SPIE- EUV & Photomask conference- Anticipating High NA- Mask Size Matters- China

– SPIE EUV & Photomask conference well attended with great talks
– Chip industry focused on next gen High NA EUV & what it impacts
– Do big chips=big masks? Another Actinic tool?
– AI & chip tools, a game changer- China pre-empting more sanctions

The SPIE EUV & Photomask conference in Monterey California

Both the weather and the crowds were great at the conference with what appeared to be record attendance amidst excellent presentations. For an industry that is in the middle of an ugly down cycle, there were a lot of people there in a very positive mood. It seemed more than double from Covid lows.

It was all about anticipation of High-NA EUV – due by end of year

Much of the conference, presentations and discussion was about the soon to be shipped (rumored to be about $400M) High-NA EUV tool by ASML.

What it means for the industry both in terms of promise and problems associated with it and what is being done to prepare for it.

Unlike the roll out of the first generation of EUV tools which seemed to take forever, was mired with problems and was somewhat anti-climatic after it finally arrived it feels like the industry may have a better handle on it this time around.

We also think that ASML is clearly doing a better job with less said perhaps working better.

Of course we haven’t yet had one shipped let alone installed and working. Even though it is significantly different from first gen tools, there is likely enough commonality to smooth the way a bit.

Are bigger Masks better? and needed?

One of the key problems with high NA EUV tools is that the new optics limits the size of the print area on the wafer (the die).

This means that chip size is limited and half that of current EUV & DUV scanners. Unfortunately the industry is moving in the opposite direction with ever larger chips needed to fill the compute power hungry applications like AI. Many current Nvidia chips could not be printed as is with High-NA scanners.

The fix that is most often talked about is “stitching” together two fields/two prints to print one whole chip. Imagine trying to print a single photograph from two negatives adjacent to one another to produce a seamless picture- its really, really hard.

Now try doing it with nanometer scale, atomic precision so that electronic circuitry lines up seamlessly- not at all easy- but needs to be done due to the limits of High NA.

Obviously the move to chiplets works well as a solution but not everything lends itself to that solution.

The pre-game show

Sunday, before the conference, a large semiconductor manufacturer gathered their key suppliers in a room to convince them, push them, and get commitments from them to adopt bigger photomasks which will allow High NA scanners to print bigger chips thus helping to fix the High-NA tiny chip problem (somewhat).

The proposal is to double the current 6X6 Photomask (negative) to a 6X12 size which would work in a High-NA scanner.

This is not as easy as it sounds but would obviously be the most elegant fix of the High NA small print problem. Essentially the entire photomask industry supply chain would have to change.

Probably easiest for mask writers and inspection tools from Lasertec and KLA but harder on “blank” makers who produce the blank photomasks.

This certainly has generated quite a bit of controversy as neither stitching nor bigger masks are easy but one is certainly more elegant.

Another Actinic Mask inspection tool to compete with Lasertec monopoly? But not from KLA….

From the conference, rumor has it, that Zeiss (the famous maker of all ASML’s lenses) will be making an actinic (EUV wavelength) mask inspection tool.

This seems to make sense as they have been making an “AIMS” EUV mask “review” tool, which finally seems to acceptable to the industry after a difficult start. Zeiss obviously knows how to make critical EUV lenses, and the industry would like more than one supplier.

But what about KLA?……Crickets….

KLA has been radio silent about its long lost/overdue actinic tool. While Lasertec had a nice presentation at the conference about their actinic tool there wasn’t anything from KLA.

The industry is clearly not fully satisfied with E-Beam mask inspection or using DUV technology or “print and pray” using wafer inspection they want the “real thing”…actinic pattered mask inspection (APMI).

AI’s impact on semiconductor equipment tools

We have been wondering where there will be impact on semiconductor tools makers from the AI revolution.

Metrology and inspection tools made by companies like KLA, AMAT, ONTO, Nova and many others consist of a light source to illuminate a target, optics to capture the image and millions of lines of code to analyze the image to provide useful information to the user.

While the illumination source and optics are difficult and complex in many cases they are likely not the competitive “moat” that millions of lines of image analysis code written over decades is. It seems much if not most of the value of measuring and/or inspecting semiconductors is determining what’s in the picture of the chip not taking the picture of the chip.

As an example, doing a “die to die” comparison of a known good chip to a chip under question gets a lot easier with today’s AI.

As both the chips and the photomasks that they are printed from, get more complex, more advanced AI is changing the industry.

