Semiconductor Capital Equipment Trends

1. Semiconductor Capital Equipment Trends Israel Beinglass, PhD, former CTO, CMO, Applied Materials GLG Institute Thursday, November 16, 2006 Yale Club, New York

2. Israel Beinglass, PhD, was until recently a CTO, CMO at Applied Materials. Dr. Beinglass has 25 years of experience in semiconductor technology, semiconductor manufacturing, and semiconductor equipment manufacturing. He has extensive experience in CMOS device fabrications, materials, yield, EDA and device physics. He is an expert in thin films deposition, lithography, etch, RTP, Ion Implant, CMP, metrology, inspection and overall industry road map as well as emerging nano technologies. Dr. Beinglass also was chief marketing officer at several Applied Materials division. He also was involved in several M&A activities, including due diligence and negotiations. Dr. Beinglass holds 27 US patents.

3. Table of Contents • An Introduction to semiconductor manufacturing including Moore's law and scaling • Case study: A major semiconductor manufacturer announcing CapEx, how does it trickle down & where does the money go? • Industry relationships of Semiconductor capital equipment suppliers

4. The original Moore’s law The original Moore’s law prediction from 1965 Cramming more components on integrated circuit

5. “Cramming more components onto integrated circuits” Gordon E. Moore, April 19th 1965 • Moore believed that scientific advances affecting semiconductors could be crucial to economic growth, because an extensive range of applications would be found for more powerful devices in industry, government and national defense • He thought that it would depend on a tradeoff between the pace of scientific advance and the costs of producing more powerful devices • “Integrated circuits will lead to such wonders as home computers – or at least terminals connected to a central computer – automatic controls for automobiles, and personal portable communications equipment. The electronic wristwatch needs only a display to be feasible today.” (Moore, 1965, p. 114) • “… the biggest potential lies in the production of large systems. In telephone communications, integrated circuits in digital filters will separate channels on multiplex equipment. Integrated circuits will also switch telephone circuits and perform data processing.” (Moore, 1965, p. 114)

6. Scaling Original Dennard 1972 scaling paper

7. 90nm 115mm2 130nm 193mm2 90nm 115mm2 130nm 145mm2 Scaling Example AMD Moving from 130nm to 90nm • Significant die size reduction • Smaller die size increases yield • Initial higher cost but eventually higher margin

8. Transistor scaling limitations • The question of how to make transistors smaller without affecting their ability to function • This theory guided the design of semiconductors for 30 years, until chip makers began using the 130nm production process and classic scaling practices ran into a brick wall, at that point, chip makers could no longer scale some transistor features and power consumption rose sharply • “Transistor size is ultimately constrained by the limits of the physical world and a time will come when it is no longer possible, or economical, to fit more transistors on a chip. There will be a point where we're going to have to give up” - Hans Stork, senior vice president of silicon technology development and chief technology officer at Texas Instruments

9. Rising Cost of Semiconductor Manufacturing

10. Worldwide Semiconductor units and sales

11. Semiconductor Capital Equipment analysis • World wide trend of equipment sale • Industry trend and capital spending • Case study AMD new fab • Semiconductor capital equipment supplier • Suppliers analysis and assessment

12. 2006 Market trend • Chip production increased 12% in ‘06, 5995 MSI of silicon • Q1 ’06 -1%, +4% in Q2, second half of the year very strong • 77.5B chips were shipped for the first 6 months of the year, NAND was 5% more • Capacity grew much slower 7% for ’06 • Capacity is ~90% and expects to grow to 95%

