Photonics Companies Merge to Keep Pace with Semiconductor Industry

R. Winn Hardin

SAN DIEGO -- High-technology industry experts say the enormous cost of research and development, the attraction of suppliers with diverse services, and dwindling federal incentives have created a climate ripe for corporate acquisitions and partnerships.
The trend has highlighted the relationship between photonics and electronics. In remarkably similar statements, servicing the semiconductor industry was cited as the reason for Zygo Corp.'s intent to merge with Digital Instruments and for Veeco Instruments Inc.'s acquisition of WYKO Corp.

Vying for microchips
Both Zygo and Veeco hope to increase market share by offering more services.
"This was the next step in an acquisition process that started 18 months ago with the purchase of [the confocal microscopy company] Technical Instrument Co.," Zygo's national sales manager, Marshall Bates, said from the exhibition floor of SPIE's annual meeting here.
Zygo, of Middlefield, Conn., designs and produces measurement and yield-improvement systems. Digital Instruments of Santa Clara, Calif., is best known for scanning probe microscopes used in materials research and evaluation.
If approved by stockholders and federal agencies, Zygo will exchange 7 million shares of common stock for all of Digital's outstanding issues. Digital would be Zygo's third acquisition in 18 months.
Three days before the Zygo announcement, Veeco, of Plainview, N.Y., finalized its acquisition of WYKO Corp., a precision measurement firm in Tucson, Ariz.
The "bigger is better" trend will likely continue. Officials from both Veeco and Zygo say that their respective companies intend to keep an eye open for attractive companies.
But for how long? Right now the move is to larger companies, according to Bates. Companies are either in acquisition or divestiture mode, and the trend is for acquisition, he said.
Jeff Weir, director of communications for the Semiconductor Industry Association, is not so sure. He sees the recent acquisitions as a response by US high-tech companies to overseas companies that benefit from higher government subsidies.
"Industry is looking at what to do about Asia in particular," he said. "We're [the US] in a dwindling federal support era. Industry is picking up the slack, but there's not a consensus yet on what the response will be to industries that are well-subsidized." G