Solmates to Lam, Besi to Applied?

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With the silent takeover of Dutch Solmates by Lam Research, another machine builder from the Netherlands has landed in foreign hands. Besi could be next.

Enschede-based pulsed laser deposition equipment manufacturer Solmates has been quietly acquired by US multinational Lam Research. For a small player with substantial debt, Lam will have paid a relatively small, perhaps symbolic amount. In any case, the sum was so low that there was no obligation to report it, and neither party wishes to comment.

Thinking about a possible next hijack, BE Semiconductor comes to mind. Besi is a much bigger fish. If it comes to an acquisition of this Dutch semicon equipment builder, we’re certainly going to see fat headlines. But who’ll be the hijacker?

Besi is a Dutch player in back-end semicon equipment. With a revenue of 750 million euros in 2021, it’s number three in its playing field, after ASM-PT (2.92 billion dollars in 2021) and Kulicke & Soffa (1.52 billion dollars). The three are competing in a ruthless arena: the highly fragmented packaging machinery market, with plenty of opportunities for new entrants – especially from China. The competition is fierce and the cost pressure is high. A typical red ocean – a market colored red by blood.

ASM-PT, K&S and Besi can’t stand each other, so a joint venture or takeover between two of the three seems out of the question to me. I’m putting my chips on a much bigger player – Applied Materials.

It seems far-fetched to see a small back-end player as potential prey for a front-end gorilla. Also, many will point to the traditional differences between back-end and front-end. But with the higher need for clean work and precision in the back-end, the lines are becoming blurred. In short, this may fly – we might very well see even more consolidation between back-end and front-end equipment builders in the coming years.

First of all, Besi and Applied have been friends for quite some time. In late 2020, they signed an agreement to set up a center of excellence in Singapore to develop machines for hybrid bonding, an interconnect technology that allows chips to be directly connected to each other. Applied is bringing in the knowledge for surface preparation: etching, planarization, deposition, wafer cleaning, metrology, inspection and particle defect control. Besi provides technology for rapid chip placement, interconnection and assembly. In Singapore, complete lines of wafer-level packaging equipment are now in place in a class-10 cleanroom measuring over 17,000 square meters.

The collaboration is considered a success. Besi expects to supply both Intel and TSMC with fifty hybrid bonding systems over the next two years – at 2-2.5 million euros each. The first systems were shipped at the end of 2021. Over the past year, most of the questions from analysts during discussions of Besi’s quarterly results were about this new line of business.

Intel has been investing in back-end technology and factories for its microprocessors for decades. Samsung and TSMC are now also betting heavily on it. They see the approach of bringing together chips from different nodes (called chiplets) in advanced packaging as a natural extension of their offerings.

For the time being, the big three seem to be the only ones with the deep pockets that are needed to invest in advanced back-end wafer fabs – the term “mid-end” is popping up more and more often. The requirements are getting higher and higher and that offers growth opportunities in this highly specialized market where the capital intensity is also increasing.

Players like Applied won’t let this kind of opportunity slip. Perhaps just as important: why wouldn’t it take this market all the way now that the technology is experiencing a breakthrough? With a market capitalization of 4 billion dollars, Besi is a nice first bite for Applied, with its market capitalization of 103 billion dollars, but the Americans will have to pay a high price considering the current profitability of the Dutch company – 282 million euros in 2021.

Main picture credit: Syafiq Adnan/