On April 23, The Wall Street Transcript interviewed Darice Liu, Vice President of Equity Research at Maxim Group, LLC specializing in flat panel display and semiconductor capital equipment companies. Key excerpts, including her sector pick, follow:
TWST: What's the story with Zygo?
Ms. Liu: Zygo Corporation is a small cap gem. It is best characterized as a semi cap company, with an industrial hedge and an FPD spin. Within the semi cap and FPD segment, about 60% of sales, market share gains are growing through next generation and new products. The company is also expanding its semi cap market opportunity from an OEM supplier to an OEM player. Zygo has historically supplied components to semi cap OEMs, specifically in the lithography space. In the past three years, the company has been working on leveraging its metrology expertise into the OEM market. It now has an OEM yield management product in the FEOL, BEOL and back-end markets. The company recently has made some strong strides with a key IDM and it is gaining strong interest for its 45-nanometer and 65-nanometer yield management products.
TWST: Did they bring something new to the market, or are they just doing a better job than they used to?
Ms. Liu: As the complexity of ICs intensifies and pricing/costs increases, yield management has played a growing and stronger role in the semiconductor process. For example, let's say the semiconductor process is going from step A with a raw wafer to step Z with a set of finished die, ready for TAP (test, assembly and packaging). If you can detect, catch and stop batches of bad wafers at step H in the process from continuing, you just saved yourself millions and millions of dollars. New yield management steps are being introduced within the process to try to catch flaws before any more value, i.e., money, is added to the wafer. While these yield management steps are new to the process line, Zygo is competing with the usual players, such as KLA-Tencor (NASDAQ:KLAC) and Rudolph Technologies (NYSE:RTEC).
TWST: So they are bringing something a little new to the market.
Ms. Liu: It's not only something new from a process step, but it's a different spin on its competitors' current tools and technology. On the industrial side, which is about 40% of revenues, Zygo's metrology products reach various end markets from automotive, to clothing, medical devices, military and defense segments. Not only has it been a hedge (to some degree) to semi cap cycles, but it has been growing as its own entity. All in all, we believe that Zygo is an attractive and interesting company that has been gaining market share as an OEM and OEM supplier, increasing its margin strength and expanding its opportunities into new markets. It has been and, we believe, is poised to continue outgrowing the cycle and its peers.
ZIGO 1-yr chart