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"Business Changes and Challenges in the Competitive
Semiconductor Industry"
Allen C.-H. WuSyntronix Corporation
June 29 2007
Syntronix Corporation © 2007206/29/2007
Outline
Induction to Semiconductor Business
Semiconductor Industry Trend
Electronic-Product Supply Chain
DRAM Business Trend
ASSP/ASIC Business Trend
Syntronix Corporation © 2007306/29/2007
Worldwide GDP Changes vs. Electronic System Growth/Semiconductor Industry Growth
Worldwide GDP Change
1.7%
4.6%
3.9%
3.4%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
F
Electronic System Growth/Semi Industry Growth
7%10%
28%
-32%
5%
7%
13%
-14%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
85 87 89 91 93 95 97 99 01 03 05 07F
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
WW Semi Indust ry Growth World Ele c t ronic System Growth
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 2007406/29/2007
GDP by Nation
2003-2007 GDP Trends
3.1
0. 4
2. 73. 1
1. 1
3. 2 3. 3
4. 2 4. 4 4. 6
6. 4
5. 7
4. 6
3. 5
1. 4
9. 9
4. 64. 3
4 3. 9
2. 1
5. 1
7. 8
4
2. 41. 9
9. 3
4. 3
5
3. 5
9. 1
10. 1
1. 7
2. 3
10. 5
3. 9
2. 3
3. 33. 4
2. 2
0
2
4
6
8
10
12
An
nu
al P
erce
nt
Ch
ang
e
2003
2004
2005
2006
2007F
2003 3.1 0.4 2.7 9.1 3.1 1.1 3.2 3.3
2004 4.2 1.7 4.4 10.1 4.6 6.4 5.7 4.6
2005 3.5 1.4 2.3 9.9 4.6 4.3 4 3.9
2006 3.3 2.3 2.1 10.5 5.1 7.8 4 3.9
2007F 2.4 1.9 2.2 9.3 4.3 5 3.5 3.4
U.S. Europe Japan China S. Korea Singapore Taiwan Worldwide
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 2007506/29/2007
Electronic System Semiconductor Content
System Type 2005 % of Total 2006 % of Total 2007 % of TotalComputer 97.9 50.8% 103.6 49.6% 110.5 49.6%Communications 47.2 24.5% 52.1 24.9% 55.7 25.0%Consumer 25.2 13.1% 29.1 13.9% 31.1 13.9%Automotive 10.9 5.7% 12.3 5.9% 13.2 5.9%Industrial 10.6 5.5% 11.0 5.2% 11.5 5.2%Gov/Military 0.9 0.5% 0.9 0.4% 0.9 0.4%Total 192.8 100.0% 209.0 100.0% 223.0 100.0%
2005
50.8%24.5%
13.1%
5.7%
5.5%
0.5%
Computer communications consumer
Automotive Industrial Gov/Military
2006
49.6%
24.9%
13.9%
5.9%
5.3%
0.4%
Computer communications consumer
Automotive Industrial Gov/Military
2007F
49.6%
25.0%
14.0%
5.9%0.4%
5.2%
Computer Communications Consumer
Automotive Industrial Gov/Military
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 2007606/29/2007
Worldwide PC Shipments
Worldwide PC Unit Shipments
128
146139 142
158
182
231
258
295305
338
210
0
50
100
150
200
250
300
350
99 00 01 02 03 04 05 06 07 08 09 10
Mil
lio
ns
of
Un
its
99 00 01 02 03 04 05 06 07 08 09 10
2006 PC Unit Shipment Estimate by System Type
34%
2%64%
Notebook PC Servers Desktops
0
50
100
150
200
250
300
350
99 00 01 02 03 04 05 06 07 08 09 10
Bil
lions
of D
oll
ars
PC ICs
Other ICs
10%
12%
14%3%
11%
39%
36%
34% 38%37%
36%36%35%
35%
34%34%
34%
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
(2010:46%)
(2010:52%)
Syntronix Corporation © 2007706/29/2007
Mobile Phone Shipments
163275
415 385 420520
670805
985 10501230 1290
1410
61%69%
51%
7% 9%
24%29%
20% 22%
7%17%
5% 9%0
300
600
900
1200
1500
98 99 00 01 02 03 04 05 06 07 08 09 10
Milli
ons
of C
ellu
lar H
ands
ets
0%10%20%30%40%50%60%70%80%
Gro
wth
Rat
e
Worldw ide Handset Shipments Grow th Rate
