SIC 3559
SPECIAL INDUSTRY MACHINERY, NOT ELSEWHERE CLASSIFIED



This classification covers establishments primarily engaged in manufacturing special industry machinery, not elsewhere classified, such as equipment for smelting and refining, cement making, clay working, glass making, incandescent lamp making, leather working, paint making, printed circuit boards, semiconductors, rubber working, cigar and cigarette making, tobacco working, shoe making, stone working machinery, industrial sewing machines, and automotive maintenance machinery and equipment. In the past, cotton ginning machinery was also included. Under the new NAICS codes, farm equipment and machinery ( SIC 3523 ) is included in this classification. Cotton ginning machines are not included in that subclassificiation.

NAICS Code(s)

333220 (Rubber and Plastics Industry Machinery Manufacturing)

333319 (Other Commercial and Service Industry Machinery Manufacturing)

333295 (Semiconductor Manufacturing Machinery)

Industry Snapshot

The special industry machinery, not elsewhere classified classification was comprised of companies that manufactured a wide variety of miscellaneous machines used to produce goods in other industries. Numerous product offerings ranged from broom making contraptions to zipper makers, although semiconductor manufacturing equipment accounted for the largest portion of the classification's output.

The number and production volume of machines classified in this industry increased substantially during the industrial revolution, particularly after World War II. By the early 1980s, about $5.0 billion in annual U.S. machinery sales were attributed to this SIC. Although overall U.S. industrial machinery sales growth slowed during the 1980s, a surging demand for high-tech semi-conductor manufacturing equipment doubled industry revenues to about $10.0 billion in 1989.

While a U.S. recession in the late 1980s and early 1990s depressed many industrial machinery segments, semiconductor machine sales continued to grow. Renewed U.S. competitiveness in high-tech equipment manufacturing allowed domestic competitors to thwart their Japanese rivals. In addition, increased semiconductor demand from industries such as telecommunications augmented growth. Output expanded throughout the midto-late 1990s, though the cyclical nature of the industry did drive output down in 1997, causing a "tech recession" that continued into the early 2000s.

Despite being affected by business cycles in the chip making industry, the long-term prospects for semiconductor equipment manufacturing appeared strong. In the mid-to-late 1990s, there were several powerful trends behind the growing demand for silicon wafer fabrication systems. A global increase in PC sales drove increased demand for semiconductors of all kinds, plus new chips being produced required more memory. For example, Intel's first Pentium chip required at least 16 megabytes of memory, almost double that of 486-based PCs. Also, the rapid growth of telecommunications and the use of electronics in automobiles increased semiconductor sales. The lightning-fast changes in the computer industry have rendered the first Pentium chip something of a dinosaur even to casual computer users, and there seems to be little evidence that changes will not continue on their rapid course. As of the early 2000s, the outlook was positive for the industry's chip makers, partly due to improved technology and expectations for better performance, and partly due to an increase in service requirements.

Organization and Structure

The special industry machinery industry encompassed a plethora of devices, including tire retreading machinery, stone tumblers, tile making equipment, automotive frame straighteners, lumber drying kilns, cork cutters, brick makers, shoe repair equipment, leatherworking devices, and plastic molding machines.

Semiconductor manufacturing equipment was the leading segment in this industry, and it saw spectacular growth in the 1990s. For example, in 1987 shipments from this segment were valued at just $1.01 billion, but by 1992 had more than doubled to $2.27 billion, or 21.6 percent of the total industry's output. By 1995, that total had ballooned even more, reaching $6.80 billion, and U.S. Census Bureau figures listed the value of shipments in 1997 at $11.20 billion. By the end of the decade, this growth had leveled off.

Other groups that fall into this category include plastics and rubber industry manufacturing (with 1997 shipments valued at $3.8 billion); power boiler and heat exchange manufacturing ($3.8 billion); other commercial and service industry machinery ($9.3 billion); and all other industrial machinery ($8.7 billion).

Semiconductor equipment was expected to remain the largest and fastest growing sector of the industry throughout the 1990s. As of the mid-1990s, semiconductor production involved a sequence of more than 200 steps using numerous machines. Although the manufacturing process varies depending on the type of chip produced, four basic functions are typically performed to complete a semiconductor wafer, or circuit: 1) deposition of thin film on the (usually silicon) wafer; 2) impurity doping, when selected impurities are introduced that controlled conductivity; 3) lithographic patterning, which determines the geometric features and layout of the circuit; and 4) etching, which removes coating material to reveal the structure patterned in the lithographic process. These steps are repeated sequentially until the semiconductor wafer is complete. After the semiconductor is created using "front-end" fabrication equipment, "back-end" machines are used to test and assemble the chips. Back-end devices include three categories of machines: material handling, process diagnostics and testing, and assembly.

