Sept. 25--ALBANY -- Two of the world's largest suppliers of equipment to manufacture computer chips -- Applied Materials and Tokyo Electron -- are combining to create a $29 billion company that will have a major impact on the Capital Region.
Applied Materials is acquiring Tokyo Electron in a $9.4 billion stock transaction that sent Applied's shares (Nasdaq: AMAT) up $1.45, or 9 percent, to close at $17.44 Tuesday, although shares fell 14 cents in after-hours trading.
The two companies hope to realize savings of $500 million from the combination. But a spokesman at the SUNY College of Nanoscale Science and Engineering in Albany -- at which both maintain research and development labs -- said the NanoCollege sees "great potential for future investment and job growth."
Both companies also supply chip factories such as GlobalFoundries' Fab 8 in Saratoga County.
And the $4.8 billion Global 450 Consortium at the NanoCollege may have played a role in setting the stage for the blockbuster deal.
Members of the so-called G450C include the world's largest chip manufacturers -- Intel Corp., IBM, Samsung -- which are working together to equip the factory of the future, producing chips on 450-millimeter silicon wafers.
Only the largest and best-capitalized manufacturers and their suppliers are expected to survive the move to 450 mm wafers -- and so industry consolidation was expected.
The collaboration is mirrored in the proposed merger, said NanoCollege spokesman Steve Janack, who explained that the G450C has established "new ways of doing business" in the semiconductor industry because of the substantial costs of using 450 mm wafers, which measure 18 inches across, compared with today's 12-inch, or 300 mm wafers.
Although the scale and efficiencies squeezed out of the larger wafers are expected to drive profits for the next two decades, the move will cost the industry tens of billion of dollars.
One of the industry's other major suppliers, ASML, took in $6 billion in investments over the past year from Intel, Taiwan Semiconductor Manufacturing Co. and Samsung to shore up its balance sheet before 450 mm manufacturing.
In a statement, the two companies said the deal will "increase the new company's opportunity to enable major, future technology inflections and advance customers' road maps," which likely refers to 450 mm equipment as well as making chips with smaller transistors, another major driver of the industry's profits.
The consortium, announced two years ago this week, has been building a 450 mm "fab" on the NanoCollege campus inside the school's $365 million NanoFab X building. Suppliers, meanwhile, have been designing new manufacturing machines that can process the larger wafers.
Without combining their financial clout with suppliers, the chip makers may have never been able to get the industry to follow them to 450 mm production.
"The governor was two years ahead of the game," Janack said of Gov. Andrew Cuomo's 2011 announcement of the consortium.
The new company created by the merger will get a new name -- and is expected to be able to wring $500 million in annual savings out of overlapping operations.
The NanoCollege doesn't believe that will get in the way of R&D in Albany.
"We see great potential for future investment and job growth in New York," Janack said.
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