New ultra-low-cost phone demands for China/India/Africa:2006: 7% 2010: 41%
Camera Phones:2006: 53% (mainly<2M)2010: 78%(mainly>2M)
2G/2.5G GSM/GPRS/3G2006: 12%/67%/21%2010: 2%/59%/39%
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 2007806/29/2007
Worldwide TV Units Shipments
185 190 202 210 215
177
20%28%
37%50% 54%
64%
0
50
100
150
200
250
05 06 07 08 09 10
Mill
ions
of U
nits
0%
20%
40%
60%
80%
100%
% D
TV
Millions of Units % DTV
2006: DTV => 5M units/28% ( 77% LCD)
2010: DTV => 64% ( 84% LCD)
2007: DTV => 37% growth
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 2007906/29/2007
Worldwide IC Market by RegionWorldwide IC Market by Region(2001-2011)
27%19% 19% 19% 16%
22%
17% 16% 15%12%
22%
17% 17% 16%
13%
29%
47%59%
50%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2005 2006 2007 2011
Mar
ket
shar
e
Asia -Pa c i fi c
Japan
Europe
Ame ric a s
2006 Regional Market IC Average Selling Prices
$2. 88
$1. 74$1. 55$1. 24
$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00
Asia-Pacific Japan Europe Americas
AS
P
China/Hong Kong 45.1%Taiwan 26.1%South Korea 13.0%Singapore 9.4%
China/Hong Kong 56.0%Taiwan 21.9%South Korea 10.2%Singapore 7.1%
Source: IC-Insights(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 20071006/29/2007
Worldwide Semiconductor Capacities
Source: SICAS(2007/03); ITRI/IEK(2007/03)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
01Q1 01Q2 01Q3 01Q4 02Q1 02Q2 02Q3 02Q3 02Q4 03Q1 03Q2 03Q3 03Q4 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2Q5Q305Q4 06Q1 06Q2 06Q3 06Q4
Th
ou
dsa
nd
pcs
/we
ek
12% 11% 12% 11% 12% 12% 11% 11%
14% 13% 13% 12% 12% 12% 12% 12%
13% 13% 13% 13% 13% 13%12% 13%
8%7% 7%
7% 7% 7%7% 7%
12%12% 11% 11% 11%
11%10% 10%
20%20% 19% 19% 19%
19%19% 19%
21% 23% 26% 28% 31% 35%41% 45%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
05Q1 05Q2 05Q3 05Q4 06Q1 06Q2 06Q3 06Q4
MOS<0. 12um
MOS<0. 16um to >=0. 12um
MOS>0. 2um to >=0. 16um
MOS<0. 3um to >=0. 2um
MOS<0. 4um to >=0. 3um
MOS<0. 7um to >=0. 4um
MOS>=0. 7um
Syntronix Corporation © 20071106/29/2007
Outline
Induction to Semiconductor Business
Semiconductor Industry Trend
Electronic-Product Supply Chain
DRAM Business Trend
ASSP/ASIC Business Trend
Syntronix Corporation © 20071206/29/2007
Semiconductor Industry Trend (I)
Moore’s law
Continuous advance technology developments
Cost down
Syntronix Corporation © 20071306/29/2007
Semiconductor Industry Trend (II)
Advance FabTechnology
Advance DesignTechnology
Cost Down/Performance Up
Large QuantityAdvance Design/Manufacturing Technology
Syntronix Corporation © 20071406/29/2007
Semiconductor Industry Trend (III)
Does Moore’s law still the driver?What types of products (and the total demands)
need technology of 90nm & below?How many players can afford it?
Syntronix Corporation © 20071506/29/2007
Semiconductor Industry Trend (IV)
Technology Driven Market DrivenProduct competitiveness by migrating designs into advanced process technologies (more # of dies + more features => lower cost)!Technology barrier among players is narrowingWhat are the main differential points between players? TTM, Cost & Key IPs.
Syntronix Corporation © 20071606/29/2007
Semiconductor Industry Trend (V)
Is semiconductor industry entering the traditional industry era???
