Accelerating China’s IC Industry Future Ken Schroeder, Chief Executive Officer.

Accelerating China’s IC Industry Future

Ken Schroeder, Chief Executive Officer


AgendaAgenda

KLA-Tencor overviewKLA-Tencor overview

China’s IC industry today: China’s IC industry today: Advantages and challengesAdvantages and challenges

Looking to the Future:Looking to the Future:3 strategies for IC manufacturing success3 strategies for IC manufacturing success

Gaining a competitive edge: Gaining a competitive edge: The unique role of process controlThe unique role of process control

SummarySummary


Corporate HighlightsCorporate Highlights

#1 #1 semiconductor process semiconductor process control company in the control company in the world world

≈ ≈ 4800 employees 4800 employees worldwide, in 22 countriesworldwide, in 22 countries

Global technology & market Global technology & market leader in process control leader in process control since 1976since 1976

44thth largest semiconductor largest semiconductor capital equipment company capital equipment company in the worldin the world

CY 2002 Revenue: $1.4B


United StatesUnited States HistoricalSales Average – 30%

EuropeEurope HistoricalSales Average – 15%

JapanJapan HistoricalSales Average – 20%

Asia PacificAsia Pacific HistoricalSales Average – 35%

Helping Global Chipmakers Speed Helping Global Chipmakers Speed Time to Market and Profit Time to Market and Profit


KLA-Tencor in ChinaKLA-Tencor in China

Established presence in China since 1997Established presence in China since 1997 Offices in Shanghai and TianjinOffices in Shanghai and Tianjin Expanding operations in Zhangjiang High Tech ParkExpanding operations in Zhangjiang High Tech Park

80% process control market share in China80% process control market share in China Working with all major Chinese fabsWorking with all major Chinese fabs

Advanced training program for local staffAdvanced training program for local staff Recruited from China’s top universitiesRecruited from China’s top universities

Global Support Center serves entire Asia-Pacific Global Support Center serves entire Asia-Pacific region (excluding Japan)region (excluding Japan)


AgendaAgenda

Introduction to KLA-TencorIntroduction to KLA-Tencor




SummarySummary


“It took Japan three decades to become a powerhouse in technology, and it took Taiwan about one decade…China is expected to achieve similar strides in three to five years.”

Electronic News, “The Waking Giant”


China’s Formidable FoundationChina’s Formidable Foundation

Huge and rapidly expanding Huge and rapidly expanding economyeconomy

Large and fast-growing Large and fast-growing domestic marketdomestic market 1.3 billion consumers1.3 billion consumers

Strong demand for electronicsStrong demand for electronics #1 in mobile phone market with #1 in mobile phone market with

only 14% penetrationonly 14% penetration

#2 in market for PCs#2 in market for PCs

#2 in internet use#2 in internet use


Demand Drivers Behind Demand Drivers Behind China’s Growing IC IndustryChina’s Growing IC Industry Huge potential for domestic IC productionHuge potential for domestic IC production

China consumes 8% of worldwide chip productionChina consumes 8% of worldwide chip production

Of that, >80% is importedOf that, >80% is imported

Gap between domestic consumption and local Gap between domestic consumption and local supply major impetus for China’s IC industrysupply major impetus for China’s IC industry

Domestic Chip Purchases and Production in China

2001 2005

Chip purchase $16B $25B

Demand filled by internal fabs 15% 30%Source: Semiconductor Industry Association


China’s IC Manufacturing China’s IC Manufacturing AdvantagesAdvantages Huge domestic marketHuge domestic market

Low-cost manufacturing and labor baseLow-cost manufacturing and labor base

Abundant supply of international and domestic talentAbundant supply of international and domestic talent

Rapid inflow of international capitalRapid inflow of international capital

Fast-growing entrepreneurial baseFast-growing entrepreneurial base

Strong government incentivesStrong government incentives

Accelerated transfer of technology expertiseAccelerated transfer of technology expertise

All segments of semi industry – upstream and All segments of semi industry – upstream and downstream – committed to China marketdownstream – committed to China market


China’s IC Manufacturing China’s IC Manufacturing ChallengesChallenges Transitioning from trailing-edge to leading-edge Transitioning from trailing-edge to leading-edge

technologytechnology

Perfecting the foundry business modelPerfecting the foundry business model

Preventing trade barriersPreventing trade barriers

Addressing the shortage of skilled chip designersAddressing the shortage of skilled chip designers

Competing head-to-head with top-tier foundriesCompeting head-to-head with top-tier foundries

Speeding time to market on future device generationsSpeeding time to market on future device generations

Developing a winning strategyDeveloping a winning strategy


AgendaAgenda





SummarySummary


Why is Strategy Important to a Why is Strategy Important to a New Semiconductor Company?New Semiconductor Company?Why is Strategy Important to a Why is Strategy Important to a New Semiconductor Company?New Semiconductor Company?

