There's no queue of investors waiting to sink their funds into young companies trying to start up a semiconductor manufacturing tool or equipment business. Yet despite the vacant corporate campuses, worsening unemployment, and empty shipping containers throughout greater Silicon Valley, one can find intrepid souls continuing the grand technoentrepreneurial tradition of the start-up.

During a recent trip to Northern California, I met with several newish companies trying to become players in the semiconductor capital equipment, materials, and software spaces. The downturn has offered start-ups a chance to get a foot in the door among the customer base, and each has scored at least one significant client. They all struggle against the widespread belief—nurtured by the larger suppliers—that a company must have a certain critical mass to be in it for the long term. Whether it eventually wants to be a large privately held company, file an IPO, or be acquired by a bigger company, each of these feisty outfits believes it has something valuable to sell, something the customer needs and can't get from other vendors.

"The largest barrier to overcome, along with raising money, is to convince the customers to deal with a small company," Torrex's Julio Guardado told me. "We go against the conventional wisdom of, 'you can't build a capital equipment company from scratch.'" Torrex, which makes sub-100-nm thermal processing tools, has been around since it spun off from Varian in 1990 as a service provider, but it didn't reinvent itself as a toolmaker until 1998. Since its first round of funding four years ago, it has raised some $61 million, a startling $38 million of which came in the latest round announced in October.

With 2002 shipments of an LPCVD tool to Powerchip in Taiwan and an ALCVD tool to a major Korean memory house, Torrex's mini- or single-batch platform has begun to get some traction. "Our strategy is to identify applications that aren't feasible in a furnace or aren't economically viable in a single-wafer tool, so we don't compete with Applied or TEL," explains Guardado, the company's president and CEO. Another key ingredient of its business plan is an outsourcing manufacturing model, in which Torrex works with 10 key components and subsystems suppliers (including its partner, investor, and Livermore neighbor ATS).

Dielectric Systems wants to go beyond the outsourcing model to what Abe Ghanbari calls "the equipment manufacturer's equivalent of fabless." The Fremont-based ultra-low-k dielectric tool and materials supplier just signed a joint manufacturing agreement with NuFlare, a subsidiary of Toshiba, to manufacture and codevelop DSI's 200-/300-mm bridge tool.

Ghanbari, the company's vp of engineering, says that DSI's competitive edge "is not just in the tool, but in the material." Unlike mainstream toolmakers, DSI starts from the materials side with a specially designed nonporous ultra-low-k film. The company claims the material has a k-value of 2.2, the lowest in the solid-film arena. It also has a unique nonplasma, non-spin-on processing technique called transport polymerization, which is "like CVD, but not exactly," explains Ghanbari. "Preliminary integration work on etch chemistries and profiles, sidewalls, CMP, copper compatibility...all have passed. Now we have to pattern film and integrate it into the metal-1 and metal-2 layers to see how the device works. . . . Almost every major fab has sent wafers here."

"We're not competing with anybody, we're partnering with everybody, pulling everything together and integrating it," emphasizes WaferYield's president and CEO, Ron Sigura. With Cypress onboard as its first paying customer, the self-described "wafer yield optimization" company is part of the emerging design-for-manufacturing trend. Its suite of software products helps chipmakers increase the number of good-yielding dies by improving mask placement. "Reticle placement on the wafer has a direct, critical impact on yield, (stepper) throughput, product reliability, and fab profitability," notes the company exec. Wafer Yield's products also help to "get more value out of existing tool sets and to correct some of their problems," a benefit Sigura says was particularly attractive to Cypress.

Whether these young upstarts have the stamina and toughness to withstand the body blows and head shots in the pugilistic semiconductor supplier market remains to be seen. But there are many reasons to believe they have a fighting chance.