Industry Surveys Semiconductors & Equipment Angelo Zino, CFA, Information Technology Sector Equity Analyst

NOVEMBER 2014

Current Environment ...... 1

Industry Profile ...... 10

Industry Trends ...... 13

How the Industry Operates ...... 20

Key Industry Ratios and Statistics ...... 29

How to Analyze a Semiconductor Company...... 31

Glossary ...... 36

Industry References ...... 42

CONTACTS: Comparative Company Analysis ...... 45 INQUIRIES & CLIENT SUPPORT 800.523.4534 clientsupport@ This issue updates the Semiconductors & Equipment Survey dated May 2014. standardandpoors.com

SALES 877.219.1247 [email protected] MEDIA Michael Privitera 212.438.6679 [email protected] S&P CAPITAL IQ 55 Water Street New York, NY 10041

Please see General Disclaimers on the last page of this report.

Topics Covered by Industry Surveys

Aerospace & Defense Electric Utilities Metals: Industrial Airlines Environmental & Waste Management Movies & Entertainment Alcoholic Beverages & Tobacco Financial Services: Diversified Natural Gas Distribution Apparel & Footwear: Foods & Nonalcoholic Beverages Oil & Gas: Equipment & Services Retailers & Brands Healthcare: Facilities Oil & Gas: Production & Marketing Autos & Auto Parts Healthcare: Managed Care Paper & Forest Products Banking Healthcare: Pharmaceuticals Publishing & Advertising Biotechnology Healthcare: Products & Supplies Real Estate Investment Trusts Broadcasting, Cable & Satellite Heavy Equipment & Trucks Restaurants Chemicals Homebuilding Retailing: General Communications Equipment Household Durables Retailing: Specialty Computers: Commercial Services Household Nondurables Semiconductors & Equipment Computers: Consumer Services & Industrial Machinery Supermarkets & Drugstores the Internet Insurance: Life & Health Telecommunications Computers: Hardware Insurance: Property-Casualty Thrifts & Mortgage Finance Computers: Software Investment Services Transportation: Commercial Lodging & Gaming

Global Industry Surveys

Airlines: Asia Foods & Beverages: Europe Pharmaceuticals: Europe Autos & Auto Parts: Europe Media: Europe Telecommunications: Asia Banking: Europe Oil & Gas: Europe Telecommunications: Europe Food Retail: Europe

S&P Capital IQ Industry Surveys 55 Water Street, New York, NY 10041

CLIENT SUPPORT: 1-800-523-4534

VISIT THE S&P CAPITAL IQ WEBSITE: www.spcapitaliq.com

S&P CAPITAL IQ INDUSTRY SURVEYS (ISSN 0196-4666) is published weekly. Redistribution or reproduction in whole or in part (including inputting into a computer) is prohibited without written permission. To learn more about Industry Surveys and the S&P Capital IQ product offering, please contact our Product Specialist team at 1-877-219-1247 or visit getmarketscope.com. Executive and Editorial Office: S&P Capital IQ, 55 Water Street, New York, NY 10041. Officers of McGraw Hill Financial: Douglas L. Peterson, President, and CEO; Jack F. Callahan, Jr., Executive Vice President, Chief Financial Officer; John Berisford, Executive Vice President, Human Resources; D. Edward Smyth, Executive Vice President, Corporate Affairs; and Lucy Fato, Executive Vice President and General Counsel. Information has been obtained by S&P Capital IQ INDUSTRY SURVEYS from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, INDUSTRY SURVEYS, or others, INDUSTRY SURVEYS does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.

Copyright © 2014 Standard & Poor’s Financial Services LLC, a part of McGraw Hill Financial. All rights reserved. STANDARD & POOR’S, S&P, S&P 500, S&P MIDCAP 400, S&P SMALLCAP 600, and S&P EUROPE 350 are registered trademarks of Standard & Poor’s Financial Services LLC. S&P CAPITAL IQ is a trademark of Standard & Poor’s Financial Services LLC.

CURRENT ENVIRONMENT

Semiconductors: growth to persist in 2015

The semiconductor group is generally considered a leading barometer of growth expectations due to its high correlation with global gross domestic product (GDP). Year to date through October 10, 2014, the S&P Semiconductors Index increased 9.6% and the S&P Semiconductor Equipment Index was up 6.5%, compared with a 3.1% increase for the S&P 500. In 2013, the Philadelphia Semiconductor Index (SOX) was up 34.9%, versus 29.6% for the S&P 500 Composite Index, while the S&P Semiconductors sub- industry index rose 31.2% and the S&P Semiconductor Equipment sub-industry index increased 43.9%. We think investors now have a more favorable view of cyclical stocks, and technology in general.

GROWTH OF SEMICONDUCTOR STOCKS VS. S&P 500 AS THE CYCLE SPINS (Percent change from March 21, 2013)

55 According to the Semiconductor Industry 50 Chart H03: Association (SIA), an international trade group representing semiconductor 45 GROWTH OF SEMICONDUCTOR manufacturers, the semiconductor industry 40 saw an increase in sales of 4.8% in 2013, 35 STOCKS VS. S&P 500 following a 2.7% decline in 2012. Worldwide 30 semiconductor sales reached a new record of 25 $305.6 billion in 2013. In the second quarter 20 of 2014, global sales reached $82.7 billion, a 15 sequential increase of 5.4%, and a year-over-

10 year increase of 10.8%.

5 The year-over-year increase illustrates a 0 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 rebound in the industrial, automotive, and communications markets, despite continued Philadelphia Stock Exchange Semiconductor Sector Index weakness in the PC supply chain. While St andard & P oors 500 Compos it e I ndex visibility on sales growth over the next few Sources: S&P Indices; Phildelphia Stock Exchange. quarters remains limited, semiconductor companies have indicated modest improvements in bookings growth, an encouraging sign. We expect sequential sales to continue to rise through 2015, as customers once again rebuild inventories ahead of higher end-market demand.

EARNINGS GROWTH AND FORECAST

Earnings for the companies in the S&P 1500 semiconductor space rose 3.9% in 2013. In contrast, the S&P 1500 witnessed earnings growth of 11%. As of September 12, 2014, we projected the semiconductor group to see earnings grow 44.6% in 2014, versus 7.9% for the S&P 500. We think this estimate reflects improving demand for a majority of the VALUATION SCORECARD companies in our coverage MARKET - - EPS % CHG. - - FORECAST universe, which should VALUE %Chart E2013- B02: E2014- VALUATION -- P/E RATIO -- P/E GR % DIV. help their gross margins, OF SECTORSCORECARD E2014 E2015 E2014 E2015 2014-19 YIELD and a continuing focus on Semiconductors 11.29‡ 44.6 17.1 16.9 14.4 1.4 1.9 tight cost controls. This is S&P 500 88.61‡ 7.9 11.9 16.8 15.0 1.4 2.0 consistent with a cyclical GR-Grow th rate, annual. †Percent of Information Technology Sector. ‡Percent of industry moving into the S&P 1500 SuperComposite Index. “middle innings” of a Source: S&P Capital IQ. recovery, in our opinion.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 1

TRENDING NOW

It is important not to lose sight of what is fundamentally driving industry demand, given the maturity and pervasiveness of semiconductors and of the cycles in which they tend to move. Cisco Systems Inc., in its Cisco Visual Networking Index: Forecast and Methodology, 2013–2018 published in June 2014, offers the following statistics and forecasts:

Traffic growth . Global Internet Protocol (IP) traffic has increased more than fivefold in the past five years, and will increase threefold over the next five years. Global IP traffic will increase at a compound annual growth rate (CAGR) of 21% from 2013 to 2018. . Globally, IP video traffic will represent 79% of all consumer Internet traffic in 2018, up from 66% in 2013. This does not include video exchanged through peer-to-peer (P2P) file sharing. The sum of all forms of video (i.e., TV, video on demand, Internet, and P2P) will be in the range of 80% to 90% of global consumer traffic by 2018. . Globally, mobile data traffic will increase 11-fold between 2013 and 2018. With a CAGR of 61% from 2013 to 2018, mobile data traffic will reach 15.9 exabytes per month by 2018.

Device growth . The number of devices connected to IP networks will be nearly twice the global population in 2018. There will be nearly three networked devices per capita by 2018, up from nearly two in 2013. Accelerated in part by the increased numbers and capabilities of those devices, IP traffic will reach 17 gigabytes per capita in 2018, up from 7 gigabytes per capita in 2013. . Traffic from wireless and mobile devices will exceed traffic from wired devices by 2018. By 2018, wired devices will account for only 39% of IP traffic, while Wi-Fi and mobile devices will account for 61% of IP traffic. In 2013, wired devices accounted for the majority of IP traffic at 56%.

. More than half of all IP traffic will originate with non-PC devices by 2018. In 2013, only 33% of the total IP traffic originated with non-PC devices, but by 2018, that share will grow to 57%. Through 2018, PC-originated traffic will grow at a CAGR of 10%, while TVs, tablets, smartphones, and machine-to-machine (M2M) modules will have CAGRs of 35%, 74%, 64%, and 84%, respectively.

CONNECTIVITY: TYING IT ALL TOGETHER

We think connectivity offers one of the more attractive opportunities for innovation in semiconductors. The combination of traffic growth and device innovation drives all sorts of connectivity demands on multiple types of devices and multiple types of networks—carrier, enterprise, and consumer.

Devices The need to support different types of traffic, irrespective of device type, has never been greater, especially wirelessly. One of the inevitable next big things is “Bring Your Own Device” (BYOD). BYOD is a term to describe employees bringing personally owned mobile devices (i.e., phones and tablets) to work and using them to access company resources such as email, file servers, and databases. Connectivity innovation is benefiting from growth in smartphones, tablets, and other devices, as detailed below.

 Smartphones. This category accounted for 55.3% of the handset market in 2013, according to market research firm IDC. Total smartphone shipments reached 1.0 billion units in 2013, up 39.1% from 725.3 million units in 2012. IDC expects smartphone shipments to grow at a CAGR of 12.7% between 2013 and 2018. In 2013, Apple and Samsung together had about 46.5% of the market.

 Tablets. Unit sales were 218.8 million in 2013, and this category is expected to have unit sales of around 303.5 million by 2018, according to IDC.

2 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

 Wireless connectivity chips. According to ABI Research, a global technology market research firm, shipments of wireless connectivity chips exceeded five billion in 2013. Such chips are used in stand-alone Bluetooth, Wi-Fi, global positioning systems (GPS), near-field communications (NFC), and ZigBee technology, and in combination in integrated circuits (ICs) and platform solutions. ABI Research forecast shipments of Bluetooth-enabled devices to reach more than 3 billion in 2014 and more than 10 billion by 2018. Shipments of Wi-Fi-enabled devices are expected to reach more than 2.6 billion in 2014 and nearly 18 billion cumulatively from 2015 to 2019.

Networks Common connectivity technologies within the network buckets are cellular and optical (carrier), Ethernet (enterprise), and cellular and Wi-Fi (consumer). Wi-Fi is most often integrated with other technologies (such as Bluetooth, GPS, FM radio, and NFC) into a single chip called a combination, or “combo,” chip. NFC is widely associated with mobile payments, for which an entire ecosystem of software and hardware developers, merchants, and transaction processors are trying to find an optimal solution.

The future of connectivity The increasing power of individuals to create smarter homes, smarter businesses, and ultimately smarter cities, means that M2M connectivity—everything from soda and washing machines, to smart metering, private security, and vehicle management—has enormous potential. Based on research from GSMA, a mobile broadband trade group, and Machina Research, a provider of M2M and mobile broadband strategy research and forecasting, China’s connected device market (including smartphones, tablets, and consumer electronics) has the potential to experience six-fold growth to $707 billion by 2020, twice the current global semiconductor market, from $116 billion in 2012.

OUR ASSESSMENT OF END MARKETS

The best way to assess the industry’s current opportunities and challenges is to take all of the growth trends and relate them to end markets. It is important to look at the end markets that use semiconductor components in order to get a better understanding of the demand environment. In terms of size, the four general categories are computing, communications (wireless and wireline), consumer, and industrial (including automotive, military, and aerospace).

We think pent-up demand in select end markets will likely buoy chipmakers’ revenues in the year ahead. We see the strength led by a pickup in communications spending, continued growth in consumer electronics, an uptick in automotive, and GDP-like growth in military and industrial end markets. In contrast, we think the computing end market will decline 3%% in 2014—a drag, given that it represents about one-third of the semiconductor chip industry’s revenues, according to S&P Capital IQ (S&P) and IDC estimates.

Computing: structural changes in device platform demand cause shift from PC use toward mobility According to IDC, computers represent the largest end market for chipmakers, accounting for 31.5% of the industry’s total revenues. In 2013, due to weak economic environments in Europe and the emerging markets, global PC shipment volume declined 10.1%, while PC sales declined 10%. Moreover, the PC market is facing extreme competition from tablets and smartphones. Holiday sales were disappointing, due to the continuing weak economic outlook and changes in the personal computing segment, while migration from Windows XP to Windows 7 and 8 helped to drive demand in the enterprise sector. According to IDC estimates, global PC shipments were down 4.9%, year over year, in the fourth quarter of 2013.

In our view, higher growth of mobile devices (compared with traditional PCs) and uncertainty within emerging markets will continue to act as headwinds for the PC space. According to an IDC August 2014 forecast, PC shipments are expected to decline 3.7% in 2014 as weak economic fundamentals and political shifts will affect demand in emerging markets, while S&P sees PC shipments dropping 3%–5%.

We think that shifts in terms of features required have benefited companies that focus on mobile devices (like Qualcomm Inc. and Broadcom Corp.), while hurting others that are more PC/enterprise-based (like Advanced Micro Devices Inc. and Intel Corp.) to the extent that they fail to penetrate smartphones and

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 3 tablets. In the meantime, we think suppliers will keep inventory lean and lead times short, leaving little visibility for sales.

Communications: finally improving Wireless and wireline communications account for around 34.2% of chip sales, according to IDC. This segment includes broadband access equipment, IP and optical carrier infrastructure, wireless local area network (WLAN), and handsets. Communication’s end markets include handsets, enterprise/data center, and carrier segments.

Growth in communications from the handset market has been in the high single digits annually, with the smartphone market growing 39.1% in 2013 and accounting for 55.3% share of handsets, according to IDC. Smartphones are expected to grow at a CAGR of 12.7% between 2013 and 2018.

According to market research firm Gartner Inc., worldwide IT spending is projected to total $3.7 trillion in 2014, a 2.1% increase from estimated 2013 spending of $3.7 trillion, driven by IT services, devices, and software. Despite the long-term secular growth trend related to the increasing need for storage, the enterprise/data center market has experienced some weakness and is expected to grow in the low- to mid- single digits through 2015. We think this segment is being hurt by uncertainty in public spending and a general pause in enterprise spending.

Consumer electronics: heavy on seasonality Consumer electronics semiconductors, which IDC says account for 17.5% of industry sales, are used in TVs, videogame consoles and handhelds, set-top boxes, portable media players, DVD players and recorders, and digital cameras. We see this segment growing in the mid-single-digit range for 2014, displaying normal second-half seasonal strength.

Historically, sales of semiconductors for portable media players, such as Apple’s iPod, have been the largest segment of the consumer semiconductor market. The digital TV segment has been the second largest group over the last couple of years and is still growing fast. Gaming consoles (such as Nintendo Co. Ltd.’s Wii, Microsoft Corp.’s Xbox, and Sony Corp.’s PlayStation) are the third largest segment. Some other key end markets for semiconductors are set-top boxes and DVDs (especially Blu-ray DVDs). We think major drivers of consumer spending include devices with improved graphics, and increased connectivity availability and speeds.

Industrial, automotive, and others: highly correlated to global GDP This diverse market, which represents about 17% of industry revenue, according to IDC, includes factory automation, information kiosks, and automotive, military, medical, and aerospace applications. Although the percentage of total IC revenue is small, many companies (particularly those making analog chips, which are designed to measure temperature, pressure, light, voltage, and motion—functions frequently used in the manufacturing process) have significantly higher exposure to this group. We think this segment will grow at a slightly faster pace than the semiconductor industry this year, with the highest growth in automotive, followed by industrial, military, and aerospace.

Because this group tends to have very low customer concentration and broad product catalogs, it is highly correlated to global GDP growth, with a few trends. One of the most notable is the use of semiconductor technology in automobiles. Chips perform such basic functions as monitoring tire pressure, allowing keyless entry and traction control, etc. On the “infotainment” side, automakers are integrating various consumer electronic devices that allow drivers or passengers to make mobile phone calls, listen to MP3s, operate laptops, watch DVDs, connect to satellite radio, and use navigation devices, among other applications. Semiconductor equipment: spending to increase in 2015

S&P projects that worldwide semiconductor equipment spending will increase 7.1% to $61.9 billion in 2014 and 4.0% to $64.4 billion in 2015, following declines of 1.2% to $57.8 billion in 2013 and 11.3% to $58.6 billion in 2012. We think that most demand for semiconductor equipment will be focused on the advancement to new technology nodes, driven primarily by foundries. Despite the current lack of visibility

4 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS within the semiconductor equipment space, we think that the semiconductor industry’s major players— including Intel Corp., Samsung Corp., and Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC)—are continuing to spend heavily on more advanced technology. In our view, these players will drive equipment industry growth going forward.

According to estimates published on October 16, 2014, by Gartner Inc., an information technology market research and consulting firm, worldwide semiconductor capital equipment spending is expected to grow 17.1% to $39.2 billion in 2014 and 11.3% WORLDWIDE SEMICONDUCTOR EQUIPMENT SALES to $43.6 billion in 2015. For 2013, Gartner 150 estimated that such spending dropped 125 11.6% to $33.5 billion. Chart H13: 100 WORLDWIDE A key sales driver for semiconductor 75 SEMICONDUCTOR equipment is the demand for 42.8 43.5 semiconductor chips. Following 50 EQUIPMENT37.1 40.5 SALES 39.9 36.9 32.9 31.6 28.0 29.5 19.77 semiconductor growth of 4.8% in 2013, we 19.7 22.2 25 15.9 expect the momentum to continue this year

0 and think that a fairly lean inventory channel should support a healthy industry (25) landscape in the coming quarters. (50) 2001 02 03 04 05 06 07 08 09 10 11 12 13 2014* S&P anticipates that equipment spending Expenditures (Bil. $) Year-to-year % change will trend upwards longer term, driven by *Data through June. Year-to-year % change is based on first half 2013–2014. the emergence of new electronic products. Source: Semiconductor Equipment and Materials International. The increasing adoption of smartphones is an important growth driver for chipmakers and equipment providers alike. Rising consumer interest in tablet devices is also supporting demand.

Foundries—companies that serve chipmakers looking to outsource their manufacturing operations— registered more than 10% sales growth in 2013, driven by the advanced technology for mobile applications. In both 2014 and 2015, we expect the foundry segment to post healthy increases in capital spending plans. We think most foundries are spending primarily on capacity expansion at advanced technology nodes.

Memory chip customers have historically accounted for the largest percentage of equipment spending. (Memory chips include dynamic random access memory or DRAM, static RAM, and flash memory.) However, over the past three years, this cycle has been different: in our view, memory chipmakers have become more conservative, considering how severely they were burned in the prior downturn. Spending on DRAM equipment was a major catalyst for the industry in 2010, but this segment declined in 2011, 2012, and 2013, given falling memory chip prices and customer profitability, as well as sluggish PC sales. (Demand for DRAM chips is closely linked to PC demand.)

NAND flash memory (a type of nonvolatile memory capable of fast data writing) faced a significant decline in prices due to industry overcapacity in the first half of 2012. However, supply-demand dynamics improved in the second half of the year as industry leaders (Toshiba, Samsung, Micron, and Hynix) reduced production to better align supply with demand. In 2013, we saw improved pricing for both DRAM and NAND products. Prices for NAND declined at a slower rate of 11% in 2013, compared with a 31% decline in 2012, whereas prices for DRAM increased at a 5% rate compared with a 33% decline in 2012. Since NAND flash memory is used in a number of different applications, its price began to react favorably as demand grew substantially due to the launch of the next-generation iPhone and other Apple devices, along with a range of new smartphones and tablets. In addition, as the usage of DRAM memory has been expanding from PCs to consumer electronic products, servers, and other applications, its price is beginning to stabilize. The DRAM segment has also witnessed a significant period of consolidation.