Create competitive Create competitive advantage before the advantage before the contest beginscontest begins

Identify growth Identify growth opportunitiesopportunities


3 3 Strategies for IC Strategies for IC Manufacturing SuccessManufacturing Success

PerformanceLeadership

CostLeadership

CustomerIntimate


3 3 Strategies for IC Strategies for IC Manufacturing SuccessManufacturing Success Performance-Leader Performance-Leader

ExamplesExamples MicroprocessorsMicroprocessors

IntelIntel

Leading-edge Leading-edge semiconductor processessemiconductor processes

IBMIBM

Digital Signal ProcessingDigital Signal Processing Texas InstrumentsTexas Instruments

PerformanceLeadership

Architecture and IP are key in this strategy


3 3 Strategies for IC Strategies for IC Manufacturing SuccessManufacturing Success Cost-Leader ExamplesCost-Leader Examples

MemoryMemory SamsungSamsung

MicronMicron

InfineonInfineon

FoundryFoundry TSMCTSMC

UMCUMC

CostLeadership


3 3 Strategies for IC Strategies for IC Manufacturing SuccessManufacturing Success Customer-Intimate ExamplesCustomer-Intimate Examples

FablessFabless AlteraAltera

nVidianVidia

XilinxXilinx

STMicroelectronicsSTMicroelectronics Telecom with Nokia/EricssonTelecom with Nokia/Ericsson

SonySony Parent company for Parent company for

PlayStationPlayStation

CustomerIntimate


Case Study: Japan IC IndustryCase Study: Japan IC Industry

Tried to overtake Intel in MicroprocessorsTried to overtake Intel in Microprocessors

Lost leadership in Memory to KoreaLost leadership in Memory to Korea

Leadership in Microprocessors*

10000

20000

25000

0

Leadership in Memory*

4000

2000

6000

8000

0 Hynix

Samsu

ng

Micr

on

Mits

ubish

i

Sharp

Toshib

a

Inte

l

Hitach

iM

itsub

ishi

NEC

Toshib

a

5000

15000

$ $

2002 revenue. Source: Gartner, Inc.


What Will be China’s IC What Will be China’s IC Manufacturing Strategy?Manufacturing Strategy? Most likely strategiesMost likely strategies

Customer IntimateCustomer Intimate Fabless companies working with Fabless companies working with

Chinese consumer companiesChinese consumer companies

Cost LeadershipCost Leadership Can Chinese foundries become a Can Chinese foundries become a

low-cost leader?low-cost leader?Cost

Leadership

CustomerIntimate


AgendaAgenda





SummarySummary


“China’s market is huge, but regarding profits in this business, there are plenty of uncertainties.”

Richard Chang, CEO, SMIC


Time-to-Market is Essential for Time-to-Market is Essential for Business SuccessBusiness SuccessTime-to-Market is Essential for Time-to-Market is Essential for Business SuccessBusiness Success

Tele-phone

TV PC CellPhone

Play-Station 2

Yea

rsY

ears

00

55

1010

1515

2020

2525

3030

3535

4040

37

23

94

<1.5

Semiconductor Innovations

Time to Reach First 10 Million Customers

Accelerating China’s IC Industry FutureTime

Ramp Rates are IncreasingRamp Rates are Increasing

Manufacturing Ramp Rates

Month from Ramp Start

WS

PW

0 5 10 15

90 nm(300 mm)

130 nm180 nm 0.25 m

0.5 m

0.8 m

B. Sohn, Intel F11X Mgr., Invited Speaker ASMC 2002, www.semi.org/web/wevals.nsf/pcde4ASMC02/1


Technology Barriers Technology Barriers Getting HigherGetting Higher

Tighter specs New materials

More process steps

New processes

New process toolsNew architectures

TransistorTransistor

GateDielectric

GateDielectric

35 nm GateLength

35 nm GateLength

400

200

600

800

00.35 0.18 0.07


Leading Edge Technologies Have Leading Edge Technologies Have Small Market WindowsSmall Market Windows

Being 3 months late Being 3 months late to market can wipe to market can wipe out all profitsout all profits

Advanced Advanced manufacturing manufacturing strategies are needed strategies are needed to accelerate up the to accelerate up the yield curveyield curve

RampDevelopment

Time

Yie

ld

Production

Accelerated Yield Learning

Accelerated yield learningspeeds time-to-market

stuckwoo

Can we make a prettier version of this graph to better match the other graphics?