Semiconductor Equipment Markets. According to the U.S. Census Bureau, the equipment market for semiconductor manufacturing equipment is divided into four categories: wafer processing equipment, assembly and packaging equipment, parts for semiconductor manufacturing equipment, and all other equipment.

The wafer manufacturing category is the largest, accounting for 60 percent of product shipment values. The product categories included thin layer deposition equipment, etch and strip equipment, microlithography, ion implantation, and other wafer processing equipment.

Background and Development

The history of miscellaneous special industry machinery varied by product group. One of the earliest and most renowned machines in this industry was the cotton gin, which Eli Whitney invented in 1793. The gin removed seed from cotton by pulling the fiber through a set of wire teeth mounted on a revolving cylinder. Because the device could be powered by man, animal, or water, it received immediate and widespread acceptance and made cotton a staple of nineteenth century southern life.

The development and widespread dissemination of electric power during the late nineteenth and early twentieth centuries resulted in the introduction of a multitude of machinery for miscellaneous industries. Likewise, postwar U.S. economic expansion propelled product introductions and sales throughout the mid-1900s. A pivotal breakthrough was Bell Laboratories' introduction in 1947 of the solid-state transistor, which utilized semiconductors. By the 1960s a market for semiconductor manufacturing equipment began to emerge.

Spurred by important chip advances such as Intel Corp.'s 1971 introduction of the memory integrated circuit, U.S. producers took the early lead in producing semiconductor manufacturing equipment. The mass production of chips allowed by these high-tech machines resulted in dramatic semiconductor price reductions. As a result, the demand for chips surged as semiconductors were integrated into all types of electronic consumer and business devices. Importantly, the use of semiconductors in personal computers caused chip manufacturing equipment sales to balloon during much of the 1980s.

The 1980s. Although domestic manufacturers took the early lead, Japanese semiconductor machinery makers successfully captured much of the global market during the 1980s. The Japanese particularly excelled at delivering equipment for high-volume commodity chips. To combat Japanese strengths, U.S. semiconductor producers restructured, increased their manufacturing efficiency, and concentrated on developing new technologies during the mid-1980s. As the U.S. chip industry made a transition from commodity to proprietary chip production, it ceded a 45 percent share of the global semiconductor equipment market to Japanese producers.

Despite a loss of market share, chip machinery makers increased sales substantially during the 1980s. However, most other special industry machinery producers suffered. Capital spending on new equipment by other industries declined or grew at a slow pace in comparison to pre-1980 expenditures. Spending on new equipment by the transportation industry stagnated, for example, as did equipment purchases by the important petroleum and coal sector. Nevertheless, growth of semi-conductor equipment demand helped double industry revenues to more than $10 billion by 1990.

The 1990s. Strategies adopted by U.S. semiconductor manufacturers in the 1980s began to pay off in the early 1990s. Aided by a weak dollar and a recession in Japan, U.S. producers boosted revenues to $5.8 billion in 1991. Although sales dropped 3 percent in 1992, shipments climbed an impressive 18 percent in 1993 to about $6.0 billion. Assisted by a technological lead in growing product segments and newfound productivity, U.S. manufacturers were able to recover a 4 percent share of the global market from Japan. In 1993 they held 51 percent, compared to 41 percent controlled by Japan.

Also boosting U.S. semiconductor equipment competitiveness was the development of SEMATECH, a joint private sector/government funded research and development consortium. SEMATECH was formed in 1987 to combat increasingly competitive Japanese semiconductor producers. In addition, industry participants on both sides of the Pacific benefited from technology exchanges and partnerships with foreign and domestic competitors. Indeed, U.S. firms learned from the Japanese that traditional methods of developing and producing manufacturing technology in isolation from competitors were no longer feasible. While government funding for SEMATECH was reduced sharply in the mid-1990s, the organization restructured, increased dues, and remained a viable organization.

The group launched International SEMATECH (ISMT) in April 1998, which included the 10 U.S. companies, plus two from Asia and three from Europe. ISMT continued to be an important force for research and development in the semiconductor equipment manufacturing industry. According to SEMATECH President and CEO Mark Melliar-Smith, "Precompetitive cooperation has proven to be a cost-effective way to share the risks of semiconductor manufacturing research. Because of the growing financial burden and increasing complexity of this research, sharing resources internationally is the best way to address it."

