Semiconductor Manufacturing Market
Outlook: A Bright Picture for 2004
Presenters:
Klaus-Dieter Rinnen
Mary Olsson
Jim Walker
Laurie Balch
Jim Hines
Emerging Technologies and Semiconductors
Gartner Dataquest
2003: A Mixed Picture
Back End
Wafer Fab
Revenue ($M)
Lithography
Removal
Deposition
Diffusion/RTP
Implantation
Process Control
Factory Automation
Growth Over 2002 (%)
3,484
3,867
3,490
546
738
2,368
948
11
1
3
-3
14
-5
0
604
446
2,356
25
34
9
$21,742
5
(Excluding OEM)
Bonding
Probe
Automatic Test Equipment
Total
Note: Data based on SAB 101
Forecast Growth Scorecard
Revenue Growth (%)
2003
Up
Base Down
World GDP
U.S. GDP
2.5
3.0
E-Equipment*
3.8
Semiconductor
2004
Up
Base
Down
5.3
3.7
4.7
3.4
7.5
11.2
11.8
13.1
30
20.1
12
7.1
5.7
3.9
46
27.9
22
Equipment Spending
6.0
WFE
2.3
P&A Equipment
26.6
AT Equipment
11.8
Silicon Shipped (MSI) 9.9
5.0
1.6
24.7
8.7
9.1
3.8
0.7
22.9
6.2
7.5
54
53
51
61
22
35.9
34.1
37.6
46.4
15.4
29
28
26
39
7
Capital Spending
*Production revenue
Macroeconomic Picture Brightens:
Quarterly U.S. GDP Growth — Dec. 2003
U.S. GDP Growth (Percentage of Seasonally Adjusted Annual Rate)
8
4
2
0
-2
Source: Global Insight and Gartner Dataquest (December 2003)
Forecast
6
Global GDP Growth, 2000-2004
Real GDP Growth (Percent)

5


+3.7
+2.0
2
Recovery under way
but is dangerously
dependent on U.S.
+1.3
1

+2.5
3
+4.1
4

0

2000
2001
Source: Global Insight
2002
2003
U.S. capital spending goes into overdrive;
consumer spending remains robust
U.S. trade deficit improves; dollar holds
value
Eurozone loosens economic policies;
promotes domestic growth
Wild cards limited
2004


U.S. capital spending slows; consumer
spending weakens
U.S. trade deficit dramatically
worsens; dollar crashes
Eurozone maintains tight economic
policies; domestic demand collapses
Wild cards wreak havoc
Key Economic Issues

Capital spending
Global capital spending revival still key to true, sustainable recovery; U.S. spending
reviving, but lingering uncertainty remains a significant inhibitor worldwide

Consumer spending
U.S. consumers have done their part but could retrench any time; stronger
consumer spending in Europe and Japan would be very helpful

U.S. trade deficit and dollar depreciation
Deficit at record levels; expansion likely as long as others remain dependent on
U.S. imports. Gapping deficit will continue to put downward pressure on dollar,
which could precipitate destructive dollar crash

Autonomous global growth
Budding recovery dangerously dependent on U.S. imports, all the more so because
of gapping U.S. trade deficit and slumping dollar. Stronger autonomous growth in
Europe and Japan would greatly improve sustainability. Stronger domestic-led
growth in China and India would help too

Wild cards
Iraq malaise, al-Qaida terrorism, Middle East turmoil, Korea tensions, SARS repeat
remain potential threats to global recovery (as do various “unknowns”)
Overall IT Trend — Weighted/Monthly:
2003 Underspending; 2004 Increase
200
Projected
Current
Key Trends:
Current spending remains
below budgeted levels;
lower IT services and
staffing spending are
a drag
 Hopes for year-end budget
flush are fading, at least
for larger corporations, as
survey indicates
 Is spending muted
because fewer dollars can
buy more?
 Projected demand
rebounds in 2004

Strong
Demand
100
Weak
Demand
0
Mar- Apr- May- Jun03
03
03
03
Jul- Aug- Sep- Oct- Nov03
03
03
03
03
DQ Index of Semiconductor Market Leading
Indicators, December 2003
DQ Index vs. Device Forecast
Semiconductor Revenue Growth
20%
45%
15%
Actual Forecast
DQ Index for 2003 vs. Time
10%
5%
30%
0%
15%
3Q02 4Q02 1Q03 2Q03 3Q03 4Q03
DQ Index for 2004 vs. Time
0%
35%
30%
-15%
25%
20%
-30%
1997
-45%
1999
2001
2003
Indicator
Semiconductor Growth
15%
3Q02 4Q02 1Q03 2Q03 3Q03 4Q03
Current DQ Forecast
Semiconductor Market Update, 4Q03:
Key Issues

The semiconductor recovery is strengthening!

