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INNOVATION: Cymer Light Sources Push Chip-making Boundaries Inward

CYMER INC.

CEO: Bob Akins

Revenue: $534.2 million in 2010; $307.7 million in 2009.

Net income: $90.9 million in 2010; $11.9 million in 2009.

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No. of local employees: 900.

Headquarters: Rancho Bernardo.

Year founded: 1986.

Stock symbol and exchange: CYMI on Nasdaq.

Company description: Makes semiconductor manufacturing equipment.

What makes the company innovative: Cymer recently introduced the next-generation, leading edge tool using extreme ultraviolet, or EUV, laser technology for etching circuits on computer chips as small as 20 nanometers.

Key factors for success: Cymer is the leader in the new EUV technology, with no competitors on the horizon. Cymer has also introduced a new system to make ultrathin film displays used for computer screens and televisions, as well as portable devices, such as smart phones and tablets.

From smartphones to tablets to laptops, it seems that just about everyone is carrying a mobile device these days.

That explosion’s proving a boon to San Diego-based Cymer Inc., which makes the laser light sources used by factories making the computing chips, or more properly, integrated circuits, embedded in all those portable computing and communicating machines.

Cymer’s machines are not that cheap, costing $1.5 million, but necessary for customers to keep up in the race to churn out more powerful computing chips in ever smaller packages.

Those customers include such high-profile industry giants as Dutch semiconductor maker ASML Holding NV and Japanese conglomerate Nikon Corp.

New Growth Follows Job Cuts

Cymer says it has more than 70 percent of the market, with just one other competitor, located in Japan.

After a tough 2008 in which it slashed a third of its 1,200 employees, the company is enjoying an upswing in business.

The semiconductor equipment maker reported profits of $90.9 million on sales of $534.2 million in 2010 compared to profits of $11.9 million on sales of $307.7 million in 2009.

For the first quarter, the company reported profits of $28.8 million on sales of $154.4 million compared with profits of $16 million on sales of $113.8 million for the year-ago period.

The good news is expected to continue when the company reports second-quarter results July 21, as sales of its next-generation laser technology, years in development, begins to find a market with the world’s chip-makers, especially those in Asia.

As noted, in the chip-making businesses, small is beautiful, and Cymer has responded to customer demand to help shrink chip sizes so those consumer devices can run better, cheaper and faster.

Going to Extremes

It’s positioned itself on the leading edge of the push with laser systems that utilize extreme ultraviolet, or EUV, technology, a generation ahead of DUV, deep ultraviolet lithography, now the industry standard.

The lasers can etch circuits as small as 20 nanometers wide, compared to the width of a human hair, which averages 10,000 nanometers wide.

The near atomic-scale capability enables chip-makers to pack more circuits on their products, increasing the computing power.

“The industry is extremely keen to get EUV exposure tools,” said Nigel Farrar, Cymer’s vice president of lithography applications and marketing.

Farrar says Cymer is helping to push the industry’s transition to EUV lithography, the next step in making smaller, faster chips.

At least one analyst agrees.

“While we believe that key technical hurdles remain … we also believe that the company is in the lead position to essentially become the sole source provider to the industry,” said Patrick J. Ho, a senior analyst for St. Louis, Mo.-based Stifel Nicolaus & Co. “We also believe that the company’s revenue opportunity will be significantly higher than first anticipated and this can drive sustainable growth over the next several years.”

Riding Moore’s Law

Bud Leedom, the San Diego-based publisher of the California Stock Report, said the fact that sales are increasing is a “pretty good indicator” for a company that “already has significant market share in the market.”

“They continue to ride the wave of Moore’s Law,” which says that the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years, said Leedom.

“They’ve been able to prove that it still holds. They’re really something special.”

Meanwhile, the company has introduced new equipment with the technology to make ultrathin OLED displays used in portable devices, as well as televisions and computers. OLED is an abbreviation for organic light-emitting diode.

Manufacturers have to throw out a lot of product because the existing technology used to make the displays is imprecise and leads to waste.

Cymer’s new lasers will reduce the complexity of the manufacturing process and increase yields, thus lowering costs and increasing margins. It has already sold several pieces of equipment to date.

Tom York is a contributing editor for the San Diego Business Journal.

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