ImplementFix

ImplementFix

Characterize&

Analyze

Characterize&

Analyze

Detect &

Measure

Detect &

Measure

Process Control Accelerates Process Control Accelerates Fab ProfitabilityFab Profitability

Monitor & control Monitor & control the quality of the the quality of the IC process and IC process and productsproducts

Maximize Fab ROIMaximize Fab ROI Better performing + Better performing +

more reliable chips more reliable chips = Higher ASPs= Higher ASPs

Quality of process Quality of process = Increased yields= Increased yields & faster ramps & faster ramps

Faster time to Faster time to market boosts fab market boosts fab profitsprofits


How KT Accelerates How KT Accelerates Fab ProfitabilityFab Profitability

Reticle inspection: Finding the errors before they print Wafer inspection:

Finding the process defects that kill yields

Metrology: Finding the errors that decrease

device performanceAnalysis software:

The glue that ties it all together

Buried void

35 nm GateLength

35 nm GateLength

CD Errors

Analyze Report ActSimulate


The Value: Increased Fab The Value: Increased Fab Competitiveness & Higher Fab ROICompetitiveness & Higher Fab ROI

Assumptions:Assumptions: Device type: LogicDevice type: Logic

Wafer Size: 300mm Wafer Size: 300mm

Wafers Starts per monthWafers Starts per month Development:Development:

500500

Ramp:Ramp:2,0002,000

Production:Production:20,00020,000

Die per wafer: ~275Die per wafer: ~275

Starting Die ASP:Starting Die ASP: $30$30

Price decline per/Q: 7%Price decline per/Q: 7%

Months

Die

Yie

ld

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 3 6 9 12 15 18 21 24 27 30 33 36

Development: $150M3 months fasterto 20% yield

Ramp: $200M20%-50% yield 2 months faster

Production: $120M50%-80% yield 9 months faster10% higher overall yield

Model Source: UC Berkeley, KT


Accelerating Fab Profitability: Accelerating Fab Profitability: 3 Examples3 Examples

Customer Benefits Cust Savings

$17MReticle Defectivity Reticle Inspection: Isolated repeater defect 7

weeks faster than traditional methods

$27MWafer Defectivity Wafer Inspection: Detected major yield killing

defect 5 weeks faster than traditional methods

$13M

UCL

LCL

Target

Problem

Gate Leakage

Con

trol

Par

amet

er

Metrology Solution: Problem identified 3 weeks

faster than traditional methods

KT Solution

Quantox XP

TeraStar

eS20XP


Total Defect Inspection Tool Per Fab

Ave

rag

e D

efec

t L

earn

Rat

e

(Pe

r M

on

th)*

6%

8%

10%

12%

14%

16%

18%

20%

0 5 10 15 20 25

Copper Defect Learning & ROI Copper Defect Learning & ROI vs. Number of Toolsvs. Number of ToolsCopper Defect Learning & ROI Copper Defect Learning & ROI vs. Number of Toolsvs. Number of Tools

*Avg of 12 monthsSource: KLA-Tencor

$20M

$30M

$40M

$50M

$60M

$70M

$80M

$90M

Company DCompany D

Company ACompany A

Company BCompany B

Company CCompany C

Company ECompany E

Company FCompany F

Incr

em

enta

l R

evenue P

er

Year

Basis: 200mm wafer, 1.50cm2 Die, $30 ASP/die


Accelerated Yield Learning:Accelerated Yield Learning:Savings ComparisonSavings Comparison

Dev'l $Gain

Ramp $Gain

Prod $Gain

0 6 12 18 24 30 36 42 48 54 60

Months

Cu

m R

ev

en

ue

Ga

in

0 6 12 18 24 30 36 42 48 54 60

Months

Lagging technology, 200mm fab Leading technology, 300mm fab

10 times the savings, revenue gains

Dev'l $Gain

Ramp $Gain

Prod $Gain

Cu

m R

ev

en

ue

Ga

in


AgendaAgenda





SummarySummary


SummarySummary

China positioned to be a major player in IC China positioned to be a major player in IC industryindustry Infrastructure advantages enable fabless and low-cost Infrastructure advantages enable fabless and low-cost

leadership strategiesleadership strategies

Major growth and revenue opportunities are at the Major growth and revenue opportunities are at the leading edgeleading edge

Accelerated yield learning key to successAccelerated yield learning key to success Process control best practices accelerate development, Process control best practices accelerate development,

technology transfer and ramp; maximize yieldstechnology transfer and ramp; maximize yields

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Accelerating China’s IC Industry Future Ken Schroeder, Chief Executive Officer.

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