Mature technologies + limited applications => many players can enter the ball game and compete in the same marketProfit margin dropsSlow growthThe bigger is getting bigger
Syntronix Corporation © 20071706/29/2007
Outline
Induction to Semiconductor Business
Semiconductor Industry Trend
Electronic-Product Supply Chain
DRAM Business Trend
ASSP/ASIC Business Trend
Syntronix Corporation © 20071806/29/2007
Electronic-Products Supply Chain
Consumers $$$
Sales Channel
ElectronicProducts
Chips OtherComponents
Standard ICsASSPsASICs
Direct SalesDistribution Network
SystemCompanies
OEMODM
IDMFabless/Foundry
Memory
OtherComponents
Syntronix Corporation © 20071906/29/2007
Three Major Chip Categories
Standard ICsCPU: (INTEL:INTEL:INTEL)Memories: Cost is the key!
ASSPs /ASICsDesign-in capability is the key!
Syntronix Corporation © 20072006/29/2007
Outline
Induction to Semiconductor Business
Semiconductor Industry Trend
Electronic-Product Supply Chain
DRAM Business Trend
ASSP/ASIC Business Trend
Syntronix Corporation © 20072106/29/2007
Worldwide DRAM Market
15 16 18 25 28 34 34 32 40 41 41 4362 71
80
110
140152
168179
240
9.6%12.5%
38.9%
10.5%
21.3%
2.0%
5.5%
23.7%
1.6%0.1%
6.5%
42.7%
14.9%13.2%
36.8%
27.3%
8.6%7.2%
9.8%
34.1%
0
50
100
150
200
250
300
350
400
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
B p
cs
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Gro
wth
Rat
e
Billion pcs Grow th Rate
Vista System
Source: Gartner(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 20072206/29/2007
1987 Market Share
Total Market 2,902
NEC 469 16.2
Fujitsu 409 14.1
Toshiba 379 13.1
TI 320 11.0
Mitsubishi 292 10.1
Hitachi 279 9.6
Samsung 153 5.3
OKI 152 5.2
1992 Market Share
Total Market 8,765
Samsung 1,192 13.6
Toshiba 1,123 12.8
NEC 894 10.2
Hitachi 824 9.4
TI 667 7.6
Mitsubishi 628 7.2
Fujitsu 547 6.2
LG Semicon 513 5.9
2004 Market Share
Total Market 26317
Samsung 8119 30.9
Hynix 4288 16.3
Micron 4167 15.8
Infineon 3499 13.3
Elpida 1569 6.0
Nanya 1186 4.5
PowerChip 1128 4.3
ProMOS 900 3.4
Worldwide DRAM Market Share
2005 Rank
2006 Rank
2005 2006 2005-2006 Change
2006 Share
1 1 Samsung 8,020 9,834 22.6% 28.7%
2 2 Hynix 4,111 5,644 37.3% 16.5%
4 3 Qimonda 3,181 5,370 68.8% 15.7%
3 4 Micron 3,867 3,697 -4.4% 10.8%
5 5 Elpida 1,784 3,489 95.6% 10.2%
6 6 Nanya 1,440 2,111 46.6% 6.2%
7 7 Powerchip 1,027 1,479 44.0% 4.3%
8 8 ProMOS 871 1,462 67.9% 4.3%
#1 Japan; #2 USA; #3 Korea #1 Samsung #1 Korea; #2 TaiwanUSA/EU/Japan only 1 company left
Korea #1, world market share 45.2% (Hynix:ProMOS foundry)Taiwan #2, world market share increases: by products 18%, by capacity 25%Qimonda15.7% (Nanya: foundry)Micron world market share drops to 10.8%Elpida 10.2% (PSC: foundry)
Source: Dataquest(2007/02); ITRI/IEK(2007/03)
Syntronix Corporation © 20072306/29/2007
Worldwide DRAM Strategy Changes
Terminated the business/Sold the fabTI, IBM, ToshibaVanguard, Mosel, Winbond
Established New CompaniesElpida (by NEC, Hitachi, Mitsubishi)Rexchip (by Elpida, PSC)
Merged, Purchased fabMicron (TI, Toshiba)
Capacity & Technology CooperationInfineon: Nanya, Winbond, SMICElpida: PSC, SMICHynix: ProMOS
New PlayersSMIC, Grace
Syntronix Corporation © 20072406/29/2007
Worldwide DRAM Supply and Demand
2006 2007 2008 2009 2010 2011 2012
Worldwide DRAM demand (B pcs) 79 110 141 154 166 181 210
Growth rate 17.8% 38.3% 28.8% 8.8% 7.7% 9.1% 16.3%