The outlook for 2004 shows price stability

Will wireless applications create a new
industry evolution?

Is China the new regional driver?
Worldwide Semiconductor Forecast, 4Q03:
Market Size and AGRs by Device, 2002-2003
2002 Total Market = $156 Billion
Share by Device
2003 Total Market = $174 Billion
AGR by Device
Memory
18%
ASSP
24%
12%
ASSP
2%
ASIC
23%
Nonoptical Sensors
23% Optical Semiconductors
4%
ASIC
10%
Discrete
Analog IC
10%
16%
Micro
24%
Nonoptical
Sensors
1%
11%
Optical Semiconductors
4%
Discrete
8%
Analog IC
6%
Source: Gartner Dataquest (November 2003)
Microcomponents
17%
Logic
5%
0%
Logic
5% 10% 15% 20% 25% 30%
Memory
WW Semiconductor Forecast, 4Q03:
No Changes to Outlook
Revenue (Millions of Dollars)
7.6%
17.7%
250,000
-4.2%
ASSP
Annual Growth
Application
Specific
20.1%
200,000
11.7%
-31.3%
ASIC
Nonoptical
Sensors
Optical
Semiconductors
Discrete
1.9%
150,000
General
Purpose
100,000
Analog IC
Logic
50,000
Microcomponents
Memory
0
2000
2001
2002
2003
Source: Gartner Dataquest (December 2003)
2004
2005
2006
2007
Wireless Applications and Regional Competition:
Are They Driving an Industry Revolution?





The handset markets are consolidating. Competition
remains intense across multiple regions
Suppliers of modules and RF products for wireless
applications are becoming critical to new designs
and functions
Removable solid-state storage (RS3) utilizing nonvolatile
memory (flash) in card format or mounted on a USBenabled device is keeping pace with the retailer market
New entrants with innovative solutions continue to be
acquired by larger players
China is building its own consumer and communications
infrastructure. What’s next — semiconductors?
Supply Outlook:
Semiconductor Inventory
Dataquest Semiconductor Inventory Index
Conclusions
1.6

1.5
1.4

1.3

1.2
1.1

1
0.9
0.8
1Q99
1Q00
1Q01
1Q02
1Q03
Healthy drop in
1Q03
Inventory remains
lean in 2H03
Good "bill of
health" for
inventories
With potential
device shortages
in 2004, increased
inventory targets
could add stimulus
for chip demand
IC Units:
New High in 2003
Rolling 3-Month Comparison,
With Aug. 2003 at 105.8% of Peak
Rolling 3-Month Units (Millions)
28,000
24,000
20,000
16,000
12,000
8,000
4,000
0
Jan-99
Source: WSTS/SIA
Jan-00
Jan-01
Jan-02
Jan-03
Worldwide Silicon Shipments
MSI/Quarter
1,800
1,600
1,400
1,200
1,000
800
600
400
200
3Q04
1Q04
3Q03
1Q03
3Q02
1Q02
3Q01
1Q01
3Q00
1Q00
3Q99
1Q99
0
Back End: Packaging and Assembly
Overall Industry Utilization
Factory Utilization
100%
90%
80%
70%
60%
50%
40%
30%
Leading Edge
Back End: SATS Quarterly Utilization
Factory Utilization
100%
90%
80%
70%
60%
50%
40%
30%
Leading Edge
Back End: SATS Market
Quarterly Revenue Forecast Scenarios
Billions of Dollars
5.0
Scenarios
(Probability)
2003
2004
Optimistic
Most Likely
Pessimistic
25% (0.10)
23% (0.80)
20% (0.10)
47% (0.30)
35% (0.50)
22% (0.20)
4.0
3.0
2.0
1.0
0.0
1Q02
3Q02
Optimistic
1Q03
3Q03
Most Likely
1Q04
3Q04
Pessimistic
Back End: SATS
Annual Revenue Forecast
Billions of Dollars
30
Conclusions
 2004:
QFN, flip-chip
and 3-D stacked
packaging continue
20
 2005:
WLP and SIP
move mainstream
10
0
2000
2004
2008
Back End: Packaging and Assembly Equipment
Quarterly Revenue Forecast Scenarios
Billions of Dollars
2.0
Scenarios
(Probability)
2003
2004
Optimistic
Most Likely
Pessimistic
27% (0.15)
25% (0.75)
23% (0.10)
51% (0.30)
38% (0.50)
26% (0.20)
1.5
1.0
0.5
0.0
1Q00
3Q00
1Q01
3Q01
Optimistic
1Q02
3Q02
1Q03
Most Likely
3Q03
1Q04
Pessimistic
3Q04
Back End: Packaging and Assembly Equipment
What Is Hot and What Is Not in 2004?
2004 Growth
45%
Flip-Chip Bonders
AP Lithography
Vision Inspection
40%
Solder Ball Attach
Dicing Saws
Singulation
35%
Wire Bonders
Molding/Encapsulation
Die Bonders
Test Handlers
Contact Prober
Market
Growth
30%
0
200
400
2004 Revenue (Millions of Dollars)
600
800
Back End: AT Equipment
Quarterly Revenue Forecast Scenarios
Scenarios
(Probability)
2003
Optimistic 11.8% (0.25)
Most Likely 8.7% (0.65)
Pessimistic 6.2% (0.10)
Billions of Dollars
2.0
2004
61% (0.20)
46% (0.60)
39% (0.20)
1.5
1.0
0.5
0.0
1Q00
3Q00
1Q01
3Q01
Optimistic
1Q02
3Q02
1Q03
Most Likely
3Q03
1Q04
Pessimistic
3Q04
Back End: AT Equipment
What Is Hot and What Is Not in 2004?
2004 Growth
SOC
70%
Mixed Signal
40% Analog/Linear RF/Microwave
Memory
Market
Growth
Digital/Logic
10%
0
200
400
600
800
2004 Revenue (Millions of Dollars)
1,000
1,200
Wafer Fab: Foundry Services
Foundry Fab Utilization
Ratio of Silicon Consumed to Fab Capacity
100%
90%
80%
70%
60%
50%
40%
Leading Edge
Wafer Fab: Foundry Services
Quarterly Revenue Forecast Scenarios
Scenarios
(Probability)
2003
2004
Optimistic
Most Likely
Pessimistic
26% (0.05)
25% (0.90)
24% (0.05)
53% (0.20)
41% (0.60)
24% (0.20)
Billions of Dollars
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1Q00
3Q00
1Q01
3Q01
Optimistic
1Q02
3Q02
1Q03
Most Likely
3Q03
1Q04
Pessimistic
3Q04
Wafer Fab: Foundry Services
Market Revenue Forecast
Billions of Dollars
Summary
30.0


