Silicon Segment

Applied’s Silicon Systems Group (SSG), reported under its Silicon segment, develops, manufactures and sells a wide range of manufacturing equipment used to fabricate semiconductor chips or integrated circuits. Most chips are built on a silicon wafer base and include a variety of circuit components, such as transistors and other devices, that are connected by multiple layers of wiring (interconnects). Applied offers systems that perform most of the primary steps in the chip fabrication process, including: atomic layer deposition (ALD), chemical vapor deposition (CVD), physical vapor deposition (PVD), etch, rapid thermal processing (RTP), chemical mechanical planarization (CMP), wafer wet cleaning, and wafer metrology and inspection, as well as systems that etch, measure and inspect circuit patterns on masks used in the photolithography process. Applied’s semiconductor manufacturing systems are used by both integrated device manufacturers and foundries to build memory, logic and other types of chips.

To build a chip, the transistors, capacitors and other circuit components are first created on the surface of the wafer by performing a series of processes to deposit and selectively remove successive film layers. Similar processes are then used to build the layers of wiring structures on the wafer. As the density of the circuit components increases to enable greater computing power in the same or smaller area, the complexity of building the chip also increases, necessitating more process steps to form smaller structures and more intricate wiring schemes. A typical, simplified process sequence for building the wiring portion of chips involves initially depositing a dielectric film layer onto the base layer of circuit components using a CVD system. An etch system is then used to create openings and patterns in the dielectric layer. To form the metal wiring, these openings and patterns are subsequently filled with conducting material using PVD and/or electroplating technologies. A CMP step then polishes the wafer to achieve a flat surface. Additional deposition, etch and CMP steps are then performed to build up the layers of wiring needed to complete the interconnection of the circuit elements to form the chip. Advanced chip designs require about 500 steps involving these and other processes to complete the manufacturing cycle.

A significant portion of the process steps used in chipmaking are performed to build the interconnect, a complex matrix of microscopic wires that carry electrical signals to connect the transistor and capacitor components of a chip. While some customers building memory chips are still using aluminum as the main conducting material for the interconnect, logic customers have transitioned to copper. Copper has lower resistance than aluminum and can carry more current in a smaller area. Applied is the leading supplier of systems for manufacturing copper-based chips, and supplies systems for depositing, etching and planarizing the copper interconnect layers. Complementing the transition to copper to improve chip speed is the use of low dielectric constant (low k) films to replace silicon dioxide material as the insulator between the copper wiring structures. Applied leads the industry in providing systems for depositing low k dielectric films.

The transistor is another key area of the chip in which semiconductor manufacturers are improving their device designs to enhance speed. Applied has the industry’s largest portfolio of technically advanced products for building smaller and faster transistors. One such area is strain engineering, a technique that stretches or compresses the space between atoms, allowing electrical current to flow more quickly, thus greatly enhancing chip performance. Multiple strain films are typically used in advanced devices since they have an additive effect on increasing transistor speed. Applied has a comprehensive portfolio of systems to enable these applications using CVD and epitaxial deposition technologies.

Most chips currently are fabricated using 65 nanometer (nm) and larger linewidth dimensions. Beginning at the 45nm technology node, major chipmakers have announced they will be integrating new high dielectric constant (high-k) and metal materials and processes in the transistor gate structure to reduce current leakage and enable faster switching speed. In 2007, Applied announced a comprehensive portfolio of fully characterized processes for building these high-k/metal gates. These solutions include an integrated dielectric gate stack tool that combines four critical processes in a single system, a portfolio of metallization technologies using ALD and PVD, and an innovative high temperature etch system.

Most of Applied’s semiconductor equipment products are single-wafer systems with multiple process chambers attached to a base platform. This enables each wafer to be processed separately in its own environment, allowing precise process control, while the system’s multiple chambers enable simultaneous, high productivity manufacturing. Applied sells most of its single-wafer, multi-chamber systems on four basic platforms: the Centura®, the Endura®, the Producer® and the Vantage®. These platforms currently support ALD, CVD, PVD, etch and RTP technologies.

Over time, the semiconductor industry has migrated to increasingly larger wafers to build chips. The predominant or common wafer size used today for the volume production of advanced chips is 300 millimeter (mm), or 12-inch, wafers. Applied offers a comprehensive range of 300mm, as well as earlier-generation 200mm systems. Applied also offers products and services to support its systems, which are reported under its Fab Solutions segment.

Fab Solutions Segment

Through Applied Global Services group, reported under its Fab Solutions segment, Applied provides products and services designed to improve the performance and productivity and reduce the environmental impact of the fab operations of semiconductor, LCD and solar cell manufacturers. The in-depth expertise and best known methods of Applied’s extensive global support infrastructure enable Applied to continuously support customers’ production requirements. Approximately 2,450 trained customer engineers and process support engineers are deployed in more than a dozen countries. These engineers are usually located at or near customers’ fab sites and service over 22,000 installed Applied systems, as well as non-Applied systems. Applied offers three general types of services:

Fab Services — Applied offers a portfolio of fab-wide operations services to maintain and optimize customers’ fabrication facilities. Applied Genuine Parts are spare parts manufactured to Applied’s strict technical specifications and quality standards. Applied Services provides customers with optimized tool performance for improved total cost of ownership and a higher return on investment. Through its Metron Chamber Performance Services unit, Applied is the industry’s leading provider of critical parts cleaning, coating refurbishment and analytical testing capabilities. In 2007, Applied announced the opening of its Advanced Wafer Reclaim Center in Taiwan. Using state-of-the-art manufacturing systems and software at this center, Applied can extend the lifecycle of silicon test wafers by over 45% and reduce customers’ costs.

