Nextin, Inc., a provider of inspection solutions, strategically leveraged its advantageous position between the United States and China, attracting significant attention from major semiconductor manufacturers. The dynamic and innovative Korean company is actively securing a larger market share, specifically in the dark field inspection market.
In 2022, Nextin achieved a remarkable milestone, recording USD 89 million in revenue, marking a 103% increase from 2021, and USD 45 million in operating income. Could you shed light on the primary drivers behind this impressive growth?
In our realm of inspection equipment, our portfolio prominently features e-beam products and optical products. Optical products, in turn, encompass three key components: bright field utilizing reflected beams, dark field leveraging scattered beams, and macro. When addressing optical inspection systems, our focus narrows to bright field and dark field. In the bright field category, KLA holds approximately 70% of the market share and Applied Materials (AMAT) holding about 30%. An interesting shift occurred in 2010 when AMAT exited the dark field industry, leaving KLA with a complete monopoly. However, device makers prefer a competitive market, avoiding dependence on a sole vendor. Consequently, equipment companies like Lam, TEL, or AMAT generally maintain two suppliers, except for in the EUV and dark field sectors, which are dominated by a single company without competition. Recognizing the need to break this monopoly, Nextin is venturing into the dark field equipment market, aiming to compete with KLA. My client companies are providing substantial support in this endeavor.
Despite the advanced technology at Nextin's disposal, the size of our company posed challenges in supplying to larger corporations. The trade tensions between the U.S. and China created an opportunity as Chinese companies sought non-U.S. suppliers, positioning Nextin as a viable alternative. From 2020 to 2023, our growth was significantly driven by the Chinese market, and now, beyond 2023, we are strategically working towards expansion in the U.S. and Japanese markets.
As mentioned earlier, Korea excels in upgrading existing products rather than developing entirely new ones. Therefore, it's not realistic to envision Nextin surpassing KLA entirely. However, our growth strategy revolves around acquiring a substantial share of KLA's market, aiming for a maximum share of 30%. Beyond this point, we intend to pioneer entirely new technologies, including IRIS and TSOM (Through-focus Scanning Optical Microscopy).
Bright light technology boasts high precision and accuracy, yet it suffers from a significant drawback—slower speed. On the other hand, dark light, though less precise, offers enhanced productivity. This discussion becomes particularly pertinent within the context of the semiconductor industry, which has undergone significant disruptions in recent years. In this evolving landscape, where do you foresee dark light technology outshining bright light? Additionally, what distinguishes Nextin's technology from KLA's within this context?
It's essential to note that dark field and bright field technologies are not in direct competition. In the 90s, there was indeed a competitive dynamic between bright field, owned by KLA, and dark field, owned by Tencor Corp. At that time, I was engaged in competition while working at KLA. However, following the merger of KLA and Tencor, resulting in the formation of KLA-Tencor, these two technologies ceased to compete directly.
While bright field and dark field share common elements, each possesses unique characteristics. Consequently, clients often opt for a combination of both technologies to suit their specific needs. In the realm of bright field technology, KLA and AMAT offer distinct advantages and disadvantages. Despite KLA's superior position with a 70% market share compared to AMAT's 30%, it doesn't imply that 70% of companies exclusively use KLA technology while the remaining 30% solely adopt AMAT's technology. Instead, a typical scenario involves a company utilizing a blend of 70% KLA technology and 30% AMAT technology. This blending principle extends to the interplay between KLA and Nextin's dark field technologies, presenting a significant opportunity for us.
Your products, TSOM and IRIS, represent innovative solutions for 3D inspection, leading me to consider potential customers like Micron and Western Digital in the U.S. Can you elaborate on your strategy for entering their markets?
Our collaboration with major players such as Intel, Micron, and Kioxia (Japan) dates back to 2016.
