Outsourcing Has Its Dark Side

Nanometrics Opts for Vertical Integration Instead

Alas, Electronic News (the print edition): we hardly knew ye!

The metrology company is bucking the trend and has become more vertically integrated to guarantee its ability to ramp whenever the industry recovers. A key part of its strategy is being able to deliver its metrology tools quickly and at the same time being able to directly ensure quality.

When the next upturn does come, having its own in-house machine shop will be a competitive advantage for Nanometrics over its larger competitors, according to its CEO John Heaton.

John Heaton, Nanometrics CEO“My only advantage as a small company is to do something quickly, better, faster, cheaper,” Heaton explained. In the past, Nanometrics would have to compete during an upturn for time at local machine shops that also served much larger companies, such as KLA-Tencor Inc., a competitor, and Applied Materials, a customer.

Needless to say, the larger companies often took priority. Furthermore, there was such a rush during 2000 among the entire supply chain that the company had quality-control problems with its suppliers. Thus Nanometrics has brought its own machine shop, anodizing shop and related parts of the business in-house.

But there is more to the strategy than guaranteeing quality and the ability to ramp production. Many of the machine shops used by process technology OEMs were hit hard by the two-year economic downturn. A number of them have closed their doors, which could dramatically impact the ability to ramp for the companies that have relied on them in the past, Heaton said.

“No one is talking about that right now. We believe we will have a competitive advantage,” he added.

Nanometrics’ size and its business model lend themselves to vertical integration. The company has been an early proponent of integrated metrology in an industry that is just beginning to seriously come around to the idea. The company has based its technology on integrated metrology modules, and then migrated that technology to its stand-alone platforms, rather than the other way around.

“We start with a clean sheet of paper and say how do we take our technology and redesign it?” said Peter Gise, Nanometrics’ senior marketing manager.

That has meant the key components of its systems are small, compact systems, which are not particularly challenging for an in-house machine shop to produce quickly while maintaining quality. And by bringing the manufacturing in-house, it keeps the cost of the finished integrated metrology modules down by eliminating a step in the supply chain, he said.

“We believe integrated metrology is the way to go,” Gise said. But this is not to suggest that the company has forsaken its off-line tool base. “We haven’t exactly bet the farm because we still have off-line tools,” he added. But the concept is gaining traction in both OEM and end-user customers. “In three to five years ? it’s really going to take hold,” he said.

With chip production lot sizes decreasing along with feature sizes and cycle times, process parameters are becoming increasingly tighter, and defects more critical. Using feed-forward and feedback of metrology data to control process excursions during production runs is becoming an increasingly popular idea among chipmakers, Gise said. As a result, Nanometrics has begun expanding beyond its traditional thin-film measurement to metrology applications for lithography, planarization, deposition, etch, and copper and low-k films.

This past week the company rolled out the Nano CLP-9010, a laser profiler that nondestructively monitors the metal loss between an isolated copper feature and the surrounding dielectric region. The module is designed to integrate within a metal chemical mechanical planarization tool. It is a new technology for Nanometrics, and an application driven by and large by its OEM customers, Heaton said. Interest in the new module was nearly instantaneous, he said, adding that the company started receiving calls from customers within hours of the news release.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.

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