Equipment Services — Applied provides remanufactured and refurbished systems, system enhancements and technical training, which are intended to optimize customers’ cost of ownership by increasing the efficiency and extending the life of their equipment. Applied also offers energy-saving solutions through its Metron EcoSystm products, the semiconductor industry’s most comprehensive line of point-of-use abatement systems. Applied’s EcoSys systems help enable chipmakers worldwide to meet environmental goals.

Automation Services — Applied offers automated factory-level and tool-level control software systems for semiconductor, LCD and solar cell manufacturing facilities. In 2007, Applied expanded its portfolio of software solutions with the acquisition of Brooks Software, a division of Brooks Automation, Inc. The Brooks Software products complement Applied’s existing software applications, allowing the Company to offer customers a comprehensive computer integrated manufacturing (CIM) solution. CIM solutions improve fab operation performance and provide real-time visibility to critical production processes for fast and informed decision-making. These enterprise solutions include manufacturing execution systems (MES) to automate the production of wafers and LCD and solar substrates, advanced process control systems, and scheduling and materials handling control systems. Applied also offers computerized maintenance management systems and performance tracking, and modeling and simulation tools for improving asset utilization.

Display Segment

Applied’s subsidiary AKT, reported under the Display segment, designs, manufactures and sells and services equipment to fabricate thin film transistor LCDs for televisions, computer displays and other consumer-oriented electronic applications. While similarities exist between the technologies utilized in chipmaking and LCD fabrication, the most significant differences are in the size and composition of the substrate. Substrates used to manufacture LCD panels can be more than 70 times larger in area than 300mm wafers and are made of glass, while wafers are made of silicon. AKT also develops, manufactures and supports differentiated stand-alone equipment for the Applied SunFabtm Thin Film Line, discussed further under the Adjacent Technologies segment.

Applied supplies a wide range of systems that process and test different glass substrate sizes. To meet growing consumer demand for larger, more cost-efficient LCD TVs, LCD manufacturers have moved to larger-sized substrates. Applied’s latest Generation (Gen) 8.5 systems can process substrates sized at 2.2 x 2.5 meters, which in turn enable the production of up to six 55-inch LCD TV screens.

For fabricating the transistor layer of Gen-8.5 panels, Applied offers the AKT-55K PECVD (plasma-enhanced CVD) system that uses multi-chamber platform architecture to deposit dielectric and semiconducting films. In 2007, the Company launched the AKT-PiVottm 55KV system, which employs high-productivity, cost-efficient PVD technology to deposit metal and transparent conductive oxide films on the substrate. For manufacturing the color filter layer of LCD panels, Applied offers a fully automated, vertical sputtering system, the AKT-NEW ARISTOtm 2200.

Complementing these systems, Applied also offers electron beam systems for testing substrates during production for defective pixels and other imperfections. The AKT-55K EBT is a Gen-8.5 tester that features one of the industry’s fastest and most accurate pixel test technology with the lowest operating cost. The electron beam system’s non-contact test technology enables safe testing of high-value LCD TV panels without damaging or scratching the display.

Adjacent Technologies Segment

The Energy and Environmental Solutions (EES) group, reported under the Adjacent Technologies segment, provides manufacturing solutions for the generation and conservation of energy. Applied entered the solar PV market in 2006 and announced its objective to lower the overall cost per watt of solar electricity to parity with that of electricity generated by other sources, such as the burning of fossil fuels. Applied offers manufacturing solutions for both wafer-based crystalline silicon (c-Si), and glass-based thin film applications to enable customers to increase the conversion efficiency and yields of PV devices. Applied’s products include large-area platforms such as the ATONtm in-line sputtering system for high-quality deposition and high-throughput in both c-Si and thin film PV cell manufacturing, as well as processes, materials-handling technologies and fabrication services.

During the fourth quarter of fiscal 2007, Applied launched the Applied SunFabtm Thin Film Line, the world’s only integrated production line for manufacturing thin film silicon solar modules using 5.7 square meter (m2) glass substrates. These ultra-large panels, which are approximately four times the size of thin film solar panels offered by others in the industry, are intended for large-scale applications such as solar farms and building-integrated PV system installations. Applied has entered into multiple contracts for its SunFab line with customers in Europe and Asia, which have not yet met Applied’s order recognition policy and accordingly have not been reported as new orders.

Also in fiscal 2007, Applied expanded its capabilities and opportunities in the c-Si technology sector through its acquisition of HCT Shaping Systems SA, the world’s leading supplier of precision wafering systems used to make c-Si substrates. These systems reduce silicon consumption and cost by sectioning silicon ingots into ultra-thin wafers used to fabricate c-Si solar cells.

Other products reported in this segment include roll-to-roll vacuum web coating systems for high-performance deposition of a range of films on flexible substrates for functional, aesthetic or optical properties. Applied also offers large-area sputtering equipment for the production of low-emissivity (Low-E) and solar control architectural glass.