We expect foundry and memory spending to increase in 2014 and beyond. Major foundry and memory players have announced plans to increase their capital expenditures (capex) in 2014. For instance, TSMC plans to expand production at 20 nanometer (nm) node to achieve output of 70,000 wafers per month by

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 5 the end of 2014, according to a report published in DigiTimes, a Taiwan-based IT Chinese newspaper and English-language website. To achieve this, the company’s capex would have to increase to a record $11 billion in 2014. Micron Technology Inc. expects its fiscal 2014 (ending August 2014) capex to be around $2.6 billion–$3.2 billion, up from $1.4 billion–$1.5 billion in 2013.

Despite recent pause, orders to rebound in the first half of 2015 After a sequential increase in equipment orders in the first half of 2014, the industry experienced a pause in such orders in the second half of 2014, but we project a rebound in the first half of 2015. According to Semiconductor Equipment and Materials International (SEMI), a trade association, in September 2014, equipment companies reported worldwide orders for North American-made chip equipment of $1.17 billion (based on a three-month moving average). Semiconductor orders reached a trough in November 2012, when equipment orders totaled $719 million.

In September 2014, the book-to-bill ratio was SEM ICONDUCTOR EQUIPM ENT DEM AND CYCLE 0.94, meaning that $94 worth of orders was 2,700 1.40 received for every $94 of product billed Chart H12: during the month. This is the first time in 2,200 SEMICONDUCTOR 1.20 2014 that the ratio was below 1.0. The ratio EQUIPMENT was at or above 1.0 for 11 consecutive 1,700 DEMAND CYCLE 1.00 months through August 2014. The ratio was below 1.0 in August and September 2013; 1,200 0.80 before that, it was above 1.0 for seven consecutive months (January-July), according 700 0.60 to SEMI data. Book-to-bill readings above 1.0 usually point to an expanding industry, while 200 0.40 those below 1.0 signal a contracting industry. 2004 2006 2008 2010 2012 2014 Bookings in the most recently completed Book-to-bil l ratio (right scale) economic downturn hit a trough of $245.6 Shipments (Mil. $, left scale) million in March 2009, down 85% from the Orders (Mil. $, l eft scale) May 2007 peak of $1.64 billion. Monthly *Data through September. Source: Semiconductor Equipment and Materials International. bookings subsequently rose more than seven- fold to a peak of $1.83 billion in July 2010. Semiconductor makers historically have completed the bulk of their equipment purchases in the first half of the year. (For further explanation of the book-to-bill ratio, see the “Key Industry Ratios and Statistics” section of this Survey.)

Taiwan Semiconductor stated during its fourth-quarter 2013 earnings call in January 2014 that it would spend slightly less than $10 billion in capex for 2014. Intel, which had around $10 billion in capex in 2013, will be spending $11 billion in 2014, but we think that this figure might drop. In its fiscal 2013, Micron noted that it fell short of its guided capex of $1.6 billion–$1.9 billion and spent around $1.4 billion–$1.5 billion. However, Micron expects to spend around $2.6 billion–$3.2 billion in fiscal 2014.

Another key sales driver for semiconductor equipment is capacity utilization rates at semiconductor manufacturers’ plants. (Utilization rates above 90% are often a signal that semiconductor companies will increase equipment spending.) We expect capacity utilization rates to decline slightly in the second half of 2014.

CHIPMAKER CAPITAL EXPENDITURE VARIES

The semiconductor industry has grown rapidly for more than 20 years due to the rising demand for PCs, the expansion of the Internet and the telecommunications industry, and the emergence of new high-technology products for the consumer. Growth has moderated in recent years, however, and there are signs that the industry has matured.

In 2009, unit demand for semiconductors fell for the first time since 2001, leading to an overall decline in semiconductor revenues. This created pressure on semiconductor manufacturers to carefully match capacity

6 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS with demand, which in turn lowered spending on capital equipment. Growth for semiconductors resumed in 2010, resulting in a dramatic increase in spending for semiconductor equipment. Although this upward trend continued in the first half of 2011, it weakened in the second half due to weak market conditions. Demand then improved in the first half of 2012, but it declined steeply in the second half. In 2013, demand was stable throughout the year. As of October 2014, Gartner forecast that worldwide semiconductor capital equipment spending would grow 17.1% to $39.2 billion in 2014 and 11.3%, to $43.6 billion, in 2015.

Semiconductor equipment spending can be broken down into three primary kinds of customers: memory, logic, and foundries. The following discussion addresses each of these markets.

Memory equipment: spending to elevate in the coming years Historically, memory customers have accounted for the largest percentage of equipment spending—as much as 70%–80% of total wafer equipment sales, according to our estimates. However, we expect memory spending to comprise about a third of overall revenues in 2014. We think memory customers more than doubled total capital expenditures in 2010, mainly driven by DRAM companies transitioning to type three double data rate (DDR3) technology. However, with DDR3 now mainstream, spending in this area declined sharply in 2011. Since then, spending in this arena has fallen as manufacturers have seen more consolidation and catalysts to spend have been missing. In 2014, we see higher spending, albeit from low levels, aided by DDR4 technology and healthy mobile DRAM investments.

We also see growing demand for NAND flash memory equipment in 2014, following a soft 2012 and 2013, given healthy global demand for smartphones, tablet devices, and solid-state devices. In addition, initial technology investments related to 3D NAND should provide a boost to spending. We expect favorable supply-demand conditions as well as pricing on the memory front for both DRAM and NAND. We note that there have been more rational price movements in the prices of certain flash and DRAM products so far this year.

Samsung Corp. has been the largest spender on memory equipment, followed by peers such as Hynix Semiconductor, Toshiba, SanDisk, and Micron. We estimate that these five manufacturers will account for more than two-thirds of total memory capital spending in 2014.

In February 2014, Applied Materials reported that 5% of its total orders from the semiconductor equipment segment in its fiscal 2014 first quarter (ended January 2014) came from DRAM customers, down from 7% in the same quarter last year. Flash memory orders contributed 27% of total orders, up from 8% in the same quarter last year. Thus, it appears that flash memory capital spending is strengthening.

Logic equipment: lackluster spending ahead According to S&P, logic equipment spending will be flattish in 2014, after decreasing 13% in 2013. Capital investment from this segment is concentrated on one large North American customer: Intel Corp. The company raised its capital expenditures to $10.8 billion in 2011, more than double the $5.2 billion figure in 2010. In both 2012 and 2013, the company’s capital expenditures totaled around $11 billion annually. The company expects to spend $11 billion again in 2014.

We think Intel alone accounted for about 20% of total wafer equipment spending in 2013, and we project that the company will represent between 17% and 19% of wafer equipment spending in 2014. Intel is planning to spend about $1.5 billion on developing its first 450-millimeter (mm) development facility. Similarly, for the development of a 14nm process technology, the company expects the spending to increase for production of Broadwell, the first product on 14nm technology. These processors will lead to better power utilization compared with the previous Haswell Model. We come away satisfied on Intel’s capital spending plans, given the difficulties within the computer industry. We think Intel will continue to use Moore’s Law as a roadmap—moving to more advanced technology every few years, regardless of the economic landscape—as it has the scale and financial ability to do so.

Intel noted in a conference call in September 2013 that with the increasing use of multi-patterning over the past few years, the capital cost per wafer has increased, but it has been able to offset the rising cost by scaling its technology. According to the company, other players are witnessing real increases in the capital intensity;

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 7 for Intel, however, only the capital intensity per wafer is going up while the intensity per transistor is still at historical levels. The company noted that as it introduces a new product line, it uses the transistor benefit in the cost, which results in lower capital intensity; however, if more features are added to a product line, the capital intensity goes up. Intel predicts that integrated circuits transistor density will double every two years. The company also noted that capex over the next few years will be driven by the 450-mm transition, which will also result in an increase in capital intensity. Intel believes that capex on 450-mm transition will have high net present value, but as with larger wafer size, capital cost distribution would be higher.

Foundry equipment: spending to be driven by next-generation technology Foundries are companies that serve chipmakers looking to outsource their manufacturing operations. TSMC is the largest participant in this highly concentrated segment. Other foundries include GlobalFoundries Inc., United Microelectronics Corp. (UMC), and Semiconductor Manufacturing International Corp. (SMI). Samsung has entered the field and plans to aggressively ramp up capacity over the next several years.

These companies significantly cut their capital spending plans during the recent economic downturn, and employed a number of cost-cutting efforts to preserve cash. Foundries then began to witness an abrupt pickup in business in mid-2009. Although these manufacturers increased their orders, we see high spending levels being sustained, given the progression to next-generation technology nodes and competitive pressures. We expect foundry spending this year to be driven by 20nm and below, as customers add capacity on these advanced technology nodes.

We estimate that spending by foundry manufacturers will increase this year, after declining. Foundries’ share in total capital expenditures was 45.9% in 2013, according to our estimates, and we expect it to be 45.3% in 2014, both up from 44.3% in 2012. We think most of the spending will be concentrated on more capacity expansion at advanced technology nodes, with foundry powerhouse TSMC leading the way.

We expect TSMC’s capital expenditures to total about $9.8 billion in 2014, up from $9.7 billion in 2013 and from $8.3 billion in 2012. In 2014, the company expects that 95% of its total capital spending will be on 28nm, 20nm, and 16nm building facility equipment. The remaining portion will be channeled toward research and development (R&D) equipment (10nm and below), specialty technology equipment, capital, and land.

OUTLOOK: POSITIVE ON SEMICONDUCTORS, NEUTRAL ON EQUIPMENT

Semiconductors As of late October 2014, we had a positive fundamental outlook for the semiconductors sub-industry for the next 12 months. We think stabilizing economic conditions resulted in revenue growth in excess of 3% last year, up from a decline of about 3% in 2012, and we forecast 5% growth in 2014. Following a weak 2012 end and a mixed 2013, we see improving sales through 2015. We expect a fairly lean inventory supply chain to leave the supply-demand balance even to slightly favorable for inventory replenishment, which should contribute to potential upside as demand improves.

Based on forecasts from Standard & Poor’s Economics (which operates separately from S&P Capital IQ), research from industry and trade groups, and our own bottom-up analysis of semiconductor companies within our coverage universe, we see the various end markets performing differently. We see the structural shift toward tablets in the PC sector as the biggest drag on the sub-industry. We think the communications and consumer end markets will be the strongest, as carrier comments suggest to us an improved spending outlook, and continued growth in smartphones. We also think the automotive sector has some favorable tailwinds despite weak global trends, while the industrial end market will remain weak. Given the high exposure to this end market, analog semiconductors are particularly exposed to this trend. All of this is against the backdrop of the proliferation of semiconductors across a range of electronic products and markets.

Industry margins continue to be a function of manufacturing utilization and inventory supply-demand imbalances. While companies that outsource manufacturing typically have more stability in gross margins (a trade-off for capped upside), others that have their own manufacturing see more variability. We think some companies, especially in analog, maintain higher inventory levels, reducing potential leverage. However, it is becoming clear to us that the cost of moving to leading-edge manufacturing is reaching a tipping point as

8 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS the cost benefits of moving to more advanced nodes diminishes. Intel believes that a vendor needs to generate two times the amount of revenue generated annually per dollar of R&D. As such, we expect a continued shift toward outsourcing and market share shifts among the companies with sufficient resources to move ahead. Long term, growth in semiconductors is highly correlated to global GDP, due to changes in inventory levels.

Semiconductor equipment As of late October 2014, our fundamental outlook for the semiconductor equipment industry for the next 12 months was neutral. We see a near-term pause in orders as leading-edge manufacturers digest recent equipment purchases, but remain optimistic about growth in both 2014 and 2015. Despite limited visibility, we anticipate that customers will look to invest in next-generation technology, assuming modest global economic growth. In addition, we think customer utilization will remain at healthy levels to support capital investments by leading-edge manufacturers. We expect normalized semiconductor inventories, as customers closely monitor production levels to better align supply with slowing demand. Longer term, we see rising orders supported by the emergence of new products, as well as improving demand for devices such as computers and handsets. We think customers are placing orders on advanced machinery at lower technology nodes, and we think the release of lower priced/more efficient mobile devices in the coming quarters should provide additional growth drivers for end demand.

For the three months ending in August 2014, the North American semiconductor equipment industry's book-to-bill ratio was 1.04, above the 1.00 level that typically indicates a period of industry expansion. Our current expectation is for improvement in memory spending over the next several quarters. In addition, we think foundry spending will remain robust despite some lumpiness, and expect logic orders to be steady. We think utilization rates at many customers are now above the 90% level that many consider a signal that semiconductor companies will increase their equipment spending. We think the biggest growth catalyst for the industry over the long term is an increase in flash memory spending.

In our view, growth for certain front-end equipment manufacturers will exceed that of the overall semiconductor equipment industry, which should support higher multiples for a handful of industry players. We also see increased expansion into the higher growth solar market, offering significant growth opportunities for equipment makers over the long term. Based on our neutral outlook for the industry over the next several quarters, and current multiples, we think that shares of most semiconductor equipment manufacturers are fairly valued, given our view of current risks and the group's historical range. 

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 9

INDUSTRY PROFILE

Semiconductors: by the numbers

In 2013, worldwide semiconductor sales reached $305.6 billion, up 4.8% from $291.6 billion in 2012, according to the Semiconductor Industry Association (SIA), an international trade group representing semiconductor manufacturers. The industry has been experiencing ups and downs since 2000. Following a growth of 36.8% in 2000, the industry WORLDWIDE SEM ICONDUCTOR SALES saw a decline of 32.0% in 2001 to $139.0 (In billions of dollars) billion. From 2002 to 2007, the industry 360 45 sustained an uptrend, reaching $255.6 billion in 2007, but sales declined again in 300 30 2008 by 2.7% to $248.6 billion. 240 15 Chart H01: The global economic slump led overall 180 WORLDWIDE 0 revenues to fall 9.0% to $226.3 billion in 2009. The decline was sharpest in the first 120 SEMICONDUCTOR (15) SALES quarter of 2009, down 30%, year on 60 (30) year. Revenues returned to a growth path in the fourth quarter of 2009 and 0 (45) 2002 03 04 05 06 07 08 09 10 11 12 13 2014* recovered smartly in 2010, gaining 31.8% Sales (Bil.$, left scale) to $298.3 billion. In 2011, growth was Year-t o-year % change (right scale) more muted, at 0.4%, to $299.5 billion. *Data through June. Year-to-year % change is based on first half 2013-2014. The industry saw a modest decline of Source: Semiconductor Industry Association. 2.6% in 2012 to $291.6 billion.

THE LEAGUE TABLES

A ranking of the 10 largest semiconductor companies, based on 2013 revenues, underscores the global nature of the industry. (See the accompanying table, “Largest semiconductor companies,” for details.) The US had five companies in the top 10, followed by South LARGEST SEM ICONDUCTOR COM PANIES (Ranked by 2013 revenues) Korea with two, while Japan, Taiwan, and Europe had one each. REVENUES ------(BIL. $) ------% CHG. Aggregate sales for the global top 10 COMPANY (COUNTRY) 2012 2013 2012-3 semiconductor companies totaled $186.8 1. Intel (US)Chart B01: LARGEST 49.11 48.32 (1.6) billion in 2013, up 11.2% from $167.9 billion 2. Samsung ElectronicsSEMICONDUCTOR (S. Korea) 32.25 34.38 6.6 in 2012. 3. TSMC (Taiw an)COMPANIES 16.95 19.85 17.1 4. Qualcomm (US) 13.18 17.21 30.6  Intel Corp. Intel is the world’s largest 5. Micron Technology (US) 7.89 14.36 82.0 chipmaker based on revenue and unit 6. Hynix Semiconductor (S. Korea) 9.06 12.97 43.2 shipments, and is well known for its leading 7. Toshiba (Japan) 11.22 11.96 6.6 market share in microprocessors for PCs. The 8. Texas Instruments (US) 12.08 11.47 (5.0) microprocessor is the central processing unit 9. Broadcom (US) 7.79 8.22 5.5 of the computer system, and acts like “the 10. STMicroelectronics (Sw itz.) 8.36 8.01 (4.2) Sourc e: IC Ins ights . brain” of the computer. The company also sells chipsets, which it refers to as “the nervous system” in a PC or computing device, sending data between the microprocessor and input, display, and storage devices.

Still the dominant market leader in microprocessors (used for computers), Intel finished the second quarter of 2014 with 86.9% unit and 94.7% revenue market shares in the microprocessor segment, according to

10 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS market researcher IDC. Although Intel lost share to rival Advanced Micro Devices Inc. (AMD) from 2003 to 2006, it regained some in 2007 (as discussed in more detail later in this section).

Intel’s sizable manufacturing capability is one of its competitive advantages. The company has been on the technological forefront, with some of the most advanced manufacturing technology and, equally impressive, the ability to produce effectively and efficiently without massive defects. It owns wafer fabrication plants (fabs) in the US, Israel, and Ireland, and operates component assembly and test facilities in Malaysia, China, the Philippines, and Costa Rica.

 Samsung Electronics. Widely known for its consumer electronics and computers, South Korea-based Samsung is also the world’s biggest manufacturer of memory chips by revenue and volume. It was No. 1 in the dynamic random access memory (DRAM) and NAND memory segments, with market shares of 40.3% in DRAM and 34.5% in NAND as of the second quarter of 2014, according to IDC. In 2013, the company’s DRAM and NAND market shares were 37.2% and 38.4%, respectively. Sales of semiconductors made up approximately 16% of the company’s total revenue.

The company’s gross margins, which were above 30%, tend to be high versus its memory peers. Although the slowdown in PC consumption in 2013 hurt DRAM prices, Samsung was able to offset the weakness by penetrating higher-end DRAM markets, such as mobile devices and servers. Furthermore, strong growth of handsets and tablets helped its NAND flash memory results. Samsung’s continued focus on keeping its semiconductor manufacturing near the leading edge has helped preserve market share and lower costs, in our opinion. Although margins have been volatile, Samsung has consistently been one of the industry’s most profitable memory chipmakers.

 Taiwan Semiconductor Manufacturing Co. Ltd. Engaged in the manufacture and marketing of discrete semiconductor devices, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) offers power management integrated circuits (ICs) and discrete devices. The company is the world’s largest dedicated chip foundry, with 49% of the market share. Founded in 1987, it played a key role in developing the stand-alone foundry strategy. TSMC is also one of the industry’s technological leaders, offering advanced manufacturing processes. The company manufactures chips for a wide range of applications for many different end markets (including computer, communications, automotive, industrial, and consumer electronics), but makes relatively few memory chips.

 Qualcomm Inc. US-based Qualcomm supplies integrated circuits and software based on code division multiple access (CDMA) technology for wireless voice and data communications, multimedia, and global positioning system (GPS) products. As a major developer of CDMA technology, Qualcomm also earns revenues from patent royalty fees through licensing agreements with communications equipment makers. The company’s products are used in mobile phones, data cards, and infrastructure equipment, and it supplies chips to Nokia Corp. and other leading mobile handset manufacturers. Qualcomm is currently the largest fabless semiconductor supplier in the world. (See the “Industry Trends” portion of this Survey for more information on foundries and fabless firms.)

 Micron Technology Inc. Micron is a US-based manufacturer and marketer of DRAM, NAND flash, and, after acquiring memory maker Numonyx Holdings B.V. in May 2010, NOR flash memory. In 2013, the company was the third largest NAND producer (16.1% market share) and the third largest DRAM producer (20.1%). Revenues have advanced at a 9.2% compound annual growth rate (CAGR) over the past five years, but because of the sales variability each year, margins have fluctuated widely. Gross margins ranged from -1% in 2008 to 20.3% in 2013. Operating profit margins have been more volatile, ranging from -27.3% to 2.6% over the past five years. As of the second quarter of 2014, the company ranked fourth in the NAND market, with a 12.9% share, and third in the DRAM market, with a 25.9% share.

 Hynix Semiconductor Inc. South Korea-based Hynix began as Hyundai Electronics Industries Co. Ltd. in 1983 and is now one of the top manufacturers of DRAM and NAND chips: No. 2 in DRAM (with a 26.6% global market share) and No. 4 in NAND (12.8%) at year-end 2013, according to IDC. The company’s DRAM business closely trends with computer sales, but it also has exposure to graphics and other consumer electronic devices like digital TVs, set-top boxes, DVD players, printers, cellular phones, and personal digital

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 11 assistants. Many of these same electronic devices drive the company’s NAND flash business. In 2013, the company saw revenues grow 39.3%, after a drop of 2.3% in 2012. Hynix’s gross margin was 37.4% in 2013, compared with 15.9% in 2012 and 16.3% in 2011. As of the second quarter of 2014, the company ranked second in the DRAM market, with a 26.7% share, and fifth in the NAND market, with a 10.4% share.