#12” fabs (40k wafers/month) 23 31 35 40 47 52 57
2006 2007 2008 2009 2010 2011 2012
Samsung 4 5 6 8 10 12 14
Hynix 1 2 2 3 3 4 4
Micro 1 2 2 2 2 2 2
Qimonda 2 2 2 2 3 3 3
Elpida 1 1 1 2 2 2 2
SMIC 1 2 3 3 3 3 3
Subtotal 10 14 16 20 23 26 28
PSC+Rexchip 3 4 5 8 11 12 13
Nanya+Inotera 1 3 4 5 5 6 6
ProMOS 2 3 4 5 6 7 7
Winbond 1 1 1 1 1 1 1
12” fab in Taiwan 7 11 14 19 23 26 27
Total 17 25 30 39 46 52 55
Demand : # of 12” fabs
Supplier : # of 12” fabs
Syntronix Corporation © 20072506/29/2007
DRAM Business Trend
A typical commodity business
Pricing is the key to success
Keep pushing cost-driven advanced design and manufacturing technologies
Market-driven penny-pinch cost-down strategy on the entire supply chain
Syntronix Corporation © 20072606/29/2007
Outline
Induction to Semiconductor Business
Semiconductor Industry Trend
Electronic-Product Supply Chain
DRAM Business Trend
ASSP/ASIC Business Trend
Syntronix Corporation © 20072706/29/2007
IDM v.s. Fabless/Foundry
CustomersChip
Sales &Marketing
R&D Manufacturing
Sales &Marketing
R&D Manufacturing
IDM
MaskProduction
WaferProduction
WaferTest
FinalTest
Fabless / Foundry
Assembly
Syntronix Corporation © 20072806/29/2007
Product Trend
Two camps: luxury and low-cost items
Lack of killer applications
3C(Computer, Communication, Consumer) integration: what’s next?
Hardware may not be the profit source, software and service will be the main profit sources!
Free phone + serviceCheap game box + softwareScanner + suppliers
Syntronix Corporation © 20072906/29/2007
Cost-Driven ASIC/ASSP Sales Strategy
Reducing the overall cost by squeezing the entire supply chain
Establishing alliances and partnerships in order to guarantee capacity and pricing
Locality market-driven sales strategy
=> China: total solution based sales strategy
=> Japan: multiple agent and distribution channelsproblem!
Strong design-in capability and service
Syntronix Corporation © 20073006/29/2007
Cost Structure
SalesPrice = Direct Cost+ Indirect Cost + Profit
Customers Sales/MarketingCost
R&D Cost
ManufacturingCost
MaskProduction
WaferProduction
WaferTest
Assembly FinalTest
Syntronix Corporation © 20073106/29/2007
Globalization Cooperation Strategy
GlobalizationCost reductionTime-To-MarketMarket Locality
Design ManufacturingSales &Marketing
Library Software
SoC Design
IPs Integration
Wafer Production
Assembly Test
JapanUSA
EU
Taiwan
India Korea China
Syntronix Corporation © 20073206/29/2007
Design, Manufacturing and R&D Costs of 45nm/32nm Process
45nm 32nm
Fab $3B $5B-10B
Process R&D $2.4B $3B
Design $20M-50M $75M
Mask $9M NA
Source: EE Times, Synopsys, VLSI Research
Syntronix Corporation © 20073306/29/2007
Technology Trend
Deep submicron technology(65nm up), R&D cost is very expensive
Co-development with foundry companiesOwn technology
Chip development cost is getting higher and higherOnly the top players will surviveChip development strategy is changing
Syntronix Corporation © 20073406/29/2007
Semiconductor Industry Evolution
IDM
Fabless/Foundry
What’s next?
“ IC Industry in midst of fundamental change”Wofgang Ziebart-Infineon CEO
Syntronix Corporation © 20073506/29/2007
Business Trend
Cost-down strategy
More strategic partnerships
Market Driven: Name-brand (Luxury items) and
Non-Name-brand (Low-cost items)
Moving toward traditional industry
Syntronix Corporation © 20073606/29/2007