20.0

10.0

0.0
2000
2003
2006
2003: Demand growth,
price pressure
2004: Tightening
capacity
2005: Strong demand
growth and pricing
support
2006: Capacity
overshoot; falling prices
Overall Wafer Fab Utilization
Ratio of Silicon Consumed to Fab Capacity
100%
90%
80%
70%
60%
50%
40%
Leading Edge
Wafer Fab: Equipment
Quarterly Revenue Forecast Scenarios
Billions of Dollars
10
Scenarios
(Probability)
2003
2004
Optimistic
Most Likely
Pessimistic
2.3% (0.30)
1.6% (0.55)
0.7% (0.15)
53% (0.25)
34% (0.65)
28% (0.10)
9
8
7
6
5
4
3
1Q00
3Q00
1Q01
3Q01
Optimistic
1Q02
3Q02
1Q03
Most Likely
3Q03
1Q04
3Q04
Pessimistic
Wafer Fab: Equipment
What Is Hot and What Is Not in 2004?
2004 Growth
70%
ECD
193-nm Steppers
Implant
50%
Track
30% RTP
CMP
Diffusion
Mask Lithography
PVD
Nontube CVD
Factory
Automation
Process
Control
Dry Etch
Market
Steppers Growth
10%
0
1,000
2,000
3,000
4,000
2004 Revenue (Millions of Dollars)
Note: Some segments include OEM sales.
5,000
Long-Term View: Cycles Continue ...
Capital and Equipment Spending Forecasts
Semiconductor Equipment
(Including Test)
Capital Spending
Billions of Dollars
Billions of Dollars
50
70
45
60
40
50
35
30
40
25
30
20
20
15
10
10
0
1999
5
0
2001
2003
2005
2007
1999
2001
2003
2005
2007
Conclusions

Economy
 Expect strong U.S. and improved worldwide economic growth for 2004
 Corporate spending returns; IT spending sentiment is strong for 2004

Electronic equipment
 Expect gradually improving macro conditions to spur broad recovery
 Y2K PC replacement cycle has started; expect 12.8 percent unit growth in 2004
 Broad-based application demand drives 2005, despite slowing PC growth

Semiconductors
 Expect revenue growth of 11 percent in 2003 with upside potential
 Expect tightening capacity utilization and better demand to drive 2004

Supply side and capital equipment
 Healthy inventories exiting 2003 aid in tightening fab utilization
 Potential spot shortages and rising inventory targets boost average selling prices
 Supply-side fundamentals encourage optimistic outlook on CAPEX, with 27.9
percent growth in 2004; spending is still cautious; exuberance is to come
 2004 semiconductor capital equipment growth is forecast at 36 percent
 Hold to two-year industry expansion cycle for equipment; next downcycle occurs
in late 2005 or early 2006