As you may know, the Japanese market tends to be conservative. While Korea is often associated with the tagline "dynamic Korea" upon arrival at Incheon Airport, signifying its readiness to explore and adopt new equipment, Japanese clients exhibit a more cautious approach. Despite establishing positive business relations with Japanese companies pre-COVID-19, the pandemic severed these ties. However, Toshiba recently reinitiated contact, and we are currently engaged in discussions. In our previous collaboration with Toshiba in 2020, we discussed the AEGIS-DP product. Now, with upgraded versions like AEGIS-2 and AEGIS-3 featuring significant improvements, we are starting anew. Despite the need to restart from scratch, I'm optimistic about expediting the process.
A couple of years ago, you acquired a company named Zisys. Rumors suggest that you are currently involved in co-developing a machine to eliminate static electricity from the EUV process, specifically targeting segments where it was previously challenging to address. Considering the current limitations in EUV technology, lacking the yield for scalable and efficient mass utilization. When do you anticipate this technology maturing, and when and where do you foresee the commercialization of this machine?
Eliminating static electricity has perpetually posed a significant challenge in the semiconductor industry, with distinctions between high voltage and low voltage static. For instance, high voltage is akin to a cannon, while low voltage resembles an arrow. Dating back to the 1990s, during the 250-nanometer era, high voltage static significantly impacted yield. To counter this, an "ionizer" technology was developed to remove high voltage static and has since been applied in semiconductor processes. However, ionizers only target high voltage static and not low voltage. In the 250-nanometer design rule, the cannon's accelerated attack was effective, while the arrow posed no threat. Consequently, ionizers could overlook low voltage static without impacting yield. As semiconductor designs have evolved to dimensions below seven nanometers, the impact of low voltage static has become a critical concern.
Static electricity poses several problems, the first being pattern defects, and the second, pattern bias. LAM Research is currently in the process of developing a dry resist for EUV. If static is present on the film, regardless of whether it is positive or negative, when we apply resist and conduct etching after applying the mask, static may cause the light to curve. Although the affected volume may be minuscule, it can lead to a pattern bias of 1 or 2 nanometers.
However, the impact on yield caused by static is currently below 5%. This implies that until the EUV process achieves a yield exceeding 80%, the benefits of static removal won't significantly contribute to yield improvement. In essence, our system cannot effectively enhance yield until it surpasses the 80% threshold.
Traditional back-end processes, including wafer grinding, wafer-edge trimming, wafer sawing, and taping/de-taping, are recognized as dirty processes that generate a substantial amount of particles and debris. The standalone Nextin Twins device complements the Aegis and Iris systems by overseeing edge trimming, identifying cracks and chips, thereby preventing manufacturing delays, cost escalation, and the need for random sampling tests. Could you provide more insight into how Twins synergizes with Aegis and Iris? What benefits does your technology bring to the enhancement of back-end processes?
As mentioned earlier, our optical equipment includes bright field, dark field, and macro inspection tools. Macro differs from dark field and bright field due to its distinct application. Dark field and bright field equipment are considerably more expensive than macro equipment, making it challenging to utilize them for macro inspection. Moreover, dark and bright field equipment are slower compared to macro tools, as speed and sensitivity have an inverse relationship. In terms of speed, macro significantly outperforms dark field and bright field technology. Continuous upgrades are essential for macro equipment to keep pace with advanced technology.
The challenge lies in the sluggish development pace of existing players in the macro industry. While KLA excels in macro development, clients consistently seek superior equipment at a more economical price. Existing players face technological constraints in meeting these demands, opening the door for second-ranking companies like Nextin.
We are actively working on equipment that matches KLA's technology while offering greater price competitiveness. The product, named KROKY (formerly Twins during the project phase), is set to be introduced to one of our clients in the second quarter of the upcoming year.
Please envision a future interview on the last day of your tenure as the CEO. What dreams or ambitions do you hope to have fulfilled during your time leading Nextin?
In Nextin, we have a slogan that encapsulates our vision — to be a company where employees arrive at work with a smile, and where children take pride in their parents working for Nextin. I consistently convey to my team that while Nextin may not be the largest company globally, we can strive to be the best. Achieving this goal would bring me immense joy. What I mean by this is, while we may not produce products on the scale of BMW or Ferrari, we can aspire to create something akin to the beloved Beetle. Many people experienced genuine happiness driving a Beetle. I aspire to build a company that brings such joy to people's lives.
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