 Toshiba Corp. Based in Japan, Toshiba is among the world’s largest diversified electronics manufacturers. The company’s semiconductor business offers a very broad range of semiconductors, including memory, analog and imaging ICs, discrete devices, and logic large-scale information (LSI). The company has manufacturing facilities in Japan, Malaysia, Thailand, and China.

A pioneer in flash memory development, Toshiba invented NAND flash technology in 1987. The technology is used in a variety of devices, including disk drives, digital cameras, and audio appliances. Toshiba’s partner in developing and producing NAND flash memory is US-based memory card maker SanDisk Corp. Although Toshiba originated NAND chips, its archrival Samsung is now the market leader, with larger production volumes and lower prices. Nonetheless, the company was still the second largest NAND player in the world, with a 28.5% share of the market in 2013 and a 20.4% share as of the second quarter of 2014, according to IDC.

 Texas Instruments. US-based Texas Instruments Inc. (TI) has played a vital role in high technology and semiconductor history: industry legend Jack Kilby of TI invented the first microchip in 1958. (His contributions are discussed in the “How the Industry Operates” section of this Survey.) The company’s semiconductors are used for various functions, such as converting and amplifying signals, interfacing with other devices, managing and distributing power, processing data, canceling noise, and improving signal resolution.

TI’s product portfolio includes products, both custom and standard, that are integral to almost all electronic equipment. A custom product is designed for a specific customer for a specific application, is sold only to that customer, and is typically sold directly to the customer. A standard product is designed for use by many customers and/or many applications and is generally sold through both distribution and direct channels.

Revenues tend to be cyclical and reflective of broader economic trends, but some of the divergences versus peer results come from TI’s efforts to divest its less-profitable businesses. Gross margins widened from the 30% area in 2001 and 2002 to nearly 52% in 2013, as the company focused on higher-margin businesses and efficiently managed internal capacity. Compared with the overall industry, TI has lower operating expenses as a percentage of sales, contributing to above-industry operating margins that have widened from the single digits to 23% in 2013.

 Broadcom Corp. US-based Broadcom provides innovative semiconductor solution for wired and wireless communication. The company provides voice, video, data, and multimedia connectivity for home, office, and the mobile environment. It operates in three segments: Broadband Communications, Mobile & Wireless, and Infrastructure & Networking. Company revenues grew at a CAGR of 6.7%, reaching $8.3 billion in 2013 from $6.82 billion in 2010. The company’s gross margin during the same period was in a range of 53.3% to 55%. Its net income contracted at a CAGR of 26.7% to $424 million in 2013 from $1.08 billion in 2010.

 STMicroelectronics NV. Switzerland-based STMicroelectronics (STM) designs, makes, and markets a broad range of semiconductor devices used in many applications, including automotive products, computer peripherals, telecommunications systems, consumer products, and industrial automation and control systems. STM’s product portfolio covers all major categories of semiconductors: analog, digital, and mixed- signal devices; dedicated ICs; microprocessors and semicustom offerings; and memory-focused standard ICs and discretes. The company has a diversified product portfolio and develops products for a wide range of end markets, which reduces its dependence on a single product, application, or market. STM focuses on leveraging its technology to create customized, system-level solutions with digital and mixed-signal content.

12 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

INDUSTRY TRENDS

Revenue advances have slowed over recent decades, and even as barriers to entry rise, competitors are facing increasingly brutal competition, rapid technological changes, and falling product prices. Chipmakers are trying to achieve faster growth through market share gains, product cycles, and penetration in end markets that are just now starting to employ semiconductors into products. Furthermore, semiconductor producers have managed to decrease the cost of products by continually shrinking transistor sizes, increasing wafer sizes, and improving throughput. Successful companies have been able to experience longevity by realigning their business models for maturing growth.

EMERGING MARKETS DRIVE INCREMENTAL DEMAND

Since 2000, higher growth in emerging markets has driven the growth in semiconductor industry revenues. From 2000 through 2011, worldwide industry revenues grew at a compound annual growth rate (CAGR) of 3.1%, with a 10.2% CAGR in the Asia-Pacific region. According to IDC, worldwide semiconductor revenues rebounded 8.3% to $324.5 billion in 2013, as strong performance of mobile phones and tablet devices offset the weakness in the PC market. IDC estimated that worldwide semiconductor revenue would grow at a CAGR of 3.4% to $384 billion from 2013 through 2018.

According to IDC, emerging markets accounted for 59.5% of total PC shipments in 2013. Moreover, emerging markets are expected to account for the majority of total PC shipments in 2014. In 2011, China replaced the US as the top consumer of PCs, while Brazil rose to third place from fifth place in 2010, ahead of Germany and Japan. According to Intel’s REGIONAL SHARES IN WORLDWIDE PC CONSUMPTION estimates, China, Brazil, Russia, and India will 2013 2014 2015 2016 2017 2018 Chart B05: REGIONAL be first, third, fourth, and fifth among the top United States 20.1 21.8 22.3 22.5 22.5 22.4 five countries for PC consumption by 2016. Western EuropeSHARES 15.4 IN 17.8 17.1 16.2 15.4 14.9 WORLDWIDE PC Asia/Pacific* 34.3 32.7 33.0 33.5 33.8 34.1 The sharper increase in industry revenues in JapanCONSUMPTION 5.0 4.8 4.5 4.7 4.8 4.9 emerging markets is driven by falling prices ROW† 25.2 22.9 23.0 23.2 23.5 23.7 of PCs and rising income. According to an *Excluding Japan. †Rest of the w orld. analysis by Intel, the PC penetration rate Source: IDC, August 2014 accelerates as the price comes in at between four and eight weeks of income (WOI) for an individual. While most mature markets are well past this level, the emerging markets are entering this level. For example, China reached the level of 7.4 WOI to purchase a PC in 2010 and is expected to reach 3.0 WOI by 2015. India and other emerging markets in the Asia-Pacific region are expected to reach 8.1 WOI to purchase a PC by 2015.

AV ERA GE SYST EM PRIC E BY FORM FAC T OR EVOLVING CORPORATE STRATEGIES (in US dollars) Should semiconductor companies diversify 750 700 or specialize? With swiftly changing 650 demand, technology, and marketplace 600 conditions, companies have wrestled with 550 that question as they have attempted to 500 chart the course to success. 450 Chart H17: AVERAGE Specialization and going fabless 400 SYSTEM PRICE BY 350 FORM FACTOR S&P Capital IQ (S&P) thinks that although 300 diversification has made some companies 250 successful, the current trend leans toward 200 specialization. This is due to several factors, 150 including the rising costs of conducting 2011 2012 2013 2014 2015 2016 2017 2018 research and building wafer fabrication Desktop Portable Total plant (fabs), the proliferation of Source: IDC, August 2014 semiconductor usage in most end markets,

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 13 and the advantages of owning patents and having a deep knowledge base about specific products. When companies focus their research in particular product areas, they can potentially develop a design advantage that, if it persists for a business cycle or two, may force competitors to shift their focus.

Going fabless—outsourcing semiconductor manufacturing operations—is another kind of specialization seen in the semiconductor industry. A growing number of firms are choosing to become dedicated design companies, which allows them to focus resources around core designing competencies and less on complex and expensive manufacturing processes. Without internal manufacturing operations, fabless or fab-lite firms rely on contract manufacturers or foundry partners to manufacture their products.

As chipmakers shed internal manufacturing, foundries are gaining importance in the industry. Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) is the world’s biggest dedicated chip foundry, with 49% of the market share for dedicated foundries. Founded in 1987, it played a key role in developing the stand-alone foundry strategy. TSMC is also one of the industry’s technological leaders, offering advanced manufacturing processes. It manufactures chips for a wide range of applications for many different end markets (including computer, communications, automotive, industrial, and consumer electronics), but makes relatively few memory chips. The world’s top foundries are in the Asia-Pacific region.

Fabless firms enjoy some advantages Because they do not construct or maintain their own production facilities, fabless companies enjoy certain advantages: typically, higher profit margins and healthier cash flows, reflecting this business model’s relative lack of capital investment. In addition, fabless companies are able to devote a higher percentage of their resources to design research and development (R&D), which has enabled them to lead the way in offering innovative chips with smaller linewidths. A fabless company’s major disadvantage is that its access to foundry space is often limited during periods of rapid industry growth: when product demand is strong, fabless firms may be unable to procure enough chips to satisfy their customers’ requirements.

In November 2010, Intel stated plans to open its plants for foundry services and entered a strategic agreement with Achronix Semiconductor Corp., a privately held, California-based fabless company that previously had worked with TSMC, that would allow that company to build the most advanced field programmable gate arrays (FPGAs) using Intel’s 22-nanometer (nm) process technology. In February 2012, Tabula Inc., a privately held, fabless semiconductor company developing 3D programmable logic devices (3PLDs), announced that it had reached an agreement with Intel for the manufacture of Tabula’s family of 3PLD products. In May 2013, Microsemi Corp. selected Intel to develop its advanced high-performance digital integrated circuits (ICs) and system-on-chip (SoC) solutions using Intel’s 22nm technology. In March 2014, Intel and Altera Corp. announced their collaboration to develop multi-die devices, which integrate Altera’s Stratix 10 FPGAs and SoCs using Intel’s 14nm Tri-gate process.

DIGITIZATION SUPPORTS ANALOG SALES

Ironically, as more information is digitized, more analog chips are required to assist the digital chips that process, transmit, and store information in the digital language of zeroes and ones. Analog or “linear” semiconductors handle continuous signals found in the real world, such as sound, light, heat, and pressure. For example, a mobile phone has a digital signal processor (DSP) at its heart, but relies on a cluster of analog chips around the DSP chip to convert the voice signals to digital format for manipulation by the DSP, then translate them back to analog format for listening. Analog chips are also needed to manage power usage, which is particularly important for portable electronics, where battery life is a key product feature.

The strong push toward wireless capabilities for laptop PCs and personal digital assistants (PDAs), as well as demand for increased functionality in mobile phones, has helped drive analog sales. Over the past several years, analog revenues have been neck and neck with sales from the microprocessor segment. In 2012, analog sales came in at $39.3 billion and accounted for 14% of the industry’s revenues, according to World Semiconductor Trade Statistics. In 2013, revenues grew 2.1% to $40.1 billion.

An important factor in analog’s attractiveness is its relatively steady and profitable business model, as demonstrated over the past decade by many of the large analog players, including Analog Devices Inc.,

14 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Linear Technology Corp., and Maxim Integrated Products Inc. Analog companies tend to have thousands of products and a very broad customer base, which lend stability to the revenue stream.

Analog is also appealing because these are not commodity products. The market is fractured: there are thousands of designs available, and many analog suppliers compete for the analog spots on proposed circuit boards. However, when a company wins a spot in a customer’s product, the price is apt to be fixed for the run of the product—often a year or so—which makes for greater price stability than in many digital markets, where commodity pricing pressures prevail. Analog products typically contain high proprietary design content and are often sole-sourced, with equivalent products available from only a limited number of other analog chipmakers. Analog products typically have longer product life cycles than digital products, are less subject to competition from Asian GLOBAL CHIP SALES BY TYPE producers, and have lower capital (Ranked by 2016 forecast sales, in billions of dollars) requirements for production facilities.

0 20406080100A good case for consolidation is the analog semiconductor segment, which is Logic fragmented but has an attractive business model. On April 4, 2011, Texas Memory Instruments Inc. (TI) announced a Chart H10: definitive agreement to acquire National GLOBAL SALES Semiconductor, a major analog player, in MicroFOR SELECTED a deal worth about $6.5 billion. The CHIPS companies expected the combination to Analog help them share their production expertise and global sales force, and Optoelectronics 2013 expand into more products lines and 2014 newer market segments. The deal closed 2015 Discrete Semiconductors in September 2011. 2016 A key barrier to entry in the analog Sensors business is the limited pool of analog circuit designers. The skill set is different Source: World Semiconductor Trade Statistics. for analog engineers than for digital designers, and companies say that it takes a decade of practical experience beyond graduate education to fully develop an analog engineer’s skills. Thus, while the world wants more electronic gadgets that monitor and digitize real-world phenomena, the analog chips that help DSPs make that happen are at a premium. Semiconductor equipment

Semiconductors are growing smaller, faster, and more complex. Chip equipment makers play a key role in making these advances possible. This section presents the major business trends and technological advances that are shaping this industry.

ASIA-PACIFIC STIRS UP CHIP AND EQUIPMENT SALES

The shift of electronics manufacturing to Asia-Pacific is a major reason for the growth of the chip market in that region. Many electronics makers have set up shop in countries such as China, Malaysia, and Singapore to take advantage of low-cost skilled labor. Hewlett-Packard Co., Motorola Inc., and Dell Inc. all have facilities in Asia, and many contract electronics makers have expanded their operations in the region.

People in Japan, South Korea, and Taiwan have been technology enthusiasts for many years. With rising prosperity in other Asia-Pacific nations, a growing number of residents can now afford the latest electronic devices. Living standards have risen dramatically in China, South Korea, Malaysia, Singapore, and India in the past decade. One result of this change has been a marked increase in Internet and computer use: about 1.3

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 15 billion Internet users—or 45.1% of total world users—resided in Asia as of December 31, 2013, according to Internet World Stats, which tracks Internet usage.

Flextronics International Ltd., a contract manufacturer that makes products for companies such as Dell, Motorola, and Xerox Corp., reported that 20% of its sales for its fiscal year ended March 2001 were in Asia. For its fiscal year ended March 2014, that percentage had risen to 53%. The region has also become more important for Jabil Circuit Inc., another leading electronics contract manufacturer, which has seen sales to this region rise, as a percentage of GLOBAL CHIP CONSUMPTION, BY REGION sales, over the last decade. (Percentage of total)

65 With the concentration of electronics 60 manufacturing in Asia, semiconductor Chart H05: 55 companies are following suit in order to 50 GLOBAL CHIP collaborate more closely with their 45 CONSUMPTION, customers, reduce shipping costs, and take 40 BY REGION 35 advantage of the region’s significantly 30 lower operating, property, construction, 25 20 material, and labor costs. With the cost of 15 building a new fab over $3 billion, 10 semiconductor companies are attracted to 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* regions that can provide savings on land Americas Europe Japan Other Asia/Pacific *Data through August. and building costs. (Fab is the informal Source: Semiconductor Industry Association. name for a chip manufacturer’s wafer fabrication plant.) In addition, wages for skilled labor are considerably less than what they are in the West, and raw materials that are heavily used during the fabrication process, such as water and industrial gases, are much less expensive.

Chip manufacturing and design are moving to Asia More and more chip manufacturing has moved to Asian countries. Taiwan and other Pacific Rim countries have seen their chip foundry businesses grow significantly in the past 15 years. (A foundry manufactures chips for other companies.)

Three of the four largest foundry manufacturers are Asian companies: TSMC and United Microelectronics Corp., both of Taiwan, as well as Semiconductor Manufacturing International Corp. (China). Although China’s tech companies used to focus on low-end assembly and manufacturing, they are now making more advanced technology products. China has also succeeded in drawing eager international investors by providing low labor and land costs, efficient ports and transportation systems, and a skilled labor force. While other countries in Asia, such as the Philippines, may offer cheaper labor, China appeals to chipmakers because it already has the factories that make computers and cellphones, which use vast quantities of chips.

Since 2000, the landscape for fab capacity has changed dramatically, with countries such as South Korea and Taiwan gaining significant market share, while others such as Japan and the US losing sizeable share. We expect this trend to continue over the long term, as companies can enhance cost efficiencies and gain competitive advantages by moving closer to customers.

Semiconductor equipment makers have followed their customers—chipmakers and foundries—to Asia; the majority of new chipmaking plants are now being built in the region. The increasing amount of new foundries in Asia, especially in Taiwan and China, means that Asia is becoming increasingly important to semiconductor equipment makers. Industry leader Applied Materials has seen sales to Asia rise from 30% of its revenues in fiscal 1997 (ended October 1997) to 71% in fiscal 2013. The breakdown of sales to Asia by location was as follows: Taiwan, 35%; Korea, 12%; China, 11%; Japan, 9%; and Southeast Asia, 4%.

16 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

TECHNOLOGICAL ADVANCES IN PROCESSES AND PRODUCTS

In the semiconductor industry, R&D activities and capital spending are critical to progress. Technological advances give chips faster processing speeds, lower power consumption, smaller form, and lower cost, or a combination of these factors. Many conceptual designs and prototype products, and new ways to manufacture chips, are developed each year. Over the last year, leading chipmakers made a few key announcements of advances in processes and designs.

Linewidths continue to shrink As part of the industry obsession with shrinking semiconductor size, chips are being manufactured in increasingly smaller linewidths (i.e., the physical dimensions of the smallest features in a circuit pattern). According to Moore’s Law, the number of transistors per chip doubles approximately every two years—with the boost in density made possible largely by smaller linewidths. The equipment industry considers the linewidth shifts as mostly positive, because smaller linewidths require increasingly sophisticated equipment that sells at higher prices. However, higher production rates for chips at smaller linewidths, as well as increased R&D costs for equipment makers, somewhat mitigate these benefits.

Leading chipmakers are making the transition from 45nm to 32nm and below. In addition to reducing linewidths, semiconductor manufacturers are constantly developing new conceptual designs and prototypes. Over the last 18 months, Intel, TSMC, and others announced many new designs and processes. As production ramps up for these new products in the future, demand for new semiconductor equipment should rise.

 Intel. Most of Intel’s microprocessors are manufactured using either its 45nm or its second-generation 32nm high-k metal gate silicon process technology, both of which are the first to use high-k metal gate transistors that increase performance while simultaneously reducing the leakage of current; or its 22nm three-dimensional tri-gate transistor process technology. A substantial majority of Intel’s microprocessors were manufactured on 300mm wafers using its 22nm or 32nm process technology as of the end of December 2013. The company is developing next-generation 14nm process technology and is on track to begin manufacturing products using this technology. In March 2014, Intel introduced its second-generation 14nm SerDes in order to expand the operating range that will reduce power requirements by 20% and area by 40% compared with its 22nm SerDes offering.

 TSMC. TSMC reported more than a thirty-fold increase in the production of 28nm technology in 2012. This technology accounted for 30% of TSMC’s revenues in 2013. The company continued to ramp up 28nm output and capacity in 2013. In the third and fourth quarters of 2013, the technology accounted for 32% and 34% of the company’s revenues, respectively. According to the company, it achieved a threefold increase in production of 28nm wafers in 2013 compared with the 2012 level. In January 2014, TSMC announced that it has started producing chips using 20nm technology in two factories. Moreover, the company expected that 20nm technology would account for 20% of total revenues in the final quarter of the year. According to the company, its 20nm SoC is at par with the 22nm or 20nm process technology offered by other manufactures in the market. In addition, for FinFET (a double-gate technology), TSMC is developing its second-generation transistors at 16nm node, and it expects volume production to begin in early 2015.

 Others. Over the last three years, Samsung, Hynix Semiconductor, and Micron have all migrated to 50nm (or below) technology and production, as type three double data rate (DDR3) technology became the mainstream dynamic random access memory (DRAM) specification. In 2011, Micron manufactured its DRAM products using 42nm linewidth process technology; the company transitioned DRAM production to a 30nm linewidth process technology and expected a production ramp-up to 20nm by spring 2014. Moreover, in April 2014, Micron announced an increase in the production of DDR4 memory to support future Intel central processing unit (CPU) launches, as it will lead to a 35% power improvement over DDR3. Micron manufactured its NAND products using 25nm linewidth process technology in 2011 and then started transitioning production of NAND flash memory products to 20nm linewidth process technology in 2012, which it continued in 2013. The company is now using 16nm technology. Such players as Toshiba and SanDisk are manufacturing their products at 19nm technology.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 17

Processors: greater integration in smaller packages Part of an ongoing industry trend is the integration of memory, graphics, and other functionalities into the microprocessor. The introduction of an integrated memory function in 2003 of Advanced Micro Devices Inc. (AMD) helped propel its gains in market share from Intel through 2006. In 2009, Intel announced plans for new microprocessors with improved integrated graphics, while AMD got closer to releasing a hybrid microprocessor and graphics processing unit (GPU) chip. In 2011, both companies scaled production of these integrated microprocessors, and the fight for technological supremacy continues.