13. AMD Fab Announcement from 2003 AMD Breaks Ground on 300 Millimeter Manufacturing Facility in Dresden, GermanyMove to Expand Manufacturing Capacity Driven by Positive Customer Response and Increased Market Opportunities for AMD64 Processors SUNNYVALE, CA AND DRESDEN, GERMANY -- November 20, 2003 --AMD (NYSE: AMD) announced today that it has broken ground on a 300 millimeter (mm) manufacturing facility (or “fab”). The facility, named AMD Fab 36, is part of AMD Dresden Fab 36 LLC & Co. KG and will be located in Dresden, Germany, adjacent to AMD Fab 30. AMD Fab 36 is expected to be in volume production in 2006. The new facility is expected to require approximately 1,000 employees, most of them highly skilled engineers and technicians. “Positive customer response and increasing momentum for our AMD64 processors make it clear that the time is right to expand our manufacturing capacity in order to effectively meet future demand,” said Hector Ruiz, president and CEO at AMD. “Our aggressive push into the enterprise computing market continues to gain traction, as evidenced by Sun’s recent adoption of the AMD Opteron™ processor and the growing success of server and workstation solutions from IBM, Fujitsu Siemens and others.” “By building in Dresden, we are able to leverage the outstanding capabilities of our existing AMD Fab 30 and gain access to the most substantial government-backed financial incentives package available to us,” said Bob Rivet, chief financial officer at AMD. “We expect AMD Fab 36 will cost approximately US$2.4 billion over the next four years. We have arranged external financing and government support of approximately $1.5 billion during that period. We believe AMD Fab 36 offers the best solution for meeting future customer demand while advancing long-term shareholder value.”

14. Fab equipment Allocation • Total cost $2600M • 25% building $650M, $1950 for Equipment • How does the $1950 divided between the different equipment type • Litho: $410M • Track (Coater, Developer): $97M • Removal (Etch and CMP): $487M • Deposition: $390M • Thermal (Furnace, RTP): $78M • Implant:$78M • Process control (Inspection and metrology): $292M • Factory Automation: $78M

15. New AMD Fab Announcement FOR IMMEDIATE RELEASE:June 23, 2006 GOVERNOR PATAKI AND AMD'S CEO RUIZ ANNOUNCE PLANS FOR MULTI-BILLION DOLLAR 300 MM SEMICONDUCTOR MANUFACTURING PLANT Plan Would Allow for the Largest Private Investment in NYS History Most Advanced Plant in the World, Creating Over 1,200 High-Tech Jobs, Thousands of Construction Jobs and More Than 3,000 Indirect Jobs Governor George E. Pataki, Dr. Hector Ruiz, Chairman and CEO of Advanced Micro Devices (NYSE: AMD), Senate Majority Leader Joseph L. Bruno and Assembly Speaker Sheldon Silver today announced plans for one of the largest private sector industrial investments in New York State history -- a multi-billion dollar deal that would enable AMD to build and operate the most advanced semiconductor manufacturing facility in the world at the Luther Forest Technology Park. This unprecedented economic development project is projected to create more than 1,200 new high-tech jobs, thousands of construction jobs, and more than 3,000 indirect jobs. Under the terms of the agreement, AMD would be able to construct a new, $600 million, 1.2 million square foot facility, equipped with approximately $2.6 billion in state-of-the-art tools designed to produce 300 mm wafers using 32nm process technology.

16. Applied Materials • Applied Materials, Inc. (*Nasdaq: AMAT) is the global leader in nanomanufacturing technology solutions for the electronics industry with a broad portfolio of innovative equipment, service and software products. At Applied Materials, we apply nanomanufacturing technology to improve the way people live.Founded in 1967, Applied Materials creates and commercializes the nanomanufacturing technology that helps produce virtually every semiconductor chip and flat panel display in the world. The company recently entered the market for equipment to produce solar arrays and energy efficient glass. From the company web site www.appliedmaterials.com • By far the largest Semiconductor Equipment Manufacturing company with revenue of $7B FY ’05 and estimated $9B FY 06’ • A “supermarket” of equipment almost all but Litho. • Recently entered the solar market equipment business • Very strong service business, trying to grow the business with IBM and GE model in mind

