AMAT Earnings Call: Next Generation FinFETs?

The Applied Materials earnings call was last week. As usual I”m not all that interested in the financial details of the quarter and I’m certainly not the person to pick whether the stock is going to go up or down in the immediate future. However, there is always interesting information to be gleaned from the semiconductor equipment industry. Facts which are debatable in one part of the industry are just accepted as given in the equipment industry. For example, when Intel cancelled fab 42 in Arizona everyone in the equipment industry had their orders cancelled so they all knew before Intel announced anything.

There are a number of transitions going on right now that are driving Applied’s business. FinFETs in the SoC world and 3D NAND in the memory world and increasingly complex DRAM processes. All of these require additional spending. They reckon that 2014 was up 15% over 2013 and that 2015 will be slightly up again, although with spending biased to the second half of the year. The split last quarter

One interesting question is why foundry is back-end loaded this year. Normally it is front-end loaded to get capacity in place for the heavy consumer volumes in the second half (and Apple typically announces a new model in the fall which requires volume to be in place to build it all). They said that it was due to the FinFET ramp being later than forecast. They explicitly said the July and October quarters would be strong.

Perhaps the most interesting answer to the linearity question was this:One other thing I would say on the foundry business is that this is a huge competitive battle for our customers. So I would expect there’s going to be more technology buys also than we would normally see. There’s certainly the race to the first generation FinFET but there’s also, in parallel, a tremendous pull from customers as they drive to second generation FinFET from a technology perspective. So that’s another thing that we see very strong pull from customers that could play out. And we’re talking about second half of our fiscal year. So it could play out a little bit more in the second half of our fiscal year.

I’m not really sure what this refers to. It is certainly not Intel since they have 14nm in production which is their second generation (Intel’s 22nm was also FinFET although they call it TriGate). I don’t think TSMC’s 16FF and 16FF+ are different enough to require a major equipment investment, they are layout compatible after all (which doesn’t mean that the details of the process are all the same, of course. Something has to be different in the transistors). And it can’t be referring to 10nm since that won’t ramp to volume (when the major equipment buys will take place) before the end of Applied’s financial year in October. If you have good ideas then then be sure to comment below.

It came up again later in the questions:So all of these companies are extremely focused. They’re investing a lot also in technology so they can shorten their cycle between first generation and second generation and all of that is very good to us because, as we’ve said before, our total available market increases a significant amount and we’re very leveraged around the transistor.

At one point they were asked about the difference between first and second generation FinFETs. The answer was not especially illuminating:Well, the FinFET technology is really very heavily weighted, if you look at Epi for instance. The number of Epi steps continue to grow and that’s just a tremendous opportunity for us. NDP steps also are — that’s a great TAM for us and FinFET. We’re also seeing actually a next-generation FinFET technologies, more opportunities in areas like implant. The customers are very focused on trying to drive down the cost of multiple patterning but the number of steps are certainly increasing. We have some technologies we talked about, selective material removal being an area that we see very high growth. And that’s another area that we believe is going to be a big focus for our customers certainly as they go to second generation FinFETs. So our strength is really around the transistor and that’s what FinFET is all about and so that leverages many areas where we have technology leadership.

Another interesting answer was on China. As you probably know, China has a strategic goal to increase the quantity of semiconductor manufactured in China rather than just consuming them. The goal I’ve heard is 40% by 2020. This is especially important in mobile where China is already 3 times the size of the US market, for example, in units. But Applied isn’t seeing it even looking out a couple of years:We don’t really see a significant change in the CapEx spending in China…But in China, we have a very, very good position, very good relationship. So if that spending would ramp, that would be a good thing for us. But we really don’t see a big change there in the next year or 2.