Intel launched the latest versions of its Core branded microprocessors in January 2011. These chips, nicknamed Sandy Bridge, a successor to the Nehalem microarchitecture, can reach CPU clock speeds of 3.8 gigahertz (GHz), are scalable in the number of cores, have markedly faster integrated graphics, and are more power efficient. These microprocessors are 17% faster than chips using the Nehalem microarchitecture, with graphics power up to two times better. Intel’s first 22nm chips, nicknamed Ivy Bridge, are a die-shrink of Sandy Bridge and were released in April 2012. Ivy Bridge is the first product to be based on Intel’s new, first-of-its-kind, 3D transistor manufacturing technique. In June 2013, Intel released a new microarchitecture called Haswell, which is designed for 22nm process technology. In March 2014, Intel and Altera Corp. announced their collaboration to develop multi-die devices, which integrate Altera’s Stratix 10 FPGAs and SoCs using Intel’s 14nm Tri-gate process.

AMD upped the ante by offering Fusion, a new design that incorporates its CPU with the high-end discrete graphics expertise that the company gained from its 2006 acquisition of ATI Technologies Inc. Intel’s Sandy Bridge offering includes integrated graphics, but does not offer the equivalent of a discrete GPU on the same die. AMD’s GPU/CPU chip can handle computing processor and intensive graphics functions, such as video gaming and high-definition (HD) video playback, much more effectively and efficiently than AMD’s current offerings, and much faster than Intel’s past integrated graphics offerings. The company released 40nm-based Fusion chips made for laptops and ultra-mobile devices in January 2011. In June, AMD expanded its Fusion offering by launching A-series accelerated processing unit (APU), shipping more than one million units in the second quarter of 2011. In March 2014, AMD continued its dominance in APU technology by introducing the AM1 platform.

Looking ahead to 450mm Intel and others are chomping at the bit for 450mm capacity because it can provide scale benefits and cost savings. In late 2010, Intel stated plans to spend between $6 billion and $8 billion for an R&D fab in Hillsboro, Oregon, and to upgrade existing fabs for 22nm manufacturing. Unlike Intel’s other existing production fabs, the Oregon facility could be the first large-scale 450mm-capable fab. Foundry giant TSMC is aiming to have a 450mm production line available in 2016–2017. Toshiba is also looking into the new technology. Although these three chipmakers are very interested in 450mm, the semiconductor equipment makers have been slow to develop the 450mm tools because they say the returns for this new technology are still too small to justify the necessary investments.

According to our estimates, a leading-edge 300mm manufacturing plant costs up to $8 billion, and we think a 450mm manufacturing plant could cost as much as $10 billion. Only a handful of semiconductor companies have the financial resources to move toward larger wafer sizes within the next several years, and their combined demand may not be enough to entice wider interest from the toolmakers.

Industry observers do not expect an immediate rollout of 450mm capacity. The International Technology Roadmap for Semiconductors (ITRS), sponsored by the leading semiconductor trade groups across the globe, reported in its 2012 edition that 450mm manufacturing tools for initial manufacturing lines were expected to be available between 2013 and 2014 and, if that happens, that the production manufacturing ramp would occur in 2017–2018.

Lithography leads the way to lower technology nodes Lithography equipment is used to print complex circuit patterns onto silicon wafers, which are the primary raw materials for ICs. The printing process is one of the most critical and expensive steps in wafer fabrication. Lithography equipment is, therefore, a significant focus of the IC industry’s demand for cost-

18 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS efficient enhancements to production technology. The costs to develop new lithography equipment are high. The lithography equipment industry is characterized by the presence of only a few participants such as ASML Holding NV, Nikon, and Canon.

A lithography tool projects light from the light source through an image of the circuitry pattern on a photomask or reticle. The image of the circuitry is transferred by the light being projected through a reduction lens onto a small portion of the surface of the silicon wafer. Depending on the kind of chip being made, a total of 30 to 50 layers are patterned precisely over the first to complete the circuit fabrication, at which time the wafer is fully processed.

To a degree, the ability to pattern smaller circuits depends on the wavelength of the light used in the photolithography process. A shorter wavelength of light can pattern circuitry with smaller critical dimensions, which in turn allows the transistors that serve as circuit switches to be smaller and the resulting chips to provide higher levels of functionality. The short wavelength of deep ultraviolet (DUV) light enables the required resolution, depth of focus and critical dimensions control required to pattern semiconductor circuits. The light from these DUV sources is generated by mixing gases inside a discharge chamber within the light source system.

It is becoming increasingly more difficult to extend optical lithography. The newest flash devices are currently being manufactured using double patterning as a way of extending the half-pitch. This approach will be pushed harder as chip manufacturers begin to test the limits at the 22nm node. However, it is at this point that alternative next-generation lithography must be introduced into manufacturing to ensure a smooth transition as the lithography extends beyond 14nm.

Extreme ultraviolet (EUV) lithography is expected to be the next critical dimension imaging solution after immersion lithography and double patterning extensions because of its lower cost of ownership. The availability of a high power source for 13.5nm radiation is one of the technologies requiring significant developments to enable the realization of EUV lithography. Other technologies that are needed to enable EUV photolithography include photoresist and mask. Photoresist performance parameters needing the greatest amount of development include sensitivity or speed, line-edge-roughness, and line-width-roughness. Photoresist sensitivity and scanner optical transmission are the basis to derive EUV source power requirements within a usable bandwidth.

SEMICONDUCTOR EQUIPMENT MANUFACTURERS LOOK TO SOLAR FOR GROWTH

We see the expansion by semiconductor equipment manufacturers into the solar industry as a longer-term trend. We think this makes sense because of the similar processes and technology used within both industries. In addition, the solar industry has higher growth opportunities compared with the more mature semiconductor industry. We think companies, both small and large, will be looking to enter this area, whether organically or through merger and acquisition (M&A) activity.

In this field, Applied Materials Inc. leads the way. The company’s Energy and Environmental Solutions (EES) group, which consists primarily of solar products, has evolved through four acquisitions since 2006 (Applied Films Corp., HCT Shaping Systems SA, Baccini SpA, and Advent Solar Inc.). Applied entered the solar photovoltaic market in 2006 and announced its objective to lower the overall cost per watt of solar electricity to parity that of electricity generated by other sources, such as the burning of fossil fuels. (Photovoltaics is a method of generating electric power using solar cells contained in photovoltaic modules.)

Applied provides manufacturing solutions for both wafer-based crystalline silicon (c-Si) and glass-based thin film applications to enable customers to increase the conversion efficiency and yields of photovoltaic devices. Products include large-area platforms, such as the ATON in-line sputtering system for high-quality deposition and high-throughput in cell manufacturing, as well as processes, materials-handling technologies, and fabrication services. (Deposition is the process by which a layer of electrically insulating or conductive material is deposited on the surface of a wafer.)

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 19

During the fourth quarter of its fiscal 2007 (ended October 31, 2007), Applied launched the SunFab Thin Film Line; at the time, it was the world’s only integrated production line for manufacturing thin film silicon solar modules using 5.7 square meter (m2) glass substrates. These ultra-large panels (four times larger than any thin film solar panel offered by competitors) were intended for large-scale applications such as solar farms and building-integrated photovoltaic system installations. However, in July 2010, the company announced plans to discontinue sales of its SunFab Thin Film Line to new customers, citing adverse market conditions.

During fiscal 2007, Applied expanded its capabilities and opportunities in the c-Si technology sector through its acquisition of HCT Shaping Systems, the world’s leading supplier of precision wafering systems used to make c-Si substrates. These systems reduce silicon consumption and cost by sectioning silicon ingots into ultra-thin wafers used to fabricate c-Si solar cells. In early fiscal 2008, Applied completed its acquisition of Baccini, which supplies the automated metallization, edge insulation, inspection and test, and integrated handling systems required for the back-end manufacturing of the c-Si photovoltaic cells. In November 2009, Applied acquired substantially all of the assets of Advent Solar, a developer of advanced technology for c-Si photovoltaics, for an undisclosed cash amount. In September 2013, Applied announced the release of its next-generation Applied Solion XP Ion Implant System in order to help customers manufacture their photovoltaic cell designs in a cost-effective manner.

Other semiconductor equipment manufacturers have also begun to follow Applied Materials, expanding their presence in the alternative energy industry. For instance, MKS Instruments Inc. manufactures component products used in c-Si and emerging thin film processes to manufacture photovoltaic cells. Advanced Energy Industries Inc. is another example of an equipment supplier increasing its exposure to the solar market. Part of the company’s business includes selling solar inverters, which convert the direct current (DC) power produced by the solar panels into alternating current (AC) power for consumption on-site or for sale through the public utility grid. Both companies are also major suppliers to Applied Materials.

SunEdison Inc. (which changed its name in May 2013 from MEMC Electronic Materials Inc.) a global leader in the manufacturing of semiconductor silicon wafers, has also become a major participant in the solar industry. The company entered the solar industry in 2006 and now derives more than 50% of its sales from solar customers. In November 2009, the company acquired privately held SunEdison LLC, a developer of solar power projects and North America’s largest solar energy services provider, for $200 million.

HOW THE INDUSTRY OPERATES

Since the mid-1990s, the semiconductor industry has contributed significantly to global economic growth. To varying degrees, semiconductors have affected economies around the world by providing the foundation for technological innovations that have led to the “Information Age.” The semiconductor industry’s ability to produce chips with rising performance and declining costs has been at the heart of progressive advances in computing, communications, and myriad electronic applications.

TRANSISTOR RACE SETS THE INDUSTRY STRUCTURE

Since the invention of the first transistor, semiconductors have directly or indirectly spawned technological advances in most devices in existence. From the early 1900s to the 1950s, vacuum tubes were the primary electronic components of electrical products. They adequately performed the important tasks of switching (turning a current on and off) and amplification (receiving and magnifying a small signal while retaining its electrical characteristics). However, vacuum tubes were fragile, bulky, unreliable, and power-hungry, and produced considerable heat.

The invention of the transistor in 1947 by John Bardeen, William Shockley, and Walter Brattain of Bell Laboratories overcame the inherent limitations of vacuum tubes. Transistors offered the electrical functioning of the vacuum tube, but with the advantages of solid state: no vacuum, small size, low weight, low-power requirements, and a long lifetime. The invention stimulated the design of increasingly complex circuits containing thousands of discrete components, such as transistors, diodes, rectifiers, and capacitors. For their work on the transistor, the three inventors shared the 1956 Nobel Prize in physics.

20 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

In 1958, Jack Kilby of Texas Instruments Inc. conceived of and proved the viability of integrating a transistor with resistors and capacitors on a single semiconductor chip—also called an integrated circuit (IC). This achievement, along with Dr. Jean Hoerni and Robert Noyce’s idea of “junction isolations” for planar interconnections, underpins the great progress of ICs and IT. By the late 1960s, 90% of all electronic components produced were ICs. Mr. Kilby was awarded half of the 2000 Nobel Prize in Physics for his pioneering work in integrated circuitry; Zhores Alferov and Herbert Kroemer won the other half for developing semiconductor heterostructures used in high-speed electronics and optoelectronics.

The invention of the IC was a landmark achievement that provided the catalyst for further electronic advances. In 1971, Intel Corp. put the key elements of a programmable computer on a single chip, the Intel 4004 microprocessor, which ran at 108 kilohertz and served as a component in a calculator. In 1974, Intel offered the more powerful 8080 microprocessor, which quickly led to the advent of the PC industry. In 1975, International Business Machines Corp. (IBM) introduced an early model PC, and Apple Computer Inc. (now Apple Inc.) introduced its Apple II in 1976. However, the most popular computer by far was the Commodore 64 (C64). During its lifetime, it sold between 12.5 million and 17 million units, making it the best-selling computer of that time. In fact, from 1983 to 1986, the C64 dominated the market with a market share between 30% and 40%. The growing demand for technology that is able to store, analyze, and transmit data promoted rapid industry growth. Today, advanced chips permit the development of Internet applications and the expansion of extensive wireless communications systems.

INNOVATION: MOORE’S LAW SETS THE PACE

The continual improvement in semiconductor technology is expressed in the concept of Moore’s Law, named after Gordon Moore, a cofounder of Intel. In 1965, Dr. Moore observed that, since the invention of the IC in 1958, the number of transistors on a chip had doubled every year, and he predicted that the trend would continue “for at least 10 years.” His prediction has proved to be uncannily accurate for nearly half a century, in part because the law is now used in the semiconductor industry to guide long-term planning and to set research and development (R&D) targets. (The doubling period is sometimes noted as every 18 months, though that timeframe refers to a doubling in chip performance—a measure that combines the effect of more transistors and their being faster—that was predicted in 1975 by Intel executive David House.)

R&D, capital equipment outlays are the resources The lifeblood of the industry is R&D. Semiconductor companies spend on average 16%–20% of revenue on R&D, according to our research. R&D can generate many forms of competitive advantage, including licensing intellectual property (as Qualcomm does), product specialization (Altera and Xilinx, which have dominated the multibillion-dollar market for programmable logic chips), developing core integration capabilities (Broadcom), or focusing on advanced manufacturing processes (Intel).

Semiconductor capital spending—all equipment, and manufacturing and testing facilities—totaled $57.8 billion in 2013, down 1.5% from 2012, according to market research firm Gartner Inc. Gartner estimates an 11.4% rebound in spending in 2014, and then an 8.8% increase in 2015.

Linewidths, wafer sizes are the targets In general, chipmakers have focused on two areas of technological improvement: smaller linewidths (the size of the transistor in an IC) and larger wafer sizes. Remarkable accomplishments in lithographic technology have permitted chipmakers to shrink device sizes at a persistent rate. The economic benefits of this trend are enormous, as the ability to condense more chips on a given expanse of silicon greatly decreases per-unit costs. Shifts to a larger wafer size have occurred less frequently—once or twice a decade throughout the history of the industry. Chips are currently being made on wafers in sizes of 200 millimeters (mm) and 300mm. As wafer diameter increases, more chips can fit on the wafer, allowing the fixed costs of processing a wafer to be spread over a higher number of chips, thereby improving production efficiency.

MANAGING THE COST OF MANUFACTURING BY OUTSOURCING

By any measure, the cost of manufacturing to stay at the leading edge of technology continues to increase. One of the largest costs is that of manufacturing. In 1984, construction costs for a state-of-the-art wafer

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 21 fabrication facility, a “fab,” were about $10 million. Currently, building a leading edge fab can cost $3 billion–$8 billion, depending on the planned capacity and up to $10 billion as the industry ramps to 450mm wafer production, according to Intel. Further, the company believes that one has to have annual revenue of around $9 billion–$10 billion in order to support a leading-edge fab. Given this level of capital and revenue, only a few have the ability to maintain their own fabs. As a result, many semi companies have outsourced manufacturing. The decision allows companies to focus resources around core designing competencies and less on complex and expensive manufacturing processes.

Factors affecting the decision of where to locate include proximity to markets, availability of an appropriately skilled labor force, and cost considerations involving labor, construction, transportation, and taxation. Many factories that develop and produce cutting-edge chips for computers and high-end communication networks are located in the US—for example, in Silicon Valley and across southern California. Concentrations of wafer fabs also are found around Boston’s Route 128 corridor and in Dallas and Austin, Texas. While Silicon Valley is a supportive environment for chipmaking, many new plant builders are seeking lower construction and living costs in places such as Phoenix, Arizona, and Portland, Oregon. Circuit design and research centers (as opposed to wafer fabs) are even more scattered: companies attempt to attract scarce engineering talent by situating their workplaces in smaller towns that offer desirable lifestyles.

Because they do not construct or maintain their own production facilities, fabless companies (i.e., those that contract manufacturing operations to chip foundries) enjoy certain advantages that chipmakers with integrated operations do not. Fabless firms generally have higher and less volatile profit margins and healthier cash flows, reflecting this business model’s relative lack of capital investment. In addition, fabless companies are able to devote a higher percentage of their resources to design R&D, which has enabled them to lead the way in offering innovative chips with smaller linewidths.

A fabless company’s major disadvantage is that its access to foundry space is often limited during periods of rapid industry growth. Thus, when product demand is strong, fabless firms may be unable to procure enough chips to satisfy their customers’ requirements. Despite this potentially negative factor, the number of fabless companies will likely continue to grow.

PRODUCT CYCLICALITY

Despite the high barriers to entry, this industry manufactures products with various life cycles. Short cycles can be seen in consumer-oriented devices like cell phones, where a design win could last for one to three years (the life cycle of a handset). Long cycles, in contrast, can last for 10 to 30 years, as in the life cycles of machine automation, automotive, and industrial products.

These variations can fall along the lines of Clayton Christensen’s The Innovator’s Dilemma of disruptive and sustaining technologies. The new applications found in phones and tablets—such as touch, global positioning system (GPS), and voice recognition—are disruptive technologies. They have short life cycles due to constant changes in standards, performance, and technology that cause material share shifts among vendors from one design win to the next. In the sustaining category are products like analog chips: their long life cycles typically include improvements on existing functionality, but share shifts are rarer here.

CUSTOMER AND DISTRIBUTION ECOSYSTEM

Semiconductors are sold both directly to end customers (called original equipment manufacturers, or OEMs) and indirectly through distributors. Sales run the gamut, from being nearly 100% OEM-based to 100% distribution- or channel-based, but most often are within a 30%–70% range. Companies serving the communication market tend to sell directly to OEMs like Cisco or Alcatel-Lucent, while those serving the PC, consumer, and analog segments typically make a greater share of their sales through distributors.

TYPES OF CHIPS

The semiconductor industry comprises several broad product segments that, in turn, contain hundreds of sub-segments. This section describes various segments of the market and their characteristics.

22 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Bipolar versus metal oxide Semiconductor chips today are based on either bipolar or metal-oxide technologies.

 Bipolar technology. Bipolar transistors work by sending a pulse across a “base,” allowing an electrical signal to flow between “emitters” and “collectors.” Utilized to create the first transistor and IC, bipolar technology remains in use today in a number of high-speed, high-radio frequency applications. Because it consumes relatively large amounts of energy, though, it has fallen out of favor in the most common computing devices.

 Metal-oxide technology. The dominant force in chip design today is metal-oxide semiconductor (MOS) technology. MOS chips combine layers of conductive metal, oxide, and semiconductor material to control the flow of electrical signals.

Early MOS designs included positive channel MOS (PMOS) and negative channel MOS (NMOS), which used positively and negatively charged base materials to enable the transmission of electrical signals. Complementary MOS (CMOS) chips reduce power consumption by integrating both PMOS and NMOS transistors onto a single chip. Most chips produced today are based on CMOS technology, which is used in each of the major chip types discussed in this section.

Discrete semiconductors Discrete semiconductors, or “discretes,” contain only one device per chip and are designed to perform a single electrical function. These nonintegrated devices, which include transistors, diodes, resistors, and capacitors, can be used individually (for simple electrical switching and processing applications) or as parts of larger circuit designs.

Analog semiconductors Analog semiconductors, also known as linear circuits, process continuous signals from real-world phenomena, such as light, heat, pressure, and sound. They are used in a variety of applications, such as computers, cellphones, and industrial products. Types of analog chips include the following: Amplifiers, which augment the voltage of a device; Voltage regulators, which control the voltage of a device at a specific level; Interface circuits, which act as an intermediary to transfer signals between or within electronic systems; Data converters, which change analog signals into digital signals and vice versa.

Digital semiconductors Digital semiconductors process information in binary form as a series of zeroes and ones. The three types of digital semiconductors are microprocessors, memory chips, and logic devices.

 Microprocessors. Also known as central processing units (CPUs), microprocessors are frequently described as the “brains” of a computer because they have complex logic circuitry that controls the central processing of data in PCs and other computers. Although they contain the basic arithmetic, logic, and control elements of a computer, they require external memory to function. Well-known microprocessors include Intel’s Pentium and Core brands, which are used in the vast majority of PCs worldwide. Microprocessors also are used in other applications, such as consumer electronics and telecommunications, automotive, and industrial equipment.