Front-end equipment sales led industry growth going into the mid-1990s. Most importantly, shipments of deposition equipment rose 17 percent in 1993. U.S. producers held the lead in deposition technology, and benefited from a proliferating trend toward smaller, more integrated chips that required more complex deposition. A shift toward the production of high-profit, application-specific, integrated circuits (ASIC) also boosted sales of U.S. front-end manufacturing devices. In contrast, sales of lithographic machinery, of which the U.S. supplied only a 16 percent global share in 1993, plummeted in the early 1990s.

Back-end equipment sales also rose at a steady clip. Global shipments of test equipment gained 14 percent in 1993, and sales of material handling and diagnostic machines increased about 13 percent. Production of assembly devices, of which the U.S. made 30 percent globally, jumped 15 percent.

The market for semiconductors has traditionally been very cyclical, and as a result the market for semiconductor equipment is cyclical as well. For example, in 1994 and 1995, semiconductor equipment firms enjoyed a booming market. A study conducted by VLSI Research on the 10 largest global semiconductor equipment suppliers showed that they sold $14.2 billion of equipment in 1995, a 74.4 percent increase over their net sales for 1994. However, in 1996 this strong growth rate slowed to 12.0 percent and semiconductor manufacturing equipment suppliers such as Applied Materials Inc., Lam Research Corp., and Varian Associates Inc. cut back on production and laid off workers. Conditions worsened in 1997 and 1998, but the industry turned around in 1999.

Some industry observers had predicted an upsurge in sales of semiconductor manufacturing equipment during 1997 due to a major change in the manufacturing process for dynamic random access memory (DRAM) chips. As manufacturers moved to produce higher memory chips (for example, from 16MB DRAM to 64MB DRAM), it was expected that they would change from using 200 mm wafers to 300 mm wafers. This would have created the need for a major retooling of manufacturing capacity. However, release of the 300 mm chip was delayed when industry changes made it impossible to make the 300 mm chip available in 1998 or even 1999.

Overall global semiconductor industry sales reached an all-time high of $149.0 billion, up nearly 19 percent from the previous year. Experts in the industry expected sales to rise even more in 2000, given the growing demand.

Markets for other kinds of equipment in this industry were down in 1996. For example, total shipments of domestically produced plastic injection molding machinery decreased by about 15 percent in 1996 after strong growth in 1995. Capital investment in equipment was expected to decline throughout all of 1996 due to the decline in injection molding resin sales.

Current Conditions

Semiconductors The 2000s saw a market rebound for this industry segment, primarily due to increased consumer spending on electronics in addition to increased business demand for IT solutions. Worldwide, construction of factories in many different sectors meant that demand for the high tech equipment using semiconductors would continue to rise into the middle of the decade. With the upswing in market conditions, manufacturers were spending more time and money on research and development.

This segment of the industry focused on new era innovations to manufacture high speed chips using low k film developed by industry leader Applied Materials. The newest chips were designed not only to enhance speed but also to be more energy efficient for premium performance in everything from supercomputers to cell phones.

Plastics In the early 2000s, plastics manufacturing began to rebound from the slump begun in the mid-1990s. The trends in manufacturing toward automation and reduction of costs were both positive indicators that plastics were set to come back. In early 2004, projections were for increased demand for polypropylene (PP) and polyvinyl chloride (PVC). PP in particular was seeing an upswing because of its lower prices and perceived cost value.

To remain competitive, manufacturers were expected to buy more of their resin materials from overseas markets. Asian products were cheaper than domestic products, particularly in the ABS market. According to Plastics News , more than 20 percent of ABS processed domestically came from foreign markets in 2002. There was also a trend toward consolidations and mergers in 2003, especially in the highly fragmented non-captive injection molding segment, which is that part of the industry that supplies other companies rather than manufacturing products for their own use.

Industry Leaders

In 2001, the industry leader was Applied Materials Inc. of Santa Clara, California, with nearly $5.1 billion in sales and 16,100 employees. Applied Materials garnered more than 22 percent of the total semiconductor industry for 2002. The following year, Applied posted a sales growth of more than 11 percent and employee growth of 25 percent. In second place was New York-based Dover Corp., with $4.2 billion in sales and 26,000 employees. Rounding out the top three was Novellus Systems Inc. of San Jose, California, with $1.3 billion in sales and 3,300 employees. The leader in the plastic molding machinery segment was Husky, with a whopping 76 percent of the market.

America and the World

Of the top 10 semiconductor equipment manufacturers in 1999, four were based in the United States, five in Japan, and one in the Netherlands. The rivalry between the United States and Japan has continued, but a growing level of cooperation, spurred in part by market softness in 1997 and 1998, has obviously been viewed as beneficial by all parties, as illustrated by the change in membership at SEMATECH.

Research and Technology

Semiconductor equipment manufacturers were heavily dependent upon research and technology to sustain competitiveness. Applied Materials, for example, injected about 10 percent of its total revenues into capital investments in the early 1990s. For comparison, the average capital investment for all U.S. manufacturers was closer to 4 percent of gross sales. In contrast, capital spending by other firms in the special industry machinery industry were much lower than even the national average.

U.S. semiconductor machinery makers invested heavily in productivity, quality, customer service programs, and new plants and equipment during the 1980s and 1990s. Most importantly, though, research and development outlays allowed them to sharpen their competitive edge in the development of high-tech, value-added machinery. They especially advanced in the fast-growing market for chemical and physical vapor deposition equipment, which was expected to lead industry growth throughout the mid-1990s. They also stretched their lead in automatic test equipment technology.

In the latter half of the 1990s, development efforts were expected to emphasize, among other technologies, machinery for advanced multichip modules, which mounted multiple integrated circuits on one unit. The Advanced Research Projects Agency (ARPA), a hightech consortium, already provided funding for this research in the early 1990s. Equipment for manufacturing liquid crystal displays (LCDs) also should be a priority. LCDs were used for flat-panel displays on portable computers, and were manufactured using a process similar to that used to make chips. The U.S. Display Consortium, which included ARPA and several equipment and display providers, was formed in 1993 to further LCD manufacturing technology.

Integrating lithography equipment into chip manufacturing had become a key issue in the 2000s, and ISMT sponsored a series of workshops to look into the solution for this industry. The lithography equipment imprints the silicon wafers from which chips are cut. In 2003, the third workshop was held to investigate the possibility of using the technology of immersion lithography in manufacturing of semiconductors. Because the immersion process allows for the production of smaller features, this process offers better quality resolution than other lithographic techniques. By the following year, ISMT was also researching another lithography technology known as extreme ultraviolet (EUV) and its use for the semiconductor industry.

In 2004, a semiconductor innovation known as "low k" was sweeping the industry. Marketed by Applied Materials as "Black Diamond," low k was touted as state-of the art, next-generation technology that would allow chips to use less energy and send signals faster. Packing a one-two-three punch, low k also was set to reduce manufacturing costs. While making certain that low k functioned properly with the other materials used in semiconductor manufacturing was a challenge, those in the industry were confident that there would be no problems. According to an industry expert quoted in Investor's Business Daily , the "only risk to low-k now is not having it."

Further Reading

"Applied Materials' Black Diamond Could Pave Way for Faster Chips." Investor's Business Daily , 5 February 2004.

"Applied Materials—CEO, CNNfn." CEO Wire , 19 February 2004.

Baker, Deborah J., ed. Ward's Business Directory of US Private and Public Companies. Detroit, MI: Thomson Gale, 2003.

"Caution Still Rules as Chip Equipment Market Rebounds." Investor's Business Daily , 5 February 2004.

"Chipmakers Break Low k Barrier." Business Wire , 24 February 2004.

Esposito, Frank. "More Processors Buying Overseas Resin." Plastics News , 18 August 2003.

Hoover's Company Fact Sheet. "Applied Materials Inc." 3 March 2004. Available from http://www.hoovers.com .

"International SEMATECH Announces Industry-Wide EUV Mask Blank Exchange Program." International SEMATECH News , 4 March 2003. Available from http://sematech.org/corporate/news/releases/20040304.htm .

"International SEMATECH Plans Third Workshop to Review Manufacturability of Immersion Lithography." International SEMATECH News , 13 November 2003. Available from http://sematech.org/corporate/news/releases/20031113.htm .

Lazich, Robert S., ed. Market Share Reporter. Detroit, MI: Thomson Gale, 2004.

"M & A Heats Up Among Plastic Processors." Mergers & Acquisitions Report , 29 September 2003.

Mapleston, Peter, et al. "Optimism and Caution." Modern Plastics , August 2003.

"PE Lags, But Other Products Improve." Chemical Week , 7 January 2004.

SEMATECH 1998 Annual Report. Austin, Texas: SEMATECH, Inc. Available from http://www.sematech.org .

U.S. Department of Labor, Bureau of Labor Statistics. Economic and Employment Projections. 11 February 2004. Available from http://www.bls.gov/news.release/ecopro.toc.htm .

VLSI Research. "1999 Top Ten Equipment Suppliers to the Semiconductor Industry." 11 February 2000. Available from http://www.semiconductoronline.com .



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