2. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 1 Shifting Winds of Power Chief Mountain, Height: 9080ft - 2767m, Waterton-Glacier International Peace Park, Montana VLSI RESEARCH INC Where the Chip Making Industry Clicks to Find its Weather ISS 2008

3. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 2 50 Years Since The Invention of the IC Introduction of the Planar Process and Si wafers. Emergence of new companies to exploit the technology. Foundation for today’s semiconductor manufacturing.

4. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 3 History of Wafer Sizes

5. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 4 20 Years Since the Introduction of P5000 First successful multi- process tool. Combined the productivity and precision. Made Applied the giant it is today. Power and process shifted to equipment suppliers.

6. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 5 Capital Productivity History P5000 Intro (1987)

7. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 6 Lessons from History Capital cost drives changes in the supply chain. –Cost escalation created Fabless/Foundry supply. Design drives shifts in supply chain. –EDA drove designer efficiency. –Higher efficiency  more complex designs.

8. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 7 New Pressure Fronts in Chip Making

9. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 8 Design Cost is No Longer Scaling

10. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 9 Design Expenditures are Increasing, while New Designs are Declining

11. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 10 As New Designs Decline, so do revenues and ASPs

12. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 11 Specific Challenges for Foundry/Fabless Model The economics are stacking against small run designs. –Very expensive to design at 90nm & below. –Foundries are backing away from aggressive scaling.  Slower revenue growth. R&D costs escalating rapidly, yet foundries are lacking. Sub 100nm Yield Challenges at Foundries.

13. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 12 Chip Maker Specialization is Increasing

14. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 13 Wall Street Pressures for a Fab-Lite Strategy Better financial ratios (ROIC, ROA etc…). But where to get leading edge devices? –Nokia moving away from TI. –Opportunity for capable IDMs (IBM alliance or Intel). Even Foundries are moving to fab-lite. –China Strategy. –200mm expansion.

15. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 14 Efficient Use of Capital is Critical

16. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 15 … And Taiwanese DRAM Suppliers Are Not Efficient

17. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 16 Winners Still Focus On Scaling

18. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 17 Scaling is Difficult -- But It is still the best cost lever. Need for higher integration is greater than ever. Successful scaling creates opportunities. –Intel is moving to traditional fabless markets. Scaling creates barriers. –Foundries have fallen off Moore’s Law. –GPUs going IDM.

19. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 18 Summary Fabless/Foundry is at limits. Limit scaling  limited financial returns. Nimble Logic IDMs can take advantage of weaker Fabless suppliers. Capex & R&D efficiency will be critical to pick winners. All Capex is not Equal.

20. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 19 Information is Going to Make the Winners Content and Context is important. –Right information, right format, right place. How you can align your operations with markets? –DRAM over investment was a result of poor information. –Dinner with customer CEO does not yield best information. Collaboration/Networking is critical for R&D.

21. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 20 Market Level Information Conferences play critical role. –ISS gives excellent sense where industry is heading. –What is hot and not. Market Research – Independent Voice. –Taiwanese would have easily prevented a DRAM glut by spending ~$2M in market research. –Would have saved them $4B. Publications/News. –What is going on day to day. –90% of Market Intelligence is Public Information.

22. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 21 Collaboration/Networking You can not succeed in today’s economy without extensive network. –It is critical for your business and personal success. –You have to give in order to receive. New platforms allow you to promote and advance your capabilities.

23. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 22 Those Who Don’t... Get Outsourced

24. VLSIRESEARCH.comVLSIRESEARCH.com WeSRCH.com CHIPHISTORY.org CHIPHISTORY.org Copyright © 2008 VLSI Research Inc. All rights reserved. Reprinted with permission from VLSI RESEARCH INC. 23 VLSI RESEARCH INC Where the Chip Making Industry Clicks to Find its Weather For a copy of this presentation go to www.WeSRCH.com and click on WeQUEST on the left of the link bar www.WeSRCH.com