 Memory chips. These devices store programming instructions and data. Memory chips often are classified as volatile or nonvolatile. Volatile devices lose their retained information when power is interrupted, while nonvolatile devices keep all their stored data when power is interrupted. Types of memory semiconductors include DRAM, SRAM, and flash memory. . Dynamic random access memory (DRAM). These semiconductor devices, which store digital information in the form of bits, provide high-speed data storage and retrieval. As high-density, low-cost-per-bit memory components, DRAM chips are the most widely used semiconductor devices in PC systems. Chipmakers have also developed synchronous DRAM (SDRAM), which is faster than regular DRAM, partly due to an input that synchronizes all operations. In 2002, double data rate (DDR) features began

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 23

to be commonly incorporated with SDRAM chips; these systems permit faster speeds by allowing data to be transferred at both the beginning and the end of a clock cycle (the time interval of an electronic pulse). As a result, DDR SDRAM has become a popular memory chip category. The DRAM industry shifted production in 2006 toward a faster type of DDR DRAM known as DDR2. Samsung Electronics Co. Ltd. and many other memory makers developed DDR3 samples in 2005 and 2006, and began volume production in early 2007. . Static random access memory (SRAM). These devices are memory circuits used in computers, data communications, telecommunications, and other electronic systems. SRAMs do not require electrical refreshment of memory contents to ensure data integrity, so they operate at high speeds. SRAMs involve substantially more circuitry than DRAMs, and thus have higher production costs and selling prices. . Flash memory. These nonvolatile semiconductors are electronically erasable and programmable. Unlike other memory components, flash chips require that information be written in fixed blocks instead of byte by byte, greatly increasing the speed at which data can be recorded and erased. They represent the latest technology in nonvolatile devices, which also include erasable programmable read-only memories (EPROMs) and electrically erasable programmable read-only memories (EEPROMs). Flash memories are used in a variety of applications, including telecommunications, computers and peripherals, and consumer electronics. . NAND flash memory. This type of flash memory is slow in reading data but fast in writing; it has become popular for products where large data storage or fast writing capability are needed, such as MP3 music players and digital cameras. The architecture’s name is a reference to Boolean logic. . NOR flash memory. This type of flash has relatively fast data reading capabilities and has commonly been used to store executable code (e.g., in mobile phones and personal digital assistants).

 Logic devices. The interchange and manipulation of data within a system requires logic devices. While designers of electronic systems use a relatively small number of standard architectures to meet their microprocessor and memory needs, they require a wide variety of logic circuits in order to achieve end- product differentiation. Types of logic chips include: . Complex programmable logic devices (CPLDs) and field programmable gate arrays (FPGAs). These devices are standard products designed to suit the needs of many customers and applications. Purchased by electronics manufacturers in a “blank” state, they can be custom-configured into specific logic functions by programming the devices with electrical signals. . Application-specific integrated circuits (ASICs). ASICs are chips that are custom designed for a particular customer for a specific application. Used in communications and computer products, they have a particularly strong presence in the consumer electronics market.

 Microperipherals. These chips augment the operations of overall CPU system performance. They encompass chips that offer systems support, such as clocks and memory management devices; they enable communications between a CPU and other components; they enhance graphics and imaging capabilities; and they control such devices as the computer mouse and keyboard.

 Microcontrollers. These devices perform computer functions without need for any external support circuitry. They are the “brains” of most electronics that are less complex than PCs. In contrast to the much larger microprocessor, the smaller, simpler microcontroller contains memory components, input/output controls, and a clock, all on a single chip. Microcontrollers can perform simple tasks as stand-alone devices, but sometimes require peripheral memory or logic devices to carry out complex tasks. Microcontrollers are used widely in many products, including toys, televisions, digital cameras, and automobile engines.

 Standard cell logic. These devices act as building blocks that ease the process of designing and building complex logic functions. These individually packaged and tested groups of transistors perform predetermined Boolean logic functions.

24 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

 Optoelectronics. These chips both transmit and receive optical signals, including continuous wave laser signals and other light-wave signals. (This category excludes liquid crystal displays, incandescent displays, and other optical displays, which are categorized separately as electronic components.) Optoelectronic components are used primarily in fiber-optic networking devices such as switches, routers, and hubs.

 Digital signal processors (DSPs). These digital chips can receive, decode, process, enhance, and encode data converted from analog format at extremely fast, real-time speeds. Used in products such as digital versatile disc (DVD) players, digital cameras, and wireless telephones, DSPs enable high-speed digital transmission of sound, voice, and video signals. DSPs require analog-to-digital and digital-to-analog signal converters in order to function, though the data converters often are integrated directly on DSP chips.

HOW CHIPS ARE MADE

Before describing the different types of semiconductor equipment, it is necessary to explain the steps in the chip manufacturing process. Semiconductors are produced through what is perhaps the most advanced and complex manufacturing process in the world, involving an average of 500 individual process steps.

The two basic stages in chip production are known as the “front end” and the “back end.” The front end involves materials preparation (circuit design, photomask making, and the manufacture of raw wafers) and wafer processing (repeated cycles of deposition, etch, doping, planarization, and in-process testing). The back end consists of assembly, packaging, and final test operations.

An outline of the major semiconductor manufacturing processes follows. For illustrations of the chipmaking process and descriptions with workflow diagrams, see the following websites: http://www.sematech.org/corporate/news/mfgproc/mfgproc.htm http://www.intel.com/pressroom/kits/chipmaking/?iid=SEARCH

The wafer: a slice of silicon The basic component in the manufacture of semiconductor devices is a thin, circular crystalline silicon wafer. Wafers are cut from a silicon column fashioned from melted sand to which a seed crystal was added. Wafers today typically have a diameter of 300mm (12 inches) or 200mm (eight inches).

The wafer is cleaned throughout the manufacturing process. As device geometries on wafers shrink further, reducing contamination becomes increasingly important. To ensure that microscopic particles do not interfere with fabrication, semiconductors are manufactured in a “clean room”—a small windowless space fitted with superfine air filters. Human presence is minimized in the clean room, and production workers wear “bunny suits” that cover the entire body.

Wafer processing After the cut wafer receives its initial cleaning, a primary layer of ultrapure crystalline silicon is grown on the wafer’s surface, in a process called epitaxy. This epitaxial layer, or “epilayer,” performs better than the bare surface of the raw, bulk wafer in subsequent fabrication steps. Following epitaxy, the wafer is cycled through each of the major wafer process steps about 16 to 24 times, in order to create up to 25 layers of materials and as many as 12 wiring levels.

The four basic types of operations in wafer processing are layering, patterning, doping, and heat treatments. The process description that follows draws on Peter Van Zant’s textbook, Microchip Fabrication: A Practical Guide to Semiconductor Processing (listed in the “Industry References” section of this Survey).

 Layering. In layering operations, also referred to as deposition, thin films of insulating (dielectric) or conductive (metal) materials are either grown or deposited on the wafer. Layers may be grown, in a manner akin to rusting, through oxidation or nitridation. Deposition techniques include chemical vapor deposition (CVD), evaporation, and sputtering.

In CVD—the most common thin film deposition method—high heat and low pressure are applied to gaseous mixtures to facilitate the deposition of a thin film layer. Evaporation involves melting a conductive

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 25 metal (often aluminum) to a liquid state so the atoms or molecules evaporate into the chamber’s atmosphere. Sputtering (also called physical vapor deposition, or PVD) is a physical, rather than a chemical, process in which positively charged argon gas atoms strike the atoms of a target material, scattering them throughout the chamber, with some moving to the wafer’s surface.

 Patterning. Patterning involves the transfer of a circuit design to the wafer surface. This process, also known as photolithography or photomasking, is very similar to the photographic process. Microscopic images of electronic circuits are imprinted in chrome on a clear quartz plate known as a photomask or reticle.

The photomask is placed together with the wafer in a piece of equipment called a step-and-repeat projection aligner, or “stepper,” which operates like a photographic enlarger except that it typically reduces the projected image. Inside the stepper, a light source is used to project the images from the photomask onto the wafer’s surface, which is coated with a layer of light-sensitive liquid called photoresist. When light hits the photoresist layer, the exposed photoresist is rendered insoluble and hardens. The stepper then repositions the wafer so that the process can be repeated on a different section of the wafer to imprint another die with the circuit.

In a step called etching, or simply “etch,” solvents are introduced that remove the portion of the wafer layer not protected by the hardened photoresist. This leaves a pattern on the wafer that exactly matches the circuit pattern on the mask after doping (deposition). The hardened photoresist is later removed with another chemical, in a step known as strip. Both etch and strip may be performed using “wet” techniques (using liquid chemicals) or “dry” techniques (using reactive gases).

 Doping. In doping operations, specific amounts of impurities (called dopant atoms) are introduced through exposed portions of the wafer to create electrically active areas. The two doping techniques are thermal diffusion (a chemical process) and ion implantation (a physical process that is more precise). . In thermal diffusion, a solid, liquid, or gaseous mixture containing the desired dopants is vaporized and allowed to contact the wafer in a heated environment. When the wafer is heated to about 1,000 degrees Celsius, the dopants are driven into the wafer and redistributed both vertically and horizontally throughout the wafer’s depth. . In ion implantation, a magnetically focused beam of charged particles (ions) is used to shoot dopants into the wafer surface in a process similar to a pistol firing bullets into a wall.

 Heat treatments. In heat treatment operations, wafers are heated or cooled to achieve certain results; no materials are introduced or removed. One example is the “anneal” step, in which damage to the wafer’s crystal structure (resulting from ion implantation) is repaired by heating the wafer above 700 degrees Celsius. Heat treatments also are used to “alloy” deposited stripes of metal to the wafer to ensure proper electrical conduction. Cooling treatments are used to freeze and control water vapor, oils, gases, and other contaminants in wafer process chambers.

In-process testing and smoothing Inspection and measurement of the wafer and its individual ICs is performed throughout the wafer fabrication process. Electrical parameters are measured to verify the reliability of the entire process, and wafers are examined for unwanted particles. In-line monitoring is becoming increasingly popular (and necessary) as a way of detecting defects at the moment of production, as opposed to waiting for final test results of the finished products to discover problems. These activities are part of yield management efforts to discover, analyze, and correct inefficiencies in processing procedures.

The process step known as chemical mechanical planarization (CMP) uses a polishing procedure involving abrasive slurries to smooth the surface of a wafer after each metal interconnect layer is created. CMP began to be widely used in the 1990s. As linewidth geometries have shrunk, CMP has grown in importance. The smoothing is necessary to correct irregularities on the wafer’s surface that can impede the photolithographic process and reduce the yield.

26 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

The back end: assembly, packaging, and testing The steps of wafer dicing, die bonding, and wire bonding are known collectively as assembly. The back end of the chip manufacturing process begins when the finished wafer is cut into individual devices with a dicing saw that uses diamond-embedded saw blades. Depending on the size of the devices (which varies widely), more than 2,400 ICs can fit on a 300mm wafer, while only 1,000 ICs can fit on a 200mm wafer. The actual yield (the percentage of usable finished devices produced per wafer) depends on the number of defects.

A die bonder takes each good IC (also known as a chip or a die) and bonds it to a package that is typically a stamped metal or ceramic leadframe. The package is then moved to a wire bonder. In order to create the electrical connection necessary for the device to function, very fine gold or aluminum wire is bonded between specific bond pads on the die and corresponding leads on the package. In an emerging alternative technology known as “flip chip,” bumps on the die make the connections to the package, thus eliminating the need for wire bonding.

Next comes packaging, which commonly involves encapsulation of the die and lead frame in molded plastic packages that protect the chips and help to dissipate heat. For chips that will operate in harsh environments, a hermetic seal can be achieved with metal and ceramic enclosures.

Finished packages are subjected to a final test process. Environmental tests check the package’s resistance to temperature change and leakage; if air can get in, then it can contaminate the chip with particles and moisture. Electrical tests ensure that the chip functions within required parametric specifications.

Test equipment includes computer-controlled mainframe testers, test heads connected to the testers, and handlers that insert the packages into the test head’s sockets. An optional burn-in test often is used to evaluate the chips in operation at various temperatures; it seeks to stress the chip and package connections to eliminate chips prone to failure early in their lifetime.

Wafers: bigger is better Historically, semiconductor manufacturers moved to a larger wafer size every seven or eight years. In the early 1970s, the standard wafer size was one and one-half to two inches. Today, standard wafer sizes are eight and 12 inches (200mm and 300mm, respectively). To process 300mm wafers, chipmakers have had to purchase new equipment, which on average costs 1.3 times as much as equipment for making 200mm wafers. Initial margins on 300mm tools were lower than those for 200mm tools, until manufacturing volumes increased and efficiencies developed. However, as the technologies matured and sales increased, 300mm sales have helped equipment makers’ revenues and margins.

Lithography: smaller is better Another critical technology for the production of devices with ever-smaller transistor sizes is imaging (or lithography) equipment, which prints complex circuit patterns onto the wafers that are the primary raw material for ICs. In a process similar to making prints from photographic negatives, lithography projects visible light (optical lithography), or x-rays or electron beams (non-optical lithography) through circuit patterns onto silicon wafers. Because it is one of the most expensive and critical steps in the manufacturing process of semiconductors, there is a need for cost-efficient enhancements to production technology.

ASML Holding NV is a major participant in the photolithography equipment industry, with its Step-and- Scan systems, which combine stepper technology with a photo-scanning method. As the size of the electronic features of semiconductors has shrunk, advanced chips’ features are now smaller than the shortest wavelength of light used in the photolithography process. The problem is analogous to that of trying to draw a one-eighth inch line with a quarter inch pen.

One way of dealing with the light-wave problem is through special photomask techniques that “trick” light into resolving very fine features. However, such tricks have caused sharp increases in the complexity (and hence the price) of photomasks. The result is that the cost of masks, and of developing new mask technologies, is spiraling out of control.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 27

To reduce photomask costs, foundries sometimes offer multi-project wafers in which several chips share the same set of photomasks. As another cost-reduction method, chipmakers also use programmable logic chips, which are off-the-shelf chips that allow for some customization, especially when they design a chip for low- volume production. This eliminates the high fixed costs of manufacturing custom-designed chips and the need for a unique set of photomasks. Photomask makers are continuing to aggressively pursue technology to reduce the cost of manufacturing photomasks. With the photomask market fairly competitive, lower costs enable photomask makers to increase their margins and/or gain market share through more competitive pricing.

Deep ultraviolet (DUV) lithography tools in production today are either krypton and fluorine, with a 248- nanometer (nm) wavelength, or argon and fluorine (193nm wavelength). Depending on the kind of chip being manufactured, krypton and fluorine light sources are used to pattern features from 250nm to as small as approximately 90nm. Argon and fluorine sources are used to pattern features of approximately 120nm, and are expected to be used until extreme ultraviolet (EUV) sources are adopted in production at approximately 22nm.

Immersion lithography—whereby a layer of water is inserted between the final lens element and the wafer to reduce the wavelength of the light to enable the patterning of even smaller critical dimensions—and double patterning is expected to extend existing technology to 22nm or smaller. In double patterning applications, using one of several potential approaches, the most critical layers on the wafer will be patterned twice in order to reduce feature sizes beyond those achievable using immersion alone. When double patterning reaches its critical dimension limit, the next wavelength will involve the use of extreme ultraviolet illumination sources.

HOW SOLAR CELLS ARE MADE

Solar cells are considered to have many similar characteristics and processes as semiconductors, and thus, semiconductor equipment manufacturers have been able to leverage products into this industry. By definition, a solar cell is a device that converts sunlight energy directly into electricity using the photovoltaic effect. There are two types of solar technologies, traditional silicon-based and thin film. We will touch upon the silicon-based approach, as it comprises by far the largest percentage of the market. Thin film has many different forms of technology and materials used depending on the manufacturer.

Both the chip and solar industries use the same key raw material, silicon, within the core manufacturing process. Within the solar industry, wafers undergo clean, etching, and rinsing processes. In addition, making the solar cell requires a p-n junction to be created out of the wafer. A p-n junction is a cell that has a positive p-type semiconductor on one side and a negative n-type semiconductor on the other; this is accomplished by diffusing one side of the wafer with phosphorus. Once this is done, testing for impurities, certain coating, and additional etching steps may be performed, among other functions. After the cell has been created, module manufacturers mount a number of cells together on a frame, which are ultimately installed on a consumer rooftop or other location when complete.

TOOLS OF THE TRADE

Semiconductor equipment is typically categorized according to the two stages in chip production: front end or back end. In the long term, growth in front-end equipment is expected to outpace that of the back-end segment. This reflects prospects for significant technology upgrades of front-end tools, which will enable the production of devices with smaller linewidths on larger wafers.

Front-end tools Front-end tools perform manufacturing steps from the creation of the silicon wafer to the production of ICs on the wafer. Wafer process equipment typically accounts for about 75% of total industry revenues from equipment sales. Other front-end equipment (including masks, wafer manufacture, and facility automation and equipment) accounts for another 5%.

The broad front-end category comprises photolithography equipment, deposition equipment, and etching and cleaning tools. Process diagnostics, ion implantation, and chemical mechanical polishing tools are other types of front-end manufacturing equipment.

28 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Back-end tools Back-end tools comprise equipment used in the latter stages of manufacturing, after ICs have been produced on the wafer, and typically account for about 20% of total industry revenues from equipment sales. These steps include assembly, packaging, handling, and testing of individual chips. Historically, the market leaders in this segment have been Advantest Corp. and Teradyne Inc.

KEY INDUSTRY RATIOS AND STATISTICS

 Global Sales Report. Published by the Semiconductor Industry Association (SIA), the monthly “Global Sales Report” provides a three-month moving sales average for four major chip markets: the Americas, Japan, Asia-Pacific, and Europe. Consequently, it presents valuable information regarding business trends in key worldwide markets.

When the report was first published in January 1997, it replaced the SIA’s book-to-bill statistical program for semiconductors, which had been in existence for 20 years. Although the book-to-bill ratio was a more forward-looking indicator, the report reflects the industry’s expanding focus on worldwide markets, and it allows analysts to determine how chip sales trends are developing relative to historical trends.

 Semiconductor equipment book-to-bill ratio. The semiconductor equipment book-to-bill ratio, compiled by trade association Semiconductor Equipment and Materials International (SEMI), is an indicator of capital spending trends in the semiconductor industry. The book-to-bill ratio is calculated as the value of three-month average global orders divided by three-month average global sales for North American semiconductor equipment companies. When the ratio is above parity (that is, above 1.0), new equipment orders exceed shipment levels, indicating that chip manufacturers are raising spending rates for new production equipment. The opposite holds true when the ratio is below 1.0.

 Wafer fabrication plant utilization rates. Analysts monitor trends in fab utilization to help understand where the industry is in its cycle. Until 2012, the SIA maintained quarterly statistics on capacity utilization rates at integrated circuit wafer fabrication plants. These data tracked the percentage of capacity being operated by chipmaking plants around the world.

In boom times, utilization rates can top 95%; during mild busts, they dip toward 80%. In the third quarter of 2000, the overall capacity utilization rate was 96.4%, compared with 80.8% in the third quarter of 1998, the bottom of the prior cycle. In the subsequent downturn, capacity utilization slumped to 64.2% in the third quarter of 2001, indicating a particularly wrenching down cycle. The worst occurred during the most recent downturn: overall capacity utilization bottomed at 55.6% in the first quarter of 2009. In the last SIA report, the fourth-quarter 2011 utilization rate was 86.2%. (In February 2012 when the SIA reported Q4 2011 data, the group noted that due to significant changes in the Semiconductor Capacity Utilization, or SICAS, program participation base in 2011, the quarterly SICAS report would be discontinued.)

Individual semiconductor companies often discuss their own fab utilization rates, and analysts use this information as well. Monitoring utilization rates of a major chip foundry (such as Taiwan Semiconductor Manufacturing Co. Ltd.) or a major independent device manufacturer, such as Intel Corp. or Texas Instruments Inc., gives the analyst a more accurate fix on the industry’s position in the cycle.

 Gross domestic product (GDP). GDP is a calculation of the market value of goods and services produced by a nation’s labor and capital. It is the broadest measure of aggregate economic activity for a given period. Economic growth is measured by changes in inflation-adjusted (or real) GDP, which can be analyzed by examining the expenditure side of national income accounts. Four major expenditure categories are added to arrive at GDP: consumption, investment, government purchases of goods and services, and net exports of goods and services. Consumption, or spending by domestic households on final goods and services, is the largest component of expenditures, and it accounts for one-half to two-thirds of GDP in most countries. In the US, consumption contributes about two-thirds of GDP.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 29

 Interest rates. Prevailing interest rate levels can have a material impact on the behavior of both producers and consumers. Since interest rates have a direct bearing on companies’ cost of capital, decisions regarding capital expenditures, share repurchases, and acquisition policies are directly related to interest rate levels and expectations for changes in interest rates.

