and engineering (CAD/CAE), and other tools to design the electronic and process properties of the devices—and design of the systems architecture embodied in chips. Although some might argue that Hitachi possesses most of this capability, the Texas Instruments of the 1960s is gone forever, and no company can push technology forward on its own. Semiconductor equipment companies play an important role in the overall technical progress of the industry.

Technical stratification has been partially spurred by the preferences of investors. There was a flurry of investment in supplier companies in the mid-1980s, and some good companies such as Novellus were born, but interest has flagged because development cycles are typically long by venture-investing standards and because the condition of the U.S. semiconductor industry has made it a worrisome customer target. Presently, even U.S. companies that offer significant improvements on processing technology have trouble obtaining financing. One example is Hampshire Instruments, an x-ray lithography company that has faced continuing financial challenges even as technical challenges have been conquered. Thus, in general, even new U.S. equipment companies with superior technology are not current investment targets because the capital required is high, the development cycles are long, the U.S. customer base is weak, and leading Japanese customers have their own suppliers. A significant portion of the technology required for future semiconductors is not gaining new company investment support, which leaves technology development to existing U.S. companies and foreign firms.

The competitive and technical landscape differs among various segments of the equipment industry. First, in lithography equipment, where technology is tied to resist and U.S. companies invented the concepts for all leading machines, the United States has the technology for the next generation—both x-ray and "phase shift mask" with eximer lasers (today's steppers). Yet there are no commercially "leading" companies resident in the United States, the leaders being Nikon, Canon, and ASM Lithography. American entrants GCA, SVG and Ultratech are followers.

In deposition equipment, Applied Materials, the strongest U.S. equipment company, has world-class technology that must be demonstrated before it can sell its products. It has acquired a strong position in Japan through hard, long effort but has growing competition and a customer base that understands its technology to some degree in order to use it. In years past, Applied Materials would get advance payments from customers, as did other equipment suppliers, and then work with them to develop the equipment and processes necessary to build the next generation of devices. Today IBM and, to some degree, SEMATECH will support the development of a machine in this way, but the balance of the load is carried by the equipment maker.

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