But it is also likely democratizing it. It is likely a lot easier with AI tools to analyze these highly complex images, you don’t need millions of lines of custom code written over decades. From what we have heard, many chip makers, especially the large ones, have put a significant effort into this and may rival in some cases what is available from tools makers.

It also allows new start ups, especially those with AI expertise (such as China) to develop new tools, more quickly or replace existing or sanctioned tools.

If a chip maker says to a tool maker “just give me an image, I’ll do my own analysis”, what does that do to the value of tools?

Is China preempting new sanctions? Gina is pissed!

While China continues to buy whatever they can get their hands on, they seem to be planning on losing more access to US tools and are getting ahead of the problem. As an example, we have heard that while China continues to buy KLA inspection tools they have also been buying less capable non US tools which they might not have otherwise bought but perhaps assume they will be able to get them for longer than the US tools.

It seems more than blatantly clear that new sanctions are coming on or about the one year anniversary of tool sanctions last October.

China all but spit in Gina Raimondo’s face by announcing a 7NM chip while she was visiting China. The timing seems that China was certainly daring her to put more restrictions in place and she will clearly oblige them.

Gina Raimondo yesterday said she needs more “tools” (read that as sanctions) to control China chips. She said “it was incredibly disturbing” (the progress that China has obviously made in the face of sanctions).

The only thing that may hold back nuclear Armageddon chip sanctions is Biden meeting with Xi in November.

5NM is next for China…will they get to 3NM?

As we pointed out in a prior report, we were not surprised that China got a 7NM chip out. We also fully expect them to put out a 5NM chip. The sanctions on EUV are clearly inadequate and any other sanctions are clearly very porous. ASML still has many DUV tools in the pipeline destined for China and AMAT, LRCX and KLAC still have China as their best customer.

Maybe the US should stop what’s in the pipeline before it gets shipped. Tool makers will scream bloody murder and they will double down on expensive lobbyists in Washington to press for relief.

Its unclear how far things will go but its safe to say more sanctions than we have now otherwise the US should just surrender and ship anything China wants.

Getting to 5NM is a forgone conclusion and embarrassment. The open question is can they keep going and how far? There are some clear indications that 3NM is not entirely out of reach with their existing DUV tools and a lot of effort and cost.

Where there’s a will, there’s a way……..

Sanctions have forgotten about all the existing tools in China

All we seem to hear about are sanctions on shipping new tools to China. But what about all those US manufactured tools and technology that are currently pumping out 7NM chips in China?

Maybe sanctions should and will contain language about service, spare parts, upgrades and all things that keep the offending tools working.

What about sending US people to China to fix & service tools and process problems? Hopefully, those in Washington will figure out that its not just new tools but all the tools that were previously shipped (in such large volumes). As we have seen in a past examples, when service & support is withdrawn, fabs collapse quickly.

The stocks

We think semiconductor equipment stocks are in for a rough earnings season. The downcycle is clearly going deeper into 2024. Memory still sucks. TSMC is slowing Arizona, not due to labor or other false excuses but because demand is weak. Utilization rates are low for TSMC and way worse for second tier players like GloFo.

Equipment companies are going to face some sort of increased sanctions. Anywhere from a total cutoff to strong tightening. Other customers, such as Taiwan, Korea and others will certainly not make up for any near term loss in China.

The only question at this point is how bad.

We think the stocks, even though they have been off have been holding up better than they should have given the current and expected state.

That will likely not be the case after quarterly reports that don’t talk about an end being in sight while potentially being forced to talk about the impact of yet to be know sanctions.

We would certainly lighten up ahead of the quarterly reports as the risk profile has increased beyond what is tolerable.

Companies with higher than average exposure to China obviously could see significant impact.

Its going to be a bumpy next few weeks no matter what…..

About Semiconductor Advisors LLC

Semiconductor Advisors is an RIA (a Registered Investment Advisor),
specializing in technology companies with particular emphasis on semiconductor and semiconductor equipment companies. We have been covering the space longer and been involved with more transactions than any other financial professional in the space. We provide research, consulting and advisory services on strategic and financial matters to both industry participants as well as investors. We offer expert, intelligent, balanced research and advice. Our opinions are very direct and honest and offer an unbiased view as compared to other sources.

Also Read:

Micron Chip & Memory Down Cycle – It Ain’t Over Til it’s Over Maybe Longer and Deeper

Has U.S. already lost Chip war to China? Is Taiwan’s silicon shield a liability?

ASML-Strong Results & Guide Prove China Concerns Overblown-Chips Slow to Recover

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