May 29, 2012 -- KLA-Tencor Corporation (NASDAQ:KLAC), maker of semiconductor manufacturing metrology tools, measures a 70% increase in fab process steps from 90nm to 32nm semiconductor nodes. This doubles the critical inspection steps required, report Citi analysts from a non-deal roadshow with KLAC’s CFO and EVP Mark Dentinger.

Node changes are not accelerating, but continue to present technology challenges that should enable both inspection and metrology to outgrow the overall equipment market. Importantly, KLAC noted that the 28nm node’s process control spending cycle is still in the early to middle inning and nowhere near its ending phases.

New device architectures -- like 3D gates -- and processing technologies -- like double/triple patterning and extreme ultraviolet (EUV) lithography -- will accelerate the demand further. Some will change metrology tool requirements -- EUVL will shift fab demands from optical inspection to reticle inspection, overlay metrology demand will grow with adoption of double patterning. KLAC noted that electron-beam inspection, which it refers to as an R&D rather than process line tool, will see flat growth in the near future.

In addition to new nodes, the move to 450mm wafers will push fabs to add metrology/inspection tools. KLAC is supplying its first bare wafer inspection system for 450mm this quarter to an OEM. KLAC believes Intel will develop 450mm pilot lines in 2016 with volume production starting sometime in 2018. The pace at which INTC executes this transition will determine the pace at which other manufacturers (foundries) embark on the transition.

Inspection/metrology spending will be 16-20% of foundry/logic capital expenditures, and 8-12% of memory’s, with combined 15% share of wafer fab equipment spending, Dentinger said. This could go higher on foundry strength. In total, for all tools, KLAC foresees 2012 spending flat to down 5%.

KLA-Tencor Corporation provides process control and yield management products, including state-of-the-art inspection and metrology technologies for the semiconductor, data storage, LED, photovoltaic, and other related nanoelectronics industries. Additional information may be found at www.kla-tencor.com (KLAC-P).

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