Photronics is the world's leading and fastest growing manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element and enabling technology in the manufacture of semiconductors, photomasks are used to transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits. They are produced in accordance with circuit designs provided by customers at strategically located manufacturing facilities in North America, Europe and Asia.

In early 2000, Photronics was engaged in an ambitious international expansion program, for the firm would need additional funding.

        ”The globalization of the semiconductor industry has created significant
           growth opportunities beyond Photronics' core market in North America.
           Customers operating manufacturing facilities in Asia and Europe, as
           well as North America, are streamlining their equipment and materials
           procurement processes, relying on fewer and more capable suppliers.

           “Photronics has made excellent progress in expanding its presence
           around the world both by acquisitions and by the construction of new
           facilities. During the year, new facilities were quickly brought to full
           production in Manchester, England, and Austin, Texas, while additional
           technological capability was installed in Singapore. These advanced
           capabilities have elevated our strategic supplier status with many
           significant customers who are now benefiting from our balanced
           approach to international expansion and technology investments.

          “ In Asia, our Singapore facility is benefiting from our customers'
           utilization of wafer foundries, reflecting the increasing trend of
           semiconductor manufacturers moving toward a fabless business
           model. We believe that the number of companies utilizing foundries will
           increase as they focus on their core strengths—designing
           semiconductors and product marketing. Such a business model
           transfers the risk associated with investing capital in production assets,
           giving the now "fabless" semiconductor company additional flexibility
           during down cycles, like the one affecting the semiconductor industry  today.”

Please examine the company's financial statements, paying close attention to its business and financial risks and its stage in the corporate life cycle. One recommendation is that the funding be obtained through a debt issue. Does this make sense, given the company's stage in its corporate life cycle and its capacity for further leverage?

Ian Giddy
ian.giddy@nyu.edu