From an investment standpoint, it is important to consider current and projected interest rate levels in calculating the value of future earnings flows from growth companies, such as the leading semiconductor equipment manufacturers. Simply put, if interest rates are expected to rise, then investors will apply lower price/earnings multiples when valuing a growth stock. However, if lower interest rates are forecast, then they can justify higher stock valuations.

In December 2008, the Federal Reserve lowered the federal funds rate, the short-term interest rate at which banks lend excess funds to 0%–0.25%, reflecting the turmoil in the financial markets and the weakening of economic activity. The rate remained at that level as of this writing.

More important is the yield on the longer-term 10-year bond. This yield has been less than 5% since mid- 2002, with only brief exceptions in 2006 and 2007. We expect this trend to continue in the foreseeable future, as we see a fragile housing market, high unemployment, credit market woes, and uncertain economic growth outweighing inflationary concerns.

 ISM Report on Business. Created by the Institute for Supply Management (ISM), “Report on Business” covers US companies. Released on the first business day of each month, the report is based on surveys of purchasing executives in more than 400 industrial companies regarding various business categories. As leading indicators, these categories can show the prevailing direction and scope of change in business activity. Measured categories include new orders, backlog of orders, new export orders, imports, production, supplier deliveries, inventory, employment, and prices. Respondents are asked if there has been an increase, decrease, or stasis in each area compared with the previous month. The report gives an index for each data series, which indicates whether the trend in activity is toward expansion or contraction.

The purchasing managers’ index (PMI) is a major element of the report. The PMI is a composite index based on seasonally adjusted indexes for five of the categories—new orders, production, supplier deliveries, inventory, and employment—each of which is weighted differently. A PMI reading above 50% indicates that the manufacturing economy (which includes semiconductors) is generally expanding; a reading below 50% indicates that manufacturing is generally declining. A PMI above 41.1% over a period of time indicates that the overall economy, or GDP, is generally expanding. The distance from 50.0% to 42.9% is indicative of the strength of the expansion.

 US index of leading economic indicators. This index, published by the Conference Board, a private research organization, has shown some accuracy in predicting sales of PCs, an important end market for the semiconductor industry. According to Intel, changes in the direction of PC sales tend to lag changes in the direction of this index by six months.

 Solar pricing. PVinsights.com maintains weekly data on spot prices across the solar supply chain, including polysilicon, wafers, cells, and modules. Started in 2005, PVinsights.com has since developed a network of price information contributors. The firm will poll prices from multiple contributors by telephone until the final price range is clear to them. Although the long-term trajectory for solar prices is down, in our view, the magnitude of the pricing decline within certain areas of the supply chain can help an individual recognize where demand could be weakest or stronger than expected, depending on the scenario. In addition, there are periods where pricing could increase within parts of the supply chain if demand exceeds supply for an extended amount of time. This is precisely what happened in the second half of 2010 for most manufacturers in the solar industry.

30 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

HOW TO ANALYZE A SEMICONDUCTOR OR SEMICONDUCTOR EQUIPMENT COMPANY

Like many areas of technology, the semiconductor and capital equipment business environment is highly competitive and subject to rapid and often unanticipated changes. This dynamic business climate poses significant challenges for a firm’s management team and requires that companies adapt quickly to evolving industry conditions.

ANTICIPATING THE UPS AND DOWNS

It is important to appreciate that the industry has been highly cyclical, historically, and to analyze a company’s performance and valuation within that context. Cycles typically last for three to seven years, and industry revenues have fluctuated by 30% or more in either direction.

Due to the industry’s cyclicality (especially following the 2000 to 2002 cyclical decline and the years of losses that followed), both companies and investors place a strong emphasis on total profitability across the cycle. In recent years, both semiconductor and equipment companies have been reducing the high fixed costs of their business by outsourcing noncore functions. Some examples of this outsourcing include chip fabrication (to foundries), testing (to subcontractors that offer chip testing and package services), photomask manufacturing, and the manufacture of subassemblies, to varying degrees, by equipment makers.

Looking forward, we see a decline in the degree of cyclicality, as a more diversified spectrum of geographic and end-product markets lead to less volatility in demand for chips. We think that, as more and better information are shared across the industry, through tighter supply chains, the severity of the divergences from the natural supply-demand equilibrium will decline, leading to softer cycles.

QUALITATIVE FACTORS

An examination of historical results gives a strong indication of management’s past success in running an enterprise in various stages of the business and product cycles, and is a good initial guide to the future. Given the industry’s highly cyclical nature, a semiconductor or semiconductor equipment company’s operating results should be considered within the context of the overall market situation.

For example, operating performance during an industry downturn is a telling indicator of management’s ability to weather storms. How a company performs relative to its competitors is key. Often, industry leaders will use a decline in business conditions to streamline operations and focus on new product offerings. Such activities position a company to outperform its peers during the next upcycle.

Porter’s Five Forces Porter’s five forces, which provide a framework for industry analysis, were formulated by Michael E. Porter of Harvard Business School in 1979. Below we describe the five parameters on which an industry can be analyzed, and the application these have to the semiconductor industry.

 Threat of new competition. In the semiconductor/semiconductor equipment industry, high startup costs and the significant capital investments needed for the creation and development of technology to compete against existing players create huge barriers for a new player to enter. In the microprocessor arena, for example, Intel Corp.’s dominance raises significant barriers to entry for competing firms. For a company such as Advanced Micro Devices Inc. (AMD) to challenge Intel successfully, it not only must develop compelling technologies, but must also offer distinct price advantages in order to wrest market share from the monolithic chipmaker. Consequently, Intel’s presence makes it difficult both to achieve and to maintain success in the microprocessor arena.

 Threat of substitute products or services. Currently, there are no substitutes for semiconductor chips.

 Bargaining power of customers. Buyers have the advantage when it comes to purchasing, since they purchase in large volumes. In addition, chips are not sold to individual consumers, but rather to original equipment manufacturers (OEMs) and original design manufacturers (ODMs), which constitute a strong

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 31 buyer influence. Intel and its competitors face a number of segment-specific challenges. The microprocessor segment primarily serves manufacturers of corporate- and consumer-focused computing devices, so chipmakers in this segment are sensitive to demand for computer hardware. In contrast, the markets for analog chips, digital signal processors (DSP), logic devices, and memory are much more fragmented, with many players vying for market share.

 Bargaining power of suppliers. The supplier market is characterized by a high number of suppliers and dominated by a small number of players. These factors allow the semiconductor firms to apply pricing pressures on their suppliers, since many suppliers may have a particular semiconductor firm as their largest client. Hence supplier power is low in the industry, and suppliers have to cater to the ever-evolving demands of their semiconductor clients.

 Intensity of competitive rivalry. Although rivalry in the semiconductor industry is high, each sub-segment may have only a few big players. For example, the major players in the semiconductor chip industry are Intel, Qualcomm, Texas Instruments, AMD, NVIDIA, and ARM Holdings. These firms differentiate themselves on various parameters: chip performance (speed, reliability, and features), power consumption, life expectancy, and total cost of ownership across the various segments.

QUANTITATIVE FACTORS

Ultimately, the qualitative factors discussed earlier will reveal themselves in a company’s financial statements. Those firms with experienced management and strong competitive positions in attractive market segments typically will display strong financial profiles.

Looking at the income statement A company’s income statement provides a comprehensive review of its revenues, costs and expenses, and earnings during an accounting period. As such, it is an important tool for identifying growth and profitability trends.

In many industries, trend analysis is done mainly on a year-to-year basis (comparing current quarter results with those of the same quarter a year earlier). In a field as dynamic as the semiconductor industry, though, it is often more revealing to examine results on a sequential basis (comparing current-quarter results with those of the immediately preceding quarter). This type of analysis will give a clearer picture of more recent changes in business conditions.

The analyst, however, should be cognizant of seasonal factors that could influence a company’s quarterly results. For example, many chip companies experience a slowdown during the summer months, reflecting decreased business volume from European countries. Demand from the region typically falls in the third quarter of a calendar year, but picks up in the fourth quarter once employees have returned from vacation and companies gear up for the year-end holiday season. A similar, but less pronounced, slowdown occurs in the first quarter of the calendar year for companies doing business in certain Asian countries, where New Year’s festivities can create up to a weeklong hiatus in order booking and production.

 Sales and orders. It is extremely important to take note of chipmakers’ sales trends, as this “top-line” figure gives a general picture of the overall tone of business. The semiconductor market is unusual in that, under normal market conditions, prices fall at a steady rate. Consequently, semiconductor companies often report strong growth in unit sales volume, while showing flat or declining revenue trends. This dynamic increases the difficulty of forecasting future sales.

Order backlogs (orders that have been received, but not delivered) can be pushed out or canceled by the customer, so semiconductor companies do not recognize revenues until products are shipped. Beginning in 2001, this practice became even more conservative, with companies tending to recognize revenue only upon the product’s full acceptance by the customer, rather than upon its departure from the producer’s premises. It avoids the embarrassment of having to explain revenue shortfalls when a downturn sets in and chips that were ordered but not paid for suddenly become stranded in distribution channels. Many (though not all) companies provide order backlog data. (Order backlog is not listed on the income statement.)

32 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Nevertheless, order trends are a good leading indicator of sales and are closely followed by analysts. The book-to-bill ratio (quarterly orders divided by quarterly sales) concisely measures order trends in relation to sales. A book-to-bill above 1.0 indicates that current orders are greater than current sales, and portends sales growth in the near term. The opposite holds true for a book-to-bill ratio below 1.0.

Due to the cyclical nature of the industry and the wide swings in sales, it is important to measure sales not only by year-over-year comparisons (such as comparing results of one year to the previous year, or one quarter to the prior quarter), but also on a sequential basis (such as quarter to quarter, or month to month). This scrutiny provides information on the cycle and can illustrate the revenue peaks and troughs effectively.

For semiconductor equipment, it is often more useful to examine trends in orders than in sales, since orders are indicative of future prospects, whereas reported sales reflect the past. Nonetheless, the analyst should be aware that companies recognize revenue only upon shipment, and orders are vulnerable to delays and cancelations—usually without any penalty on the part of the firm requesting the cancelation. Cancelations often have a strong depressing effect on order rates during an industry down cycle.

 Margins. Profit margins for semiconductor companies vary widely, depending on market segment characteristics and prevailing industry conditions. Other factors that influence margins include capacity utilization, raw material pricing, operational efficiencies, and product mix. Typically, firms that sell proprietary products with distinctive performance traits have higher margins than do companies that make commodity products, such as dynamic random access memory (DRAM) chips. Commodity chip producers have little or no pricing power; their profitability levels are largely dependent on market forces and their ability to keep costs low. Producers of commodity-type chips tend to be aggressive adopters of new manufacturing techniques; they spend money on machine tools to save money by lowering the average cost of producing a chip.

For semiconductor companies in general, the cost of goods sold includes a high level of fixed charges, largely reflecting the significant depreciation charges associated with chip companies’ manufacturing plants (“fabs”). Therefore, profit margins generally move in the same direction as sales, but the magnitude of the change in profits is greater than that of sales. Since variable costs are a small part of the equation, each incremental dollar of sales produces more profit on the bottom line, as fixed costs are spread over a larger sales base. This high degree of operating leverage can result in large swings in earnings as chipmakers move through semiconductor business cycles. However, the increasing use of chip foundries helps integrated chip manufacturers shift some of the fixed costs of plant ownership from their books, thereby smoothing gross margins and reducing the severity of cyclical swings in earnings.

 Options expense. The extent to which the income statements of US semiconductor and IT companies could be compared with those of companies in other sectors had diminished. This divergence was the result of the former’s practice of compensating many employees with stock options rather than cash. Cash wages show up immediately in the cost of goods sold, which reduces gross margin on the income statement. Stock option compensation, however, typically did not show up on the income statement until later—sometimes as dilution to earnings per share (EPS), when the company issued new shares to employees who exercised options.

This has changed. The Financial Accounting Standards Board (FASB) and Securities and Exchange Commission (SEC) announced that companies must expense stock options starting in the first interim or annual reporting period that began after June 15, 2005. Thus, stock options are now appearing as a cost of goods sold, significantly reducing reported earnings for many chip companies. Those in the semiconductor industry argued that this change would force them to reduce their issuance of options, thus making it more difficult to attract talent and encourage strong efforts by employees. Issuing stock options has also been an important way for startup companies to conserve cash. In addition, there has been much controversy over how to value stock option expense.

For periods before the change became effective, investors were able to examine the effect of stock options compensation by comparing the pro forma EPS data calculated under Statements of Financial Accounting Standards (SFAS) Rule 123 with the company’s reported EPS; the difference was stock options expense. Typically, however, these figures were available only annually, in the 10-K reports.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 33

A company’s expense line items—typically research and development (R&D) and selling, general, and administrative (SG&A) costs—should be evaluated against industry norms. (SG&A costs are sometimes broken down into two categories: marketing and selling, and general and administrative.) It is preferable for these expenses to increase more slowly than sales, but that is not always possible, especially for R&D. This is particularly true during downturns, when stronger companies invest heavily in R&D to gain market share.

Financial statement analysis would be incomplete without some discussion of return on investment (ROI), of which the most popular measure is return on equity (ROE), or net income divided by average common shareholders’ equity. Again, a comparison with industry norms should prove useful, making sure to compensate for differences in operating and financial leverage and net cash positions, which can affect ROE.

Looking at the balance sheet The balance sheet, or statement of financial condition, shows the status of a company’s assets, liabilities, and shareholders’ equity on a given date. With these data, an analyst can determine much about a company’s financial health, including its liquidity, asset turnover, and capital structure.

 Liquidity. Liquidity is an important indicator of a firm’s ability to fund its day-to-day operational needs. The simplest measure of liquidity is working capital, or the excess of current assets over current liabilities. Working capital represents a liquid reserve that companies can draw upon to finance the cash cycle of the business (the time required to convert raw materials into finished goods, finished goods into sales, and accounts receivable into cash).

Two other liquidity measures are the current ratio (current assets divided by current liabilities) and the quick ratio (current assets less inventory, divided by current liabilities). These financial ratios show a company’s ability to pay its current obligations out of current assets.

Future liquidity may be inferred from the turnover ratios for inventory and accounts receivable. Inventory turnover, calculated by dividing inventory into cost of goods sold, shows how many times a firm’s inventory is sold and replaced during an accounting period. Low turnover relative to comparable firms in the semiconductor industry is an unhealthy sign, as it indicates a firm may be carrying excess inventory, which would make it vulnerable to falling prices. Furthermore, excess inventory represents an inefficient use of capital, since the investment carries a very low rate of return.

The numbers do not always tell the whole story, however. Chip companies and semiconductor equipment makers sometimes build inventory in anticipation of rising sales. While this practice may result initially in lower inventory turnover, the bullish sales forecast actually would be a positive indicator for the firm.

 Accounts receivable turnover. The accounts receivable turnover ratio is obtained by dividing total credit sales by accounts receivable during an accounting period. The ratio, which measures the number of times that the receivables portfolio has been collected during the period, is used to determine bad debt risk. A rising ratio could indicate that a chip company’s customers are facing cash flow problems and cannot pay their account balances. Many chipmakers have significant sales exposure to Asian countries; given the region’s history of credit crunches, analysts should keep a close watch on receivables turnover to gauge credit risk.

 Days of outstanding inventory. The industry constantly faces periods of oversupply and undersupply. Since these periods tend to impact sales and margins, we think it is important to keep a close eye on inventory. Commonly used in the cash conversion cycle, the days of outstanding inventory (DOI) can also gauge inventory health, especially when compared with historic and seasonal averages. It is useful to run the analysis not only for chipmakers, but also for the companies throughout the supply chain so that investors can watch for inventory buildups. DOI is calculated by dividing 365 (or the number of days in the period) by the inventory turnover ratio (cost of sales divided by average inventory).

 Debt. The semiconductor business is capital intensive, requiring investment in plants and production equipment that can approach $6 billion per facility, all costs included. To fund this investment, many semiconductor companies carry a moderate amount of debt on their balance sheets. The ratio of long-term debt to total capital is useful in determining the relative risk that a company takes on by employing financial leverage.

34 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Debt can be an important and beneficial tool for firms seeking to fund growth through new product development or expansion into new markets. However, firms with a high level of indebtedness must allocate a large portion of cash flow to debt service. The times-interest-earned ratio (income before interest expense and taxes, divided by interest expense) measures a company’s ability to pay its interest charges; this ratio should be closely examined for firms with high debt-to-capital ratios.

Cash flow The statement of cash flows reports a firm’s sources and uses of cash by category: operations, investments, and financing activities. This is valuable information regarding a company’s transactions. The statement illustrates, among other things, how a company generated or used cash from its business, funded capital expenditures, or paid debt.

US accounting standards allow some degree of latitude in how companies can present certain aspects of their financial condition. For example, the rate at which a company depreciates its assets and the method it uses to account for its inventory can have a significant impact on net income. Consequently, analysts often look to the statement of cash flows for a more accurate assessment of financial health. Quite simply, it is cash, not net income, that must be used to repay loans, fund capital spending, and pay dividends.

Free cash flow is defined as cash flow from operations less capital expenditures and changes in working capital. This figure, sometimes referred to as “owners’ earnings,” represents the cash flow that accrues to the firm after all obligations have been met. For semiconductor companies, free cash flow can fluctuate dramatically from year to year, depending on semiconductor industry conditions and a firm’s capital spending requirements. Given these fluctuations, it is helpful to observe free cash flow trends over an extended period to determine how a company has performed through various semiconductor cycles.

Performance and valuation metrics to consider Drawing from both the income statement and the balance sheet, two important measures of a company’s overall financial performance are return on assets and ROE. These measures, along with growth projections, provide key indicators for a valuation analysis.

In evaluating the relative attractiveness of a company’s current stock price, performance metrics and growth rates should be considered alongside price-related valuation ratios such as price/earnings, price/sales, and price/cash flow. The analyst should compare valuation ratios with the company’s own historical ratios and with those of peer companies and the overall stock market.

 ROA and ROE. The two most popular measures of return on investment (ROI) are return on assets (ROA) and ROE. ROA (net income divided by average total assets) measures the operating efficiency of a firm or the return earned on assets under management’s discretion. ROE (net income divided by average total shareholders’ equity) measures the return earned on shareholders’ capital. Both ratios measure management’s ability to earn a reasonable profit on the assets and capital entrusted to them.

 P/E and PEG. To arrive at the price-to-earnings (P/E) ratio of a stock, simply take the stock price and divide by the current year’s projected earnings. For a forward projection, one can use the forecasted earnings for the next year. A variation of this ratio, which can be used to weigh the strength of earnings growth as part of valuation assessments for a given company relative to its peers, is referred to as the PEG ratio, or the P/E divided by the company’s projected average three-year earnings growth rate.

 Price/sales. Dividing the current share price of the company by its projected revenues for the current year on a per-share basis is how price/sales ratio is derived. This ratio is used in times when earnings are not available (the company is operating at a loss), or when earnings forecasts are in question.

 Price/cash flow. This ratio is calculated by taking the price of a company’s stock and dividing by the sum of the current year’s forecasted cash flow. The most commonly used proxy for a company’s cash flow is referred to as earnings before interest, taxes, and depreciation and amortization (EBITDA). The real-world use of this ratio is generally derived using the forecast of EBITDA for the next year. This ratio is typically applied in cases where a company’s earnings are penalized by high capital intensity. 

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 35

GLOSSARY

802.11 n/ac—A wireless computer networking standard that is under development.

Analog data—Data collected or presented in continuous form, such as voltage measurement, sound waves, or temperature.

Application-specific integrated circuit (ASIC)—Integrated circuit (IC) designed to suit a customer’s particular requirements.

Application-specific standard product (ASSP)—IC that performs functions for a single application.

ARM processor—Developed by ARM Holdings, this processor is based on reduced instruction set computer (RISC) instruction set architecture (ISA).

ASP—The average selling price, per unit, of a class of components.

AT attachment (ATA)—A computer bus interface for storage systems, connecting servers and different types of drives.

Automatic test equipment (ATE)—Highly complex computerized tools used to verify, without human intervention, the electrical performance and functionality of finished chips. The two types of ATE tests are wafer probe, which takes place before dicing, and package test, in which individual chips are tested in their packages. (See Dicing.)

Bandwidth—A measure of the data transmission capacity of any electronic line, including fiber-optic, twisted-pair, wireless, or computer bus.

Baseband processor—An IC that is used mainly in a mobile phone to process communication functions.