17. Applied Materials – cont’d • Strong position: PVD, DCVD, Epi, CMP, RTP • Week position: Ion Implant, Etch, Inspection and Metrology, Cu ECP, LPCVD • Since the company plays in most of the equipment they are competing with almost all the other equipment vendors: Novellus, KLA, Lam, Varian Semi, TEL etc. • Great in introduction new products and taking big market share • Very weak in • Etch <20% SOM –against Lam, the biggest disappointment since the market is so large • No progress in the inspection and metrology-against KLA ~20%. • Lost a lot of Market in the Ion Implant-against Varian Semi • Disaster in ECP, never got of the ground-against Novellus • Practically the market leader in • PVD-against Novellos, Ebara • CMP-against Novellus, Ebara • RTP- against Mattson • DCVD- against Novellus, ASMI

18. Lam Research • Founded in 1980, Lam Research Corporation is a major supplier of wafer fabrication equipment and services to the world's semiconductor industry. The Company's innovative etch technologies empower customers to build the world's highest-performing integrated circuits. Lam's etch systems shape the microscopic conductive and dielectric layers into circuits that define a chip's final use and function. From the company web site www.lamrc.com • Lam Research is the premier company for etching Q3 revenue of $604M • Very solid business execution • Main competitors – Applied Materials, TEL • Lam is taking Market share both from Applied Materials and TEL • Company is trying to get into the cleaning business no product announced yet. In the past other business besides Etch was very dismal and had to be shut down • Major draw back-lack of diversity and relying on one product only

19. Novellus • Novellus Systems designs, builds, and services manufacturing equipment that is used in the production of semiconductor devices, or chips.  Our chemical vapor deposition (CVD), physical vapor deposition (PVD), electrochemical deposition (ECD), chemical mechanical planarization (CMP), and surface preparation systems are used worldwide for the volume production of advanced semiconductor devices at the lowest overall cost to our customers. Novellus was established in 1984. From the company web site, www.novellus.com • Novellus is very successful company in the CVD and ECP. ’06 estimate revenue $1.45B. The increase of products offering was done through acquisitions • CMP- IPEC • PVD-Varian • ECP-JV with IBM • Cleaning-Gasonix

20. Novellus-cont’d • Novellus is a long time competitor of Applied Materials especially in the CVD area • Novellus strength is in the following market place • Certain DCVD deposition • Tungsten CVD (very high SOM) • Cu ECP (practically 100% SOM) • Novellus weakness is the following market place • PVD • CMP • Last two years hired many Applied Materials executives

21. Tokyo Electron (TEL) • The Number 2 Semiconductor Capital Equipment in the world based in Japan • In 1963, a group of young and innovative entrepreneurs established TEL, the first company to introduce American semiconductor production equipment and integrated circuit (IC) testers to Japan. Since then, the company has grown to encompass nearly 80 offices in 16 countries that engineer, manufacture, sell, and service wafer-processing or semiconductor production equipment (SPE), as well as flat panel display (FPD) equipment. As the world market share leader in several product lines, TEL plays a vital role in the evolving global semiconductor industry. From the company web site.www.tel.com • 2005 revenue $6B • TEL is the Japan “Applied Materials” a diversified manufacturer

22. Tokyo Electron (TEL)-cont’d • Strength • Thermal process furnaces practically 100% SOM _”commodity“ • Track coater/developer-practically 100% SOM, raising the price all the time, printing money machine!!!! • Special MCVD • ETCH- number 2 after Lam • Number 1 in wafer probing

23. KLA-Tencor • KLA-Tencor Corporation is the world's leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries. The company's comprehensive portfolio of products, software, analysis, services and expertise is designed to help IC manufacturers manage yield throughout the entire wafer fabrication process-from R&D to final yield analysis. Since yield improvements are key to increasing manufacturing productivity and profitability, the yield management market that KLA-Tencor leads has outperformed the semiconductor capital equipment market segment as a whole. From the company web site, www.kla-tencor.com • FY’06 revenue $2.1B, Q1’07 revenue $630M. • The premier company for Inspection and metrology with little or no competition in several markets it compete. • KLA-Tencor was formed in 1997 as a merger between KLA and Tencor after Applied Materials entered to the inspection market with the acquisition of Opal and Orbot Instrument • KLA-Tebcor is the Applied Materials of the inspection and metrology- a giant supermarket

24. KLA-Tencor cont’d • Main competitors ; Applied Materials and Hitachi to lesser extent Rudolph, Nanometrix and PDF solutions • Market KLA-Tencor strong • Inspection, dark field and bright field, the “bread and butter” products • Reticles inspection • Overlay inspection • Surface inspection • Market KLA-Tencor weak • SEM review-Applied Materials • CD SEM recently exit the market-Applied Materials and Hitachi • Big effort in Yield and related software but all are to leverage equipment sales

25. ASML • ASML systems -- called steppers and Step & Scan tools (scanners) respectively -- use a photographic process to image nanometric circuit patterns onto a silicon wafer, much like a camera prints an image on film. ASML researches, develops, designs, manufactures, markets and services lithography systems used by the semiconductor industry to fabricate state-of-the-art chips. Most of the major global semiconductor manufactures are ASML customers. For chipmakers, technological advancement in imaging means increased manufacturing productivity and improved profitability. From the company web site. www.asml.com • The premier company for stepper over 53% SOM with Nikon of 30% (2005) and Canon as the competitors • The latest immersion 193nm tool is $26M by far the most expensive tool in the fab • Extremely complicated equipment with a lot of R&D expenses, long cycle between an order and shipment

26. ASML -cont’d • The only industry in the Semi capital equipment that quote the actual number of tools that they are shipping. • In Q3 ASML shipped 59 new and 12 refurbished systems for sales of $1.1B and generated revenue from field option and service sales of $130M. In Q2 2006, ASML shipped 58 new and 14 refurbished systems for sales of $1.08B million and generated revenue from field option and service sales of $129M million.

27. Summary • The Semiconductor Industry is live and kicking!! • The number of units sold keeps on increasing… • The Semiconductor Capital Equipment Industry is a cyclical industry and will continue to be like that • The industry plagued by over supply and under supply • Overall only few companies controlling most of the business • The rising cost of new Fabs limits the number of companies that can afford having a Fab • Rising cost of Litho equipment could become a real crisis • What’s next?

28. Prediction is very difficult, Especially if it’s about the future Niels Bohr

29. Appendix

30. Basic Industry Terminology Integrated Circuits (ICs) • Single piece of semiconductor (silicon) with many interconnected transistors and other electronic devices. • Multiple ICs combined with electronics are used to create electronic products. • Semiconductors Capital Equipment companies, sell, and service the chemicals, tools, people and processes to make these ICs

31. Basic Industry Terms FABs • Place where microelectronics can be manufactured • Requires precise control of lengthy and complex set of processes • Uses dedicated and highly specialized tools • Conducted by specially trained individuals • Extremely clean environment where good yield can be maintained

32. Wafer Process • Thermal Processing and Ion Implantation • Oxidation • Doping and Activation • Film Deposition • Chemical Vapor Deposition • Physical Vapor Deposition • Electro-Chemical Plating • Film Removal/Patterning • Photolithography • Etching • CMP • Metrology and Inspection in the Fab

33. The original Moore’s law The original Moore’s law prediction from 1965 Cramming more components on integrated circuit

34. Interconnect 1947 8 layers Cu Transistor 30nm Gate Lg Technology Progress 2006

35. Topological SEM Views of Poly Patterning (top view) Poly Gates P+ N+ Poly Gates N+ P+ Poly Gates 90501_21 / 90501_TPI (Strategic Selling Conf. II - Q3’99)_21

36. Metal 3 via Metal 2 via Metal 1 Metal 1 contact Silicon substrate Copper Interconnect technology

37. IC’s basic • Overall IC’s industry divided between • Logic • Memory • Logic circuits are the basic building blocks used to realize consumer and industrial products that incorporate digital electronics • logic circuits respond to combinations of input signals • Logic networks which are interconnected so that the current set of output signals is responsive only to the current set of input signals • Microprocessor are the most complicated but also the most profitable logic circuit the industry is involved with

38. DRAM Basic

39. Overview of Different Memory types • DRAM cell has one transistor and one capacitor. The charge on the capacitor need to be refreshed frequently. When the power removed from the device the information on the DRAM chip is lost • SRAM Cell has 6 transistors. Very fast memory chip with relatively big and complicated cell. No need to refresh!! Used mainly as an on board of a mP memory. The information in the SRAM memory chip is lost when the power is switched off. Stand alone memory market for SRAM is declining • FLASH memory has the advantage that the information stored in the chip is not lost when the power is switched off. The charged is stored in a capacitor between two poly gates the floating gate and the control gate

40. Semiconductor memory market

41. Basic DRAM concept • DRAM: Dynamic Random Access Memory • RAM memory: data storage (writing) and retrieving (reading) are done rapidly and the cells can be accessed in random order • DRAM: the data storage is done by charging a capacitor • Dynamic: the charge on the capacitor leaks and needs to be periodically restored or refreshed (volatile memory) • The data is not retained for a long time, even when power is on. Data retention: a few msec to a few seconds • The DRAM is the most widely used form of semiconductor memory (needed in all computing & communicating systems

42. DRAM Cell Basics • A DRAM circuit is made out of the 3 following blocks: • Memory array (array of cells) • Circuits aligned to the memory pitch (pitched blocks) • Periphery circuits (periphery blocks) Pitched blocks Memory array (only 55 to 65% of the chip area) Periphery blocks

43. DRAM Cell Basics • A modern DRAM cell or bit is formed with 1 Transistor (a switch) and 1 Capacitor (a storage element): 1T/1C cell • The cell holds binary information in the form of a charge on the capacitor • The cells are connected to 2 conductive lines: • The Digit line or Bit line or Column to bring/retrieve information • The Word Line or Row to control the switch Word Line T Vcc/2 C Vcc for logic « 1 » 0 for logic « 0 » Q = +/- C Vcc/2 Bit Line Vcc or 0

44. DRAM Market • DRAM is a homogeneous product, and a standard one • DRAM market is very volatile and highly cyclical • There are only a handful of major DRAM manufacturers in the global market • The top 3 manufacturers controlled over 75% of the global market • Major issues for DRAM manufactures are • Cost of new Fabs • Cost of Fab has no salvage value • Fab’s cost just going higher and higher • R&D cost is also continues to escalate • Imbalance between supply and demand • DRAM market growth is correlate to the growth in the world economy

45. Most US DRAM makers exit Many mergers DRAM Cost and Profit • DRAM: lowest cost memory (1T/1C): today 10-7 $/bit • DRAM production costs: -26% per year for cost/bit • DRAM Bit price trends:

46. FLASH Basic

47. NOR vs NAND

48. Flash Read /Write /Erase Mechanism CG CG CG FG FG FG Write Erase Read • Apply voltage to CG • If e-present in FG - no conduction between source and drain • If e- is absent conduction happens • Apply voltage to source • e- transfer occurs from FG to source • Apply voltage to control gate • e- tunneling occurs from channel to FG

49. 2006 Market Trends • Chip production increased 12% in ‘06, 5995 MSI of silicon • Q1 ’06 -1%, +4% in Q2, second half of the year very strong • 77.5B chips were shipped for the first 6 months of the year, NAND was 5% more • Capacity grew much slower 7% for ’06 • Capacity is ~90% and expects to grow to 95%

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