasertec began winning orders in 2H FY06/16, and Tier I demand ran its course in FY06/17, so contributions in FY06/18 were mostly centered on Tier II. The product name is the MATRICS X810EX series Lasertec announced on its website in Q3 FY06/16. While its existing system MATRICS X810HiT series targeted the 20nm- and 14nm- generations of production technology, this series targets the 20nm through 10nm and finer generations, and is equipped with a high-powered laser that is twice as powerful as its existing products, resulting in higher sensitivity and faster throughput. The company marketed this series in FY06/16 and after winning orders in Q4 FY06/16, continued to win orders in 1H FY06/17. Its share rose to 75% as previously mentioned, and the company captured a high share of major foundries in particular.
Lasertec attributes its high market share to the following: 1) its focus on a particular segment of the market, specifically the wafer fab market, and optimizing equipment specification for wafer fabs (through high throughput, low costs, and high inspection sensitivity of haze and other foreign objects); and 2) strong relationship with customers established through providing attentive support.
Haze: A small amount of organic substances and ammonia, when exposed to deep ultraviolet light, have a chemical reaction and form particles on the surface of masks. These particles are called haze. When haze grows, it prevents the accurate copying of mask patterns and causes defects.
In the inspection market, the number of masks has been increasing as devices become more complex due to the advancement of technology and the adoption of multi-patterning necessary for creating smaller pattern features. At the same time, inspection of haze on the surface of masks has become an important issue in advanced wafer fabs using argon fluoride (ArF) and ArF immersion lithography.
A photomask is a film layer with a circuit pattern that is formed atop a mask blank. Light transfers the photomask’s pattern onto a wafer (this is known as a reduced projection exposure). After further processes such as etching, the semiconductor device is fabricated atop the wafer. Because defective photomasks produce defective wafers no matter how precise subsequent processes are, photomasks effectively dictate the quality of semiconductor devices. In turn, the equipment that inspects and ensures photomask quality is crucial to the process.