Bit/byte—The first is a “binary digit,” the basic building block of computer communications, with the value of 0 or 1, representing the two electrical states: on and off (or charge/no charge, or positive/negative). The second is a group of bits (usually eight) on which a computer operates as a unit.

Bluetooth—A short-range wireless networking technology that is designed to replace cables linking high-tech devices. It may be used to connect headsets to cellphones or cellphones to laptops.

Boolean logic—A set of rules that govern true/false logic functions. Developed by English mathematician George Boole in the mid-1800s, Boolean logic is based on the primary operations of “and,” “or,” and “not.”

Capacitance—The property of an electronic device that determines how much charge it can store.

Cellular—A radio network distributed over land areas via cell sites containing wireless antenna and network communications equipment.

Central processing unit (CPU)—The computer component in which calculations and manipulations take place; sometimes referred to as “the brains.”

Chemical mechanical planarization (CMP)—The use of a compound to polish a wafer’s surface to eliminate imperfections in the manufacturing of semiconductors with linewidths of 0.50 micron or less.

Chemical vapor deposition (CVD)—The process of applying a thin film to a substrate using a controlled chemical reaction. CVD is used in the deposition of semiconducting and insulating materials.

Chip—A rectangular piece of semiconductive material (typically silicon) on which large amounts of transistors and circuitry have been implanted; also known as a die, integrated circuit, or semiconductor.

Chipset—A group of chips that enables communication and interaction among all of the various subsystems of such electronic devices as personal computers, modems, or wireless telephones.

36 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Clean room—A semiconductor manufacturing environment in which the humidity, temperature, and particulate levels are precisely controlled.

Clock cycle—The time between signal pulses generated by a microprocessor’s oscillator. The speed of a microprocessor is measured in gigahertz (GHz), where one GHz equals one billion pulses, or clock cycles, per second.

Combination chip—A chip containing both microprocessor and graphics processing units (GPUs).

Complementary metal-oxide semiconductor (CMOS)—The preferred silicon IC process technology; it combines complementary components (P-channel and N-channel) on the same wafer, which permits the design of low-power ICs.

Complex programmable logic device (CPLD)—An IC consisting of a limited number of relatively large, user-programmable logic blocks.

Conductivity—A measure of the ease with which a material transfers an electrical charge; the inverse of resistivity.

Conductor—A material that efficiently transfers an electrical charge; it has an excess of unbound electrons that are released to support the current flow.

Cost of ownership—The total expense incurred in owning a piece of semiconductor manufacturing equipment, relative to its productive output. Includes purchase, training, and operating costs, throughput (the total number of wafers processed in a given period), and yield.

Critical dimension—The size of the smallest circuit line, element, or feature that must be manufactured on a given layer of a chip; also called linewidth or minimum feature size.

DDR SDRAM—Double data rate synchronous dynamic random access memory. The DDR feature on memory chips permits faster speeds by allowing data to be transferred on both edges of a clock cycle. SDRAM operates faster than DRAM partly because of a clock that synchronizes inputs.

Defect—Any imperfection on a layer of an integrated circuit that causes a short circuit or other problem with the performance of the device.

Deposition—The process by which a layer of electrically insulating or conductive material is deposited on the surface of a wafer.

Design rules—A set of instructions, used by circuit designers, that define the minimum size of a transistor and the minimum spacing between adjacent components. A given set of design rules is specific to a given manufacturing process.

Dicing (wafer dicing)—The process of cutting a wafer into individual chips, or dice; typically done with a diamond-bladed saw.

Die—A piece of a semiconductor wafer containing a single integrated circuit that has not yet been packaged. The plural form is dice. (See Chip.)

Die bonding—Attaching a die to the frame of a package before wire bonding.

Dielectric—See Insulator.

Dielectric constant—The property of a dielectric (or insulator) that determines the electrostatic energy that can be stored. The dielectric constant affects the properties of transmission lines.

Diffusion—The movement of one material into another; used in semiconductor manufacturing to introduce impurities, or dopants, into a semiconductor area to form a transistor junction.

Digital data—Electronic data that are represented by a series of bits or discrete values, such as zeroes and ones.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 37

Digital signal processor (DSP)—A high-speed digital circuit designed to process and enhance a broad range of “real-time” signals, such as voice or video, that have been converted from analog format.

Discrete device—A single semiconductor, such as a transistor, that is fabricated, packaged, and tested for individual use in a circuit design. (See Integrated circuit.)

Doping—The introduction of precise amounts of impurity to a semiconductor, via diffusion or ion implanting, to alter its electrical properties.

Dry (plasma) etch—The process of using reactive gas excited by a plasma field to remove surface material from a wafer.

Dynamic random access memory (DRAM)—Pronounced DEE-ram, this is the cheapest and most widely used type of semiconductor memory chip. “Dynamic” means that the device’s memory cells need to be periodically recharged. Information, stored in the memory cells as a positive or negative charge, is accessed randomly.

Embedded system—A computer system designed to control specific function within a larger system.

EPROM/EEPROM—Erasable programmable read-only memory and electrically erasable programmable read-only memory, respectively; these nonvolatile memory devices retain stored information when electrical power is interrupted.

Etching—The selective removal of thin films or layers to engrave a circuit pattern on a wafer’s surface.

Ethernet—A standard for network communications; the most popular standard in LAN networking.

Fab—The informal name for a chip manufacturer’s wafer fabrication plant, where ICs are made.

Fabless—Semiconductor companies that design and market their own chips, but rely on others to manufacture them.

Fab-lite—Describes a semiconductor company that maintains in-house wafer fabrication facilities, but also contracts a significant amount of production to chip foundries.

Feature size—The dimensions, usually in microns or nanometers, of an electronic device or component in an integrated circuit; often used to mean “minimum feature size.” (See Linewidth.)

Field programmable gate array (FPGA)—The logic function of an IC that is custom designed (by means of development system software) for a particular client.

Flash memory—Nonvolatile memory devices that can be electronically erased and reprogrammed with great speed.

Foundry—A wafer fab that makes chips on a contract basis for other companies.

Gate—The basic logic element in an IC; along with the source and the drain, one of the three regions of a field-effect transistor.

Graphics processor unit (GPU)—Circuit designed to rapidly manipulate and alter memory to build images for output to a display.

High-k (or Hi-k)—Stands for high dielectric constant, which is a measure of how much charge a material can hold and relates directly to transistor performance.

Insulator—A material, such as glass or porcelain, that does not conduct electricity. It will absorb an electrical charge because it has a deficiency of unbound electrons; also called a dielectric.

Integrated circuit (IC)—An electronic circuit in which many active or passive elements are fabricated and connected on a continuous substrate. (See Discrete device.)

Integrated device manufacturer (IDM)—A company that designs and manufactures its own chips, as contrasted with “fabless” companies, which design but do not manufacture their chips.

38 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Interconnect layer—The alternate layers of wiring and insulation in an IC that form its electrical interconnections.

Ion—An atom that has been electrically charged by the loss or gain of electrons.

Ion implanting—The use of magnetically focused ion bombardment to inject charged particles (impurities known as “dopants”) into a silicon wafer in order to change its electrical properties.

Linewidth—The size of the transistor in an IC, measured in microns.

Lithography—Use of ultraviolet-sensitive photoresist and masks to create IC patterns, which are transferred from a mask to a silicon wafer; also called photolithography. (See Photoresist and Mask.)

Logic chip—A semiconductor device used for data manipulation and control functions requiring higher speeds than a microprocessor can provide.

Low-k dielectric—A dielectric with a small dielectric constant. Low-k dielectrics have reduced parasitic capacitance and enable faster switching speeds and lower heat dissipation. (See Dielectric and Dielectric constant.)

LTE—A wireless communication standard for high-speed data on mobile phones and data terminals. Short for “Long Term Evolution,” LTE is a fourth-generation (4G) network technology.

Mask—A glass or quartz plate with an opaque pattern through which ultraviolet (UV) light is beamed in order to reproduce the design onto a silicon wafer’s photoresist; also known as a reticle.

Memory chip—A semiconductor device that stores information in electronic form. Memory chips often are classified as volatile or nonvolatile. Volatile devices lose their retained information when power is interrupted, while nonvolatile devices keep all their stored data when power is interrupted. Types of memory semiconductors include DRAM, SRAM, and flash memory.

Metal-oxide semiconductor (MOS)—MOS chips combine layers of conductive metal, oxide, and semiconductor material to control the flow of electrical signals. Most chips designed today are based on complementary MOS (CMOS) technology.

Metal–oxide–semiconductor field-effect transistor (MOSFET)—A transistor used to amplify or switch electronic signals.

Metallization—The use of sputtering or evaporation to create conductive layers on a chip by applying a thin layer of metal (usually aluminum or copper) to a device.

Metrology—In semiconductor manufacturing, the measurement of the thickness of thin film layers, circuit widths, and other microscopically small features. Metrology is used to assure that the results of a process conform to desired specifications.

Microcontroller—A stand-alone device that performs computer-like functions within an electronic system, such as a cell phone, without using other support circuits. A microcontroller contains memory functions—unlike the original microprocessor, which was paired with a memory chip. (See Microprocessor.)

Micron—A unit of length, equal to 1/1,000 of a millimeter, used to measure semiconductor linewidths.

Microprocessor—A central processing unit (CPU) fabricated on one or more chips, containing the arithmetic, logic, and control elements needed by a computer to process data. In 2003, Intel introduced microprocessors with integrated memory. (See Microcontroller.)

Mixed signal—A circuit requiring both analog and digital techniques and components.

Moore’s Law—The observation that the number of transistors on integrated circuits doubles approximately every two years.

NAND flash memory—A type of nonvolatile memory capable of fast data writing. NAND flash memory can retain information, even when there is no power. The acronym NAND stands for “not and,” which refers to logic rules applied in digital technology.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 39

Nanometer (nm)—One billionth of a meter, or 1/1,000 of a micron. As semiconductor feature sizes are reduced, minimum feature sizes are often referred to in nanometers instead of microns (e.g., 90nm versus 0.09 microns).

Nonvolatile memory—A memory device that retains stored information when power is interrupted. (See EPROM/EEPROM, NAND flash memory, and Read-only memory.)

NOR flash memory—A type of nonvolatile memory capable of fast data reading, but slower write and erase functions than NAND.

Oxide—A common term for silicon dioxide, which is added as an insulating film on the surface of a wafer.

Passivation—Adding a final protective layer of silicon nitride or silicon dioxide to the top surface of a wafer. This step seals the finished semiconductor to prevent damage or contamination during packaging.

Photolithography—Use of light-sensitive photoresist and reticle masks to create integrated circuit patterns. These patterns are transferred from a mask to a silicon wafer using a light projector called a stepper; also called “lithography.”

Photomask—A clear quartz plate containing microscopic images of electronic circuits, used as a template to transfer the circuit image to a silicon wafer; also called a mask or reticle.

Photoresist—A light-sensitive substance used in the process of etching IC patterns on silicon wafers. The photoresist is deposited evenly on a blank wafer, covered by a mask with the desired IC pattern, and exposed to UV light. The light hardens the photoresist on the uncovered areas, and the unhardened film is washed away to expose the silicon underneath, enabling circuits to be etched into the wafer.

Physical vapor deposition (PVD)—A deposition technique in which insulating or conductive material is transferred to a substrate by physical means, such as evaporation or sputtering.

Polysilicon—Highly purified silicon used in the electronic and solar industry. Often referred to as crystalline silicon.

Power management—A feature in some electrical appliances that automatically turns off or lowers the power required when the appliance is not in use.

Power over Ethernet (PoE)—A system to safely pass both electrical power and data over Ethernet cabling.

Programmable logic device (PLD)—An electronic component used to build digital circuits that are reconfigurable.

Random access memory (RAM)—Makes up the basic read/write storage element in computers. May be written to or read from any address location in any sequence.

Read-only memory (ROM)—Permanently stores information that is used repeatedly (e.g., data tables and electronic display characters). ROM with stored programmed data is also known as firmware. (See EPROM/EEPROM.)

Resistivity—A measurement of the difficulty with which materials transfer an electrical charge; the inverse of conductivity.

Reticle—See Photomask.

Semiconductor—A material, such as silicon, whose properties lie in between that of a conductor and an insulator. If impurities are introduced (a process called doping), the material can be made slightly conductive or slightly insulative. (See Chip.)

Serial ATA (SATA)—An internal interface used for connecting mass storage devices, such as hard disk drives and optical drives.

Serial Attached SCSI (SAS)—A communication protocol used to send data to and from computer storage devices like hard drives.

Serializer/Deserializer (SERDES)—A pair of functional blocks used for high-speed communication to overcome the problem of limited input/output.

Silicon—A nonmetallic element, made from melted sand, used to create wafers.

40 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Small Computer Systems Interconnect (SCSI)—A standard for computer ports that allows faster data transmission and greater flexibility than normal ports.

Solar cell—A device that converts sunlight energy directly into electricity using the photovoltaic effect.

Solid-state drive (SSD)—A data storage device that uses solid-state memory to store persistent data. An SSD emulates a hard disk drive and is capable of replacing it in most applications.

Sputtering—A method of depositing a thin film of material on wafer surfaces using radio frequency-excited ions; also called physical vapor deposition (PVD).

Static random access memory (SRAM)—An IC memory that requires no constant refreshing or recharging; it stores information as long as power is applied to the computer. SRAMs are much faster but more expensive than DRAMs.

Stepper—A device used to expose a photoresist-coated wafer surface by projecting light through a circuit pattern contained on a photomask. Its name is derived from the operation of making small step offsets to align the mask with each die position.

Substrate—The underlying material on which a microelectronic device is built, such as a silicon wafer.

Transistor—A three-terminal semiconductor device for amplification, switching, and detection.

Volatile memory—A memory device that does not retain stored information when power is interrupted. (See Dynamic random access memory and Static random access memory.)

Voltage regulator—A device that automatically maintains a constant voltage.

Wafer—A thin circular silicon disk, usually 0.6 millimeters (mm) thick and 150 mm to 300 mm in diameter, that forms the substrate of an IC.

Yield—The percentage of dice that function normally out of the total number available on a wafer. 

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 41

INDUSTRY REFERENCES

PERIODICALS/WEBSITES PV Insights http://pvinsights.com EDN Provides valuable insight on solar spot prices across the http://www.edn.com supply chain. Provides semiconductor and electronics news, strategic business information, and product and process content for BOOKS engineers and managers. The Chip: How Two Americans Invented the EE Times Semiconductor News Microchip and Launched a Revolution http://www.eetimes.com/archives.asp?section_type=New T.R. Reid s+Analysis&tag_id=35 The story of Jack Kilby and Robert Noyce, who invented the Offers news and commentary on the semiconductor integrated circuit. industry and links to sister sites covering various electronics industry issues in the EE Times Network. The Conquest of the Microchip: Science and Business in the Silicon Age Infrastructure Hans Queisser http://www.infras.com The story behind the growth of a new industry, from a first- Monthly newsletter; independent resource for news and hand observer. analysis of the worldwide semiconductor business, its end- to-end supply chain and related markets, including flat Crystal Fire: The Invention of the Transistor and the panel display, communications, nanotechnology, alternative Birth of the Information Age energy and specialty materials. Michael Riordan, Lillian Hoddeson Colorful history of how transistors and integrated circuits SEMI Book-to-Bill Report were invented. http://www.semi.org Released monthly on the website, this report includes total The Essential Guide to Semiconductors shipment and booking figures for North America-based Jim Turley manufacturers of semiconductor equipment. Briefing written by an analyst on the semiconductor industry that includes technology, design, manufacturing, Solid State Technology applications, and markets. http://electroiq.com/semiconductors Monthly; semiconductor manufacturing news, data, and The Innovator’s Dilemma: When New Technologies research sources. Website covers semiconductors, wafer Cause Great Firms to Fail fabrication, integrated circuits, and more. Clayton M. Christensen With the disk drive industry as a blueprint, analysis of how ONLINE RESOURCES firms failed to make new technology transitions.

EE Times Investing in Solar Stocks http://www.eetimes.com Joseph Berwind Valuable source of daily news stories on the entire A textbook that gives readers an introduction to solar and semiconductor industry, including equipment makers. how to invest in the industry.

International Technology Roadmap for Microchip Fabrication: A Practical Guide to Semiconductors (ITRS) Semiconductor Processing (5th Ed.) http://public.itrs.net Peter Van Zant Annual report; a cooperative effort to assess the Textbook basics about making semiconductors. technological challenges and needs facing the semiconductor industry over the next 15 years.

42 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

TRADE ASSOCIATIONS IC Insights Inc. http://www.icinsights.com Global Semiconductor Alliance (GSA) Leading provider of market research and analysis for the http://www.gsaglobal.org integrated circuit industry. Industry group for fabless semiconductor manufacturers. IDC International Telecommunication Union (ITU) http://www.idc.com http://www.itu.int Leading global provider of information technology data and Founded in Paris in 1865 as the International Telegraph industry analysis to the IT, telecommunications, and Union, the ITU is the United Nations’ specialized agency for consumer technology markets. information and communication technologies; it allows government and private-sector members to coordinate IHS Inc. global telecommunications networks and services. http://www.ihs.com Provides economic, financial, and political coverage of SEMI countries, regions, and industries. http://www.semi.org Global industry association serving the nano- and IHS Technology microelectronics manufacturing supply chains (including http://technology.ihs.com semiconductors). Its Book-to-Bill Report provides the book- Provides information, analysis, and consulting on the to-bill ratio for semiconductor equipment manufacturers electronics industry. Tracks industry performance and headquartered in North America; its mid-year and year-end develops forecasts. SEMI Capital Equipment Consensus Forecast are based on interviews with companies representing a majority of sales The Information Network in the global semiconductor equipment industry. http://www.theinformationnet.com Provider of market research and analysis reports and Semiconductor Industry Association (SIA) services for the integrated circuit, computer, and http://www.semiconductors.org telecommunications industries. Trade group representing US semiconductor companies. Provides various reports and forecasts, including the Global International Technology Roadmap for Sales Report (GSR), a three-month moving average of Semiconductors (ITRS) semiconductor sales activity, and Semiconductor http://public.itrs.net International Capacity Statistics (SICAS), capacity and Cooperative effort to assess technological requirements for utilization of the total wafer start capacity of the integrated the semiconductor industry to advance in the future. circuit manufacturing industry. Acts as a commercial Reports and updates are available on the website. distribution channel for WSTS reports. Sponsored by leading industry trade associations, with International SEMATECH as the communications World Semiconductor Trade Statistics Inc. (WSTS) coordinator. http://www.wsts.org Industry membership organization that manages the Institute for Supply Management (ISM) collection and publication of trade shipments and forecasts. http://www.ism.ws Not-for-profit association providing national and RESEARCH ORGANIZATIONS international leadership in purchasing and supply management research and education; publishes monthly DisplaySearch ISM Report on Business. http://www.displaysearch.com Worldwide leader in display market research and SEMATECH consulting. http://public.sematech.org Research consortium of semiconductor companies. Gartner Inc. Website has a wealth of information—everything from a http://www.gartner.com dictionary of semiconductor terms to research on new and Information technology market research and consulting firm existing technologies. serving information technology suppliers and the financial and investment communities.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 43

Semico Research Corp. KLA-Tencor Corp. http://www.semico.com http://www.kla-tencor.com Market and engineering research company focused on Photographs of various measurement, wafer inspection, semiconductor forecasts based on consumption of and yield control tools. The company also has a quarterly semiconductors in end-use markets. electronic magazine on yield management under the “Company” link. VLSI Research Inc. http://www.vlsiresearch.com Kulicke & Soffa Performs market research and economic analysis on the http://www.kns.com semiconductor and semiconductor equipment industries. Displays images of back-end wafer process equipment.

GOVERNMENT AGENCIES Lam Research Corp. http://www.lamresearch.com Federal Reserve Bank of St. Louis Shows pictures of etch, chemical mechanical polishing, and http://research.stlouisfed.org/fred2 wafer cleaning tools. Provides the FRED Economic Time-Series Database, a well- organized government source for a wide range of statistical Taiwan Semiconductor Manufacturing Co. Ltd. economic data, including GDP, interest rates, and more. http://www.tsmc.com The world’s largest foundry provides monthly sales updates COMPANY RESOURCES on its website (under “Investor Relations, Financials”); these are a leading indicator of impending industry turns. Applied Materials http://www.appliedmaterials.com Teradyne Inc. Many pictures of front-end wafer process equipment in the http://www.teradyne.com “Products & Technologies” section. Displays pictures of automatic electronic testing equipment. Intel Corp. http://www.intel.com Texas Instruments Inc. http://www.intel.com/content/www/us/en/company- http://www.ti.com overview/intel-museum.html http://www.ti.com/corp/docs/company/history/tihistory.shtml The Intel Museum (at the second website listed) describes The latter site’s “History of Innovation” timeline notes how a chip is made, how transistors work, the history of when certain kinds of semiconductors were introduced. the microprocessor, what a clean room is like, and other background information.

