[SEMI Theater] Disappearing Supply Chain from Silicon Valley?

The Semiconductor Supply Chain, a Moving Market By John Housley Techcet Group, LLC

Techcet Group, LLC • Strategic Planning and Business Development Consulting – Specialized in Electronic Materials Supply Chain Business & Technical Trends • Techcet Critical Material Reports* : • Solar Cell Process Materials • CMP Consumables • Solar Cell Equipment Consumables • Gases • Polysilicon Market and Supply Chain • Graphite • Ceramics • Masks and Reticles • High K/ALD Precursors • Photoresists and Photoresist Ancillaries • Interconnect Materials Beyond 65nm • Quartz • Ion Implant Sources • Silicon Carbide • Liquid Dopants • Sputter Targets • Low Temperature Dielectric Precursors • Wet Chemicals • Advanced Interconnect Dielectrics • Advanced Interconnect Metallization Techcet Group, LLC * Several Critical Materials Reports are www.techcet.com commission by International Sematech. 2 December 2009 www.techcet.com 2

Supply Chains We Follow  Semiconductor Materials, both direct and indirect  OEM suppliers  Intellectual treasure  Skilled Labor

OEM Semiconductor Supply Chain- Silicon Valley  In 2008-2009 we were losing 3-4 machine shops and related supply chain providers per month  In 2010, newer generation risk takers are buying equipment and older shops are running at full capacity  Currently no shortage or most raw materials  This supply chain is recovering, but still very vulnerable to the Asia shuffle

Intellectual Treasure Supply Chain  Graduate and  Will this discourage experienced Engineers future generations of working on daily hard science majors? contracts  Can American  New Graduates, graduates compete with Engineers, physics and Asian engineers on a Chemistry majors cost basis? working at Starbucks.  Is it worth it?  New Engineers that are hired working for much lower salaries

Skilled labor supply chain  If fabs move out of Silicon Valley, the jobs for skilled labor moves or dies  Few opportunities for occupational training  With the repeated industry ups and downs, many skilled workers switch industries.  SEMI and other companies have had good luck with their High Tech U program.

Materials Supply Chain, Always Looking for the Lowest Link

Electronic Materials Semiconductor Indirect materials as Materials 3% Direct measured in Materials US$ 28% Packaging 47% Silicon 22% Techcet Group, LLC www.techcet.com CGMG-SemiconW 2010 8

Supply Constraints/ Drivers Other Markets Market Drivers Demanding Same Materials • Portable Applications Driving Need for Materials Smaller Geometry IC’s Business Growth/ • Cloud Computing Driving Demand for Profitability Simpler Technologies Raw Material Production Si/ polySi Flexibility Wafer Prices Techcet Group, LLC 9 January 2010 www.techcet.com

Crazy Supply Chains  Makers selling to: Manufacturers, “Blenders”, Purifiers and Repackagers who sell to each other  OEMs competing with like parts/ materials suppliers (quartz, targets, post CMP cleaning)  Users always trying to buy deeper in the chain to save money and control POR Techcet Group, LLC www.techcet.com CGMG-SemiconW 2010 10

Silica Worldwide Use Hot growth areas: • “green” tires (US & Europe) • reinforced silicone-rubber in shoes (Asia) • toothpaste (China) >5% CAGR Other • electronics (CMP WW) Coatings 9% • cosmetics (WW) 8% Rubber “Rise in Chinese Economy Boosts Electronics 36% Toothpaste Market” 10% alkoxysilane 3% Investment Castings fumed 17% Health 31% 20% Consumption Source: USGS colloidal 66% 11 July 2010 Techcet Group, LLC www.techcet.com

Indirect Materials Supply Chain Mines Base Material Supplier Quartz Fabricators Cold Cold & Hot Hot OEM Eqt. Supplier End User (IC Fabricator) Techcet Group, LLC www.techcet.com CGMG-SemiconW 2010 12

Supply Chain Shift  Makers selling to end users  US Makers consolidating or getting out of the business  Solvents being minimized in IC Fabs  Asian material supplier market growing  For other chemicals such as acids, we are too picky and cheap Techcet Group, LLC www.techcet.com CGMG-SemiconW 2010 13

Gases & Wet Chemicals $4,000 $3,500 $3,000 Revenues ($M's) $2,500 Specialty Gases $2,000 $1,500 Ambient Gases $1,000 $500 Wet Chemicals $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Consumption Specialty Products and Smaller Quantities Relegated to Source: USGS Smaller Companies and Local Suppliers Larger Companies Primarily Want to Deal in Bulk Volumes and Cater to Asia January 2010 Techcet Group, LLC 14 www.techcet.com

Indirect Materials Hit Hard – Quartz and SiC Markets SiC and Quartz ($Ms) $1,000 40% Both SiC and Si $900 SiC 35% Revenues ($M's USD) SiC as a Percent of Total $800 Quartz Fabrication continue to gain $700 30% 25% relative market $600 $500 20% shares $400 $300 15% 10% Graphite losing $200 $100 5% ground based on $0 2003 2004 2005 2006 2007 2008 2009 2010 0% “dirty” perception Silicon and SiC have such a better CTE, and cleaner reputation, they are hard to beat January 2010 Techcet Group, LLC 15 www.techcet.com

Targets - Tantalum Supply and Demand • Poor demand impacting Ta market • Main Ta Mine Moth-balled Ta 2000 2010 est comments Supply Australia 1.3 0.0 Mines shutdown Africa 0.79 1.025 Humanitarian issues Brazil 0.42 0.85 • 2009 Ta Target Revenues ~ $70M China 0.37 0.33 will soar to >$140M in 2010 due SE Asia Consumption 0.25 0.27 to price escalation Canada 0.17 0.15 Others 0.05 0.19 Recycled 0.75 0.5 Stockpiles 0.65 0.42 January 2010 Total Supply 5.25 3.735 December 2009 Techcet Group, LLC Demand Techcet Group, LLC 5.2 4.2 16 www.techcet.com Shortfall www.techcet.com 0.05 0.465 16

Polysilicon Established Suppliers New Entrants 500% 450,000 450% Annual Capacity (MT/Yr) 400,000 Price Fluctuation 400% 350,000 350% 300,000 300% 250,000 250% 200,000 200% 150,000 150% 100,000 100% 50,000 50% 0 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: SEMI and Techcet January 2010 Techcet Group, LLC 17 www.techcet.com

CMP Slurry & Pad Materials Market 2,000 Cu Barrier 1,800 Cu Step 1 Annual Revenue (M$USD) Tungsten 1,600 Oxide 1,400 S-STI Slurry & Pad 1,200 1,000 800 600 400 Consumption 200 0 2006 2007 2008 2009 2010 July 2010 Techcet Group, LLC 18 www.techcet.com

Supply Chain Cross-Links  PV Materials Markets drive for lower cost will impact ASPs of Like SC Materials  Already happening in TFT area - Gases Meters of Solar Cell Substrates Thin Film CAGR of 120.0 20%+ expected 100.0 CIGS/CIS CdTe over 5 yrs 80.0 Millions of m2 a-Si/mx-Si c-Si 60.0 40.0 20.0 January 2010 Techcet Group, LLC 0.0 www.techcet.com 2008 2009 2010 2011 2012 2013 19

Front End Process Materials* $14,000 Ceramics Silicon Carbide $12,000 Quartz Indirects Graphite Revenues (M$'s) $10,000 Wet Chemicals $8,000 Ancillaries Targets Photoresist Ancillaries $6,000 Photoresist Masks $4,000 Masks Gases Gases $2,000 CMP CMP Electroplating $0 Adv.Dielec. and SOGs 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 * Without Silicon Techcet Group, LLC January 2010 www.techcet.com 20

Worldwide Estimated Photoresist Market Size (in US$) 1800 1600 1540 1400 Annual Revenue in $M 1400 1300 1230 1200 1150 1200 950 1000 800 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 Cost Per Puddle Puddle size Puddles Per Wafer January 2010 Techcet Group, LLC 21 www.techcet.com

Conclusions? These four supply chains are at major risk Growth in Asia continues, causing much of this risk Some jobs can switch to software or bio-engineering, but where is the re-training for the over 45 group? For materials, US laws and regulations affect an aging and disappearing manufacturing base Growth areas in SC Materials Litho – 193 nm ArF resists Interconnect Materials (CMP, dielectrics, metals) > $2B Front End Materials (dielectrics, metals) <$200M by 2015 December 2009 Techcet Group, LLC 22 www.techcet.com December 2009 Techcet Group, LLC 22 www techcet com

Acknowledgements • SEMI - Dan Tracy, Ph.D. and Lara Chamness • TechSearch International - Jan Vardaman • VLSI Research – Risto Puhakka • Techcet Partners and Associates – Lita Shonroy – Partner – Karey Holland, Ph.D. – Partner – Steve Holland, Ph.D.– Partner – Mike Fury, Ph.D. – Director / Sr. Technologist – Allan Wiesnoski – Director / Sr. Market Analyst – Jiro Hanaue – Associate Market Analyst Techcet Group, LLC December 2009 www.techcet.com Techcet Group, LLC 23 December 2009 www.techcet.com 23

[SEMI Theater] Disappearing Supply Chain from Silicon Valley?

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[SEMI Theater] Disappearing Supply Chain from Silicon Valley? Presentation Transcript