The semiconductor industry is undergoing dynamic changes as technology challenges escalate due to the end of scaling and declining prices/shortening lifecycles. R&D and manufacturing investment requirements are becoming unaffordable for many smaller companies. As a result, companies globally are adopting an "asset-lite" strategy and manufacturing is moving offshore to large-scale foundries. Revenue growth of the IC industry will remain lower than traditional rates in the single digits rather than double digits, though productivity will still improve at lower rates. Partnerships will be important for development, manufacturing, and delivering technology leadership given mounting investment needs.

1. The Semiconductor Edge Business Circles

2. Present Industry Overview Industry is undergoing Dynamic changes Technology challenges are escalating due to the end of scaling Declining prices and shortening lifecycles R&D and manufacturing investment requirements are becoming unaffordable for many companies

3. Present Industry Overview Industry is undergoing Dynamic changes Result Industry financials are causing liquidations, consolidations, and JVs Small players cannot afford increasing R&D and manufacturing investments Companies globally following “Asset-lite” strategy Growth of semiconductor manufacturing foundries Manufacturing is moving offshore to large scale foundries

4. Present Industry Overview Conclusion

5. Business Dynamics Huge Productivity Exponential decrease in $/function R&D Exponential growth in investment in R&D, Manufacturing, & infrastructure Exponential growth of revenue New Markets Exponential growth in consumption of circuits

6. Industry Trends & Impacts Revenue growth rate of the IC industry to remain lower than traditional rates (single digit vs. double digit). Productivity will improve, though at lower rates Partnerships in development and manufacturing Consolidation Growth and dependency on foundries and off shore manufacturing THE IMPACT

7. Industry Trends & Impacts More focus will be on innovative transistor structures, materials, circuits, design, and systems architecture Investment in R&D required for leadership will continue to grow Traditional drivers of productivity advances will be shifting Partnership model to deliver technology leadership and support the mounting investment to continue the lead THE IMPACT

8. Actions in USA Holds only 21 % of manufacturing capacity and 25 % at leading-edge. But both shares are declining Drives design and process R&D U.S. still drives the global IC industry; though future uncertain

9. Actions in China Share of global manufacturing capacity has grow from 6% in 2006 to 10% in 2007 Most fabs are 2-3 generations behind; but the gap will close Process R&D cluster emerging in Shanghai and Beijing IC design primarily low-end; likely to consolidate with fewer stronger players moving into advanced designs China has grow quickly as a mfg power but slowly in design & technology

10. Actions in Taiwan Design industry will continue >30% growth, expanding share and moving beyond computing and “follower” designs Share of global manufacturing will increase from 23% in 2006 to 27% in 2007 Taiwan is strengthening leading-edge mfg, design, and process integration R&D

11. Conclusion Semiconductor manufacturing capabilities are being driven offshore by market realities Only vertically integrated US IDM’s will be able to stay the course in semiconductors for the near term (4-8 years) Design and integration capabilities will migrate with manufacturing capabilities

12. A Ravi Vishnu Presentation