44 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

COMPARATIVE COMPANY ANALYSIS

Operating Revenues

Million $ CAGR (%) Index Basis (2003 = 100) Ticker Company Yr. End 2013 2012 2011 2010 2009 2008 2003 10-Yr. 5-Yr. 1-Yr. 2013 2012 2011 2010 2009 SEM ICONDUCTORS‡ AMD † ADVANCED MICRO DEVICES DEC 5,299.0 5,422.0 A 6,568.0 6,494.0 C 5,403.0 5,808.0 D 3,519.2 4.2 (1.8) (2.3) 151 154 187 185 154 ALTR [] ALTERA CORP DEC 1,732.6 1,783.0 2,064.5 1,954.4 A 1,195.4 1,367.2 827.2 7.7 4.9 (2.8) 209 216 250 236 145 ADI [] ANALOG DEVICES OCT 2,633.7 2,701.1 2,993.3 2,761.5 2,014.9 2,582.9 D 2,047.3 2.6 0.4 (2.5) 129 132 146 135 98 ATML † ATMEL CORP DEC 1,386.4 1,432.1 1,803.1 A 1,644.1 1,217.3 1,540.8 1,330.6 0.4 (2.1) (3.2) 104 108 136 124 91 AVGO[]AVAGO TECHNOLOGIES LTD OCT 2,520.0A 2,364.0 2,336.0 2,093.0A 1,484.0A 1,699.0D NA NA 8.2 6.6 ** ** ** ** NA

BRCM [] BROADCOM CORP -CL A DEC 8,305.0 A 8,006.0 A 7,389.0 A 6,818.3 A 4,490.3 A 4,658.1 A 1,610.1 17.8 12.3 3.7 516 497 459 423 279 CEVA § CEVA INC DEC 48.9 53.7 60.2 44.9 38.5 40.4 36.8 2.9 3.9 (8.9) 133 146 164 122 104 CRUS § CIRRUS LOGIC INC # MA R 714.3 809.8 426.8 369.6 221.0 174.6 196.3 13.8 32.5 (11.8) 364 412 217 188 113 CREE † CREE INC JUN 1,386.0 1,164.7 A 987.6 867.3 567.3 493.3 229.8 19.7 23.0 19.0 603 507 430 377 247 CY †CYPRESS SEMICONDUCTOR CORP DEC 722.7 769.7A 995.2 877.5 667.8 765.7A,C 836.8 (1.5) (1.1) (6.1) 86 92 119 105 80

DIOD § DIODES INC DEC 826.8 A 633.8 635.3 612.9 434.4 432.8 A 136.9 19.7 13.8 30.5 604 463 464 448 317 DSPG § DSP GROUP INC DEC 151.1 162.8 193.9 A 225.5 212.2 305.8 152.9 (0.1) (13.2) (7.2) 99 106 127 147 139 ENTR § ENTROPIC COMMUNICATIONS INC DEC 259.4 A 321.7 A 240.6 210.2 116.3 146.0 A NA NA 12.2 (19.4) ** ** ** ** NA EXAR § EXAR CORP # MAR 125.3 122.0 130.6 146.0 134.9 A 115.1 67.2 6.4 1.7 2.7 187 182 194 217 201 FCS † FA IRCHILD SEMICONDUCTOR INTL DEC 1,405.4 1,397.4 1,588.8 1,599.7 1,187.5 1,574.2 1,401.3 0.0 (2.2) 0.6 100 100 113 114 85

FSLR [] FIRST SOLAR INC DEC 3,309.0 3,368.5 2,766.2 2,563.5 2,066.2 1,246.3 NA NA 21.6 (1.8) ** ** ** ** NA IDTI † INTEGRATED DEVICE TECH INC # MAR 484.8 D 487.2 A 526.7 D 625.7 535.9 A 663.2 345.4 3.4 (6.1) (0.5) 140 141 152 181 155 INTC [] INTEL CORP DEC 52,708.0 53,341.0 53,999.0 A 43,623.0 35,127.0 37,586.0 30,141.0 A 5.7 7.0 (1.2) 175 177 179 145 117 ISIL † INTERSIL CORP -CL A DEC 575.2 607.9 760.5 822.4 A 611.4 769.7 507.7 D 1.3 (5.7) (5.4) 113 120 150 162 120 IRF † INTL RECTIFIER CORP JUN 977.0 1,050.6 1,176.6 A 895.3 721.7 984.8 864.4 1.2 (0.2) (7.0) 113 122 136 104 83

KOPN § KOPIN CORP DEC 22.9 A 34.6 A,C 131.1 A 120.4 114.7 114.8 76.6 (11.4) (27.6) (33.9) 30 45 171 157 150 LLTC []LINEAR TECHNOLOGY CORP JUN 1,282.2 1,266.6 1,484.0 1,170.0 968.5 1,175.2 606.6 7.8 1.8 1.2 211 209 245 193 160 MCRL § MICREL INC DEC 237.1 250.1 259.0 297.4 218.9 259.4 211.7 1.1 (1.8) (5.2) 112 118 122 140 103 MCHP [] MICROCHIP TECHNOLOGY INC # MAR 1,931.2 A 1,581.6 A 1,383.2 A 1,487.2 A,C 947.7 A 903.3 699.3 10.7 16.4 22.1 276 226 198 213 136 MU []MICRON TECHNOLOGY INC AUG 9,073.0A 8,292.0 8,788.0 8,482.0A 4,803.0 5,841.0 3,091.3 11.4 9.2 9.4 294 268 284 274 155

MSCC § MICROSEMI CORP SEP 975.9 1,012.5 A 835.9 A 518.3 A 453.0 A 514.1 197.4 17.3 13.7 (3.6) 494 513 423 263 230 MPWR § MONOLITHIC POWER SYSTEMS INC DEC 238.1 213.8 196.5 218.8 165.0 160.5 24.2 25.7 8.2 11.4 984 883 812 904 682 NVDA [] NVIDIA CORP # JAN 4,130.2 4,280.2 3,997.9 A 3,543.3 3,326.4 3,424.9 1,822.9 8.5 3.8 (3.5) 227 235 219 194 182 PSEM § PERICOM SEMICONDUCTOR CORP JUN 129.3 137.1 166.3 C 146.9 128.6 163.7 45.0 11.1 (4.6) (5.7) 288 305 370 327 286 POWI § POWER INTEGRATIONS INC DEC 347.1 305.4 A 298.7 299.8 215.7 201.7 125.7 10.7 11.5 13.7 276 243 238 238 172

RFMD † RF MICRO DEVICES INC # MAR 1,148.2 964.1 A 871.4 1,051.8 978.4 886.5 651.4 5.8 5.3 19.1 176 148 134 161 150 SMTC † SEMTECH CORP # JAN 595.0 578.8 A 480.6 454.5 286.6 A 294.8 192.1 12.0 15.1 2.8 310 301 250 237 149 SLAB † SILICON LABORATORIES INC DEC 580.1 563.3 491.6 493.3 A 441.0 415.6 A 325.3 A 6.0 6.9 3.0 178 173 151 152 136 SWKS † SKYWORKS SOLUTIONS INC SEP 1,792.0 1,568.6 A 1,418.9 A 1,071.8 802.6 860.0 617.8 11.2 15.8 14.2 290 254 230 173 130 SYNA § SYNAPTICS INC JUN 663.6 548.2 598.5 514.9 473.3 361.1 100.7 A 20.7 12.9 21.0 659 544 594 511 470

TXN [] TEXAS INSTRUMENTS INC DEC 12,205.0 12,690.0 13,697.0 13,966.0 10,427.0 12,501.0 9,834.0 2.2 (0.5) (3.8) 124 129 139 142 106 TQNT §TRIQUINT SEMICONDUCTOR INC DEC 892.9 829.2 896.1 878.7 654.3 573.4A 312.3A 11.1 9.3 7.7 286 266 287 281 210 XLNX [] XILINX INC # MAR 2,382.5 2,168.7 2,240.7 2,369.4 1,833.6 1,825.2 1,397.8 5.5 5.5 9.9 170 155 160 170 131

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 45

Operating Revenues

Million $ CAGR (%) Index Basis (2003 = 100) Ticker Company Yr. End 2013 2012 2011 2010 2009 2008 2003 10-Yr. 5-Yr. 1-Yr. 2013 2012 2011 2010 2009 SEM ICONDUC T OR EQUIPM ENT ‡ AEIS § ADVANCED ENERGY INDS INC DEC 547.0 A 451.9 A 516.8 459.4 A,C 186.4 328.9 262.4 7.6 10.7 21.0 208 172 197 175 71 AMAT [] APPLIED MATERIALS INC OCT 7,509.0 8,719.0 A 10,517.0 9,548.7 5,013.6 8,129.2 4,477.3 5.3 (1.6) (13.9) 168 195 235 213 112 BRKS § BROOKS AUTOMATION INC SEP 451.0 A 519.5 688.1 A 593.0 218.7 526.4 343.6 A 2.8 (3.0) (13.2) 131 151 200 173 64 CCMP § CABOT MICROELECTRONICS CORP SEP 433.1 427.7 445.4 408.2 291.4 A 375.1 251.7 5.6 2.9 1.3 172 170 177 162 116 COHU § COHU INC DEC 247.3 A 221.2 309.0 322.7 171.3 199.7 A 138.6 6.0 4.4 11.8 178 160 223 233 124

KLAC [] KLA-TENCOR CORP JUN 2,842.8 3,171.9 3,175.2 1,820.8 1,520.2 2,521.7 A 1,323.0 7.9 2.4 (10.4) 215 240 240 138 115 KLIC § KULICKE & SOFFA INDUSTRIES SEP 534.9 791.0 830.4 762.8 225.2 A 328.0 D 494.3 0.8 10.3 (32.4) 108 160 168 154 46 LRCX [] LA M RESEA RCH CORP JUN 3,598.9 2,665.2 A 3,237.7 2,133.8 1,115.9 2,474.9 A 755.2 16.9 7.8 35.0 477 353 429 283 148 MKSI § MKS INSTRUMENTS INC DEC 669.4 643.5 822.5 853.1 D 411.4 647.0 337.3 7.1 0.7 4.0 198 191 244 253 122 NANO § NANOMETRICS INC DEC 144.3 182.9 230.1 A 188.1 76.7 102.1 A 41.6 13.2 7.2 (21.1) 347 440 553 452 184

RTEC § RUDOLPH TECHNOLOGIES INC DEC 176.2 218.5 187.2 195.3 78.7 131.0 58.5 11.7 6.1 (19.3) 301 373 320 334 134 SUNE † SUNEDISON INC DEC 1,984.7 2,492.8 2,539.8 2,239.2 1,163.6 A 2,004.5 781.1 9.8 (0.2) (20.4) 254 319 325 287 149 TER † TERADYNE INC DEC 1,427.9 A 1,656.8 1,429.1 A,C 1,608.7 819.4 1,107.0 A 1,352.9 0.5 5.2 (13.8) 106 122 106 119 61 TSRA § TESSERA TECHNOLOGIES INC DEC 168.9 D 234.0 254.6 301.4 299.4 248.3 37.3 A 16.3 (7.4) (27.8) 453 627 682 808 802 UTEK § ULTRATECH INC DEC 157.3 234.8 212.3 140.6 95.8 131.7 100.1 4.6 3.6 (33.0) 157 235 212 140 96

VECO § VEECO INSTRUMENTS INC DEC 331.7 A 516.0 979.1 D 933.2 D 380.1 442.8 279.3 A 1.7 (5.6) (35.7) 119 185 351 334 136

OTHER COM PANIES RELEV ANT TO INDUSTRY ANALYSIS CAVM CAVIUM INC DEC 304.0 235.5 259.2 A 206.5 101.2 A 86.6 A NA NA 28.5 29.1 ** ** ** ** NA FSL FREESCA LE SEMICONDUCTOR LTD DEC 4,186.0 3,945.0 4,572.0 4,458.0 3,508.0 NA NA NA NA 6.1 ** ** ** ** NA ONNN ON SEMICONDUCTOR CORP DEC 2,782.7 2,894.9 3,442.3 2,313.4 1,768.9 2,054.8 A 1,069.1 C 10.0 6.3 (3.9) 260 271 322 216 165 OVTI OMNIVISION TECHNOLOGIES INC # APR 1,453.9 1,407.9 897.7 A 956.5 603.0 A 507.3 318.1 16.4 23.4 3.3 457 443 282 301 190 STM STMICROELECTRONICS NV -ADR DEC 8,082.0 8,493.0 9,735.0 10,346.0 8,510.0 A 9,842.0 A 7,238.0 A 1.1 (3.9) (4.8) 112 117 134 143 118

TSM TA IWA N SEMICONDUCTOR -A DR DEC 20,014.2 C 17,426.8 14,109.0 14,397.3 9,256.4 10,169.6 5,972.3 12.9 14.5 14.8 335 292 236 241 155 UMC UTD MICROELECTRONICS -ADR DEC 4,150.6 A,C 3,981.9 3,855.4 4,339.1 A 2,860.4 2,955.2 2,815.6 4.0 7.0 4.2 147 141 137 154 102

Note: Data as originally reported. CAGR-Compound annual grow th rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. **Not calculated; data for base year or end year not available. A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.

46 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Net Income

Million $ CAGR (%) Index Basis (2003 = 100) Ticker Company Yr. End 2013 2012 2011 2010 2009 2008 2003 10-Yr. 5-Yr. 1-Yr. 2013 2012 2011 2010 2009 SEM ICONDUCTORS‡ AMD † ADVANCED MICRO DEVICES DEC (83.0) (1,183.0) 495.0 471.0 379.0 (2,414.0) (274.5) NM NM NM NM NM NM NM NM ALTR [] ALTERA CORP DEC 440.1 556.8 770.7 782.9 251.1 359.7 155.1 11.0 4.1 (21.0) 284 359 497 505 162 ADI [] ANALOG DEVICES OCT 673.5 651.2 860.9 711.2 247.4 525.2 298.3 8.5 5.1 3.4 226 218 289 238 83 ATML † ATMEL CORP DEC (22.1) 30.4 315.0 423.1 (109.5) (27.2) (118.0) NM NM NM NM NM NM NM NM A V GO [] A V A GO TECHNOLOGIES LTD OCT 552.0 563.0 552.0 415.0 (44.0) 57.0 NA NA 57.5(2.0) ** ** ** ** NA

BRCM [] BROADCOM CORP -CL A DEC 424.0 719.0 927.0 1,081.8 65.3 214.8 (959.9) NM 14.6 (41.0) NM NM NM NM NM CEVA § CEVA INC DEC 6.7 13.7 18.6 11.4 8.3 8.6 (12.0) NM (4.8) (51.2) NM NM NM NM NM CRUS § CIRRUS LOGIC INC # MA R 108.1 136.6 88.0 203.5 38.4 3.5 46.5 8.8 98.9 (20.9) 232 294 189 438 83 CREE † CREE INC JUN 86.9 44.4 146.5 152.3 30.6 31.8 34.9 9.6 22.3 95.7 249 127 420 436 88 CY † CYPRESS SEMICONDUCTOR CORP DEC (46.4) (22.4) 167.8 75.7 (150.4) (462.1) (5.3) NM NM NM NM NM NM NM NM

DIOD § DIODES INC DEC 26.5 24.2 50.7 76.7 7.5 39.0 10.1 10.1 (7.4) 9.9 263 239 503 760 74 DSPG § DSP GROUP INC DEC 2.7 (8.0) (16.2) (7.4) (8.4) (212.4) 25.4 (20.1) NM NM 11 (32) (64) (29) (33) ENTR § ENTROPIC COMMUNICATIONS INC DEC (66.2) 4.5 26.6 64.7 (13.2) (136.4) NA NA NM NM ** ** ** ** NA EXAR § EXAR CORP # MAR 5.8 2.9 (28.8) (35.7) (28.1) (73.0) 4.6 2.3 NM 101.3 125 62 (621) (769) (606) FCS † FA IRCHILD SEMICONDUCTOR INTL DEC 5.0 24.6 145.5 153.2 (60.2) (167.4) (81.5) NM NM (79.7) NM NM NM NM NM

FSLR [] FIRST SOLAR INC DEC 353.0 (96.3) (39.5) 664.2 640.1 348.3 NA NA 0.3 NM ** ** ** ** NA IDTI † INTEGRATED DEVICE TECH INC # MAR 111.3 (15.9) 37.3 72.6 40.0 (1,045.2) 6.4 33.1 NM NM 1,740 (249) 584 1,136 626 INTC [] INTEL CORP DEC 9,620.0 11,005.0 12,942.0 11,464.0 4,369.0 5,292.0 5,641.0 5.5 12.7 (12.6) 171 195 229 203 77 ISIL † INTERSIL CORP -CL A DEC 2.9 (37.6) 67.2 26.4 38.6 (1,062.5) 58.5 (26.1) NM NM 5 (64) 115 45 66 IRF † INTL RECTIFIER CORP JUN (88.8) (55.0) 166.5 80.8 (247.4) (62.6) (89.6) NM NM NM NM NM NM NM NM

KOPN § KOPIN CORP DEC (24.9) (21.2) 3.6 8.9 19.4 2.6 (6.9) NM NM NM NM NM NM NM NM LLTC [] LINEAR TECHNOLOGY CORP JUN 406.9 398.1 580.8 361.3 313.5 387.6 236.6 5.6 1.0 2.2 172 168 245 153 133 MCRL § MICREL INC DEC 17.6 12.3 34.0 50.7 16.3 28.3 4.8 13.8 (9.0) 43.3 364 254 702 1,046 336 MCHP [] MICROCHIP TECHNOLOGY INC # MAR 395.3 127.4 336.7 429.2 217.0 248.8 137.3 11.2 9.7 210.3 288 93 245 313 158 MU [] MICRON TECHNOLOGY INC A UG 1,190.0 (1,032.0) 167.0 1,850.0 (1,835.0) (1,619.0) (1,273.2) NM NM NM NM NM NM NM NM

MSCC § MICROSEMI CORP SEP 43.7 (29.7) 54.4 59.0 (26.8) 49.7 3.2 29.9 (2.5) NM 1,372 (932) 1,711 1,855 (843) MPWR § MONOLITHIC POWER SYSTEMS INC DEC 22.9 15.8 13.3 29.6 19.7 24.2 (3.0) NM (1.1) 45.3 NM NM NM NM NM NVDA [] NVIDIA CORP # JAN 440.0 562.5 581.1 253.1 (68.0) (30.0) 74.4 19.4 NM (21.8) 591 756 781 340 (91) PSEM § PERICOM SEMICONDUCTOR CORP JUN (21.6) (2.1) 13.5 10.8 6.1 17.0 (4.3) NM NM NM NM NM NM NM NM POWI § POWER INTEGRATIONS INC DEC 57.3 (34.4) 34.3 49.5 23.3 1.8 18.1 12.2 99.7 NM 317 (190) 190 274 129

RFMD † RF MICRO DEVICES INC # MAR 12.6 (53.0) 0.9 124.6 71.0 (898.6) 29.7 (8.2) NM NM 43 (178) 3 419 239 SMTC † SEMTECH CORP # JAN (164.5) 41.9 89.1 72.6 1.0 37.5 32.5 NM NM NM (507) 129 274 224 3 SLAB † SILICON LABORATORIES INC DEC 49.8 63.5 35.5 73.2 73.1 32.9 44.7 1.1 8.6 (21.6) 111 142 79 164 163 SWKS † SKYWORKS SOLUTIONS INC SEP 278.1 202.1 226.6 137.3 93.3 111.0 (54.3) NM 20.2 37.6 NM NM NM NM NM SYNA § SYNAPTICS INC JUN 98.9 54.1 63.8 53.0 54.3 31.1 7.7 29.1 26.0 82.7 1,282 702 827 686 704

TXN [] TEXAS INSTRUMENTS INC DEC 2,162.0 1,759.0 2,236.0 3,228.0 1,470.0 1,920.0 1,198.0 6.1 2.4 22.9 180 147 187 269 123 TQNT § TRIQUINT SEMICONDUCTOR INC DEