Department of Justice scuppers $30 billion semiconductor merger

The proposed merger of Tokyo Electron and Applied Materials into a $30 billion semiconductor equipment giant has collapsed due to competition concerns from the US Department of Justice.

The failure of the merger -- first agreed more than 18 months ago -- is likely to mean lower profit margins at Applied and Tokyo Electron but will benefit competitors such as Lam Research and customers such as Intel. The number of players in semiconductor equipment, one of the world’s most technologically demanding industries, has been falling as research and development costs increase and the pool of customers shrinks. Only a small number of chipmakers -- such as Intel, TSMC and Samsung -- now operate at the cutting edge of semiconductor technology, giving them significant power over equipment suppliers. A merger of Applied Materials, the largest company in the sector, with Tokyo Electron would have had about 25 percent of the total equipment market. But it would have had market shares closer to 50 percent for some tools, such as silicon etching machines, forming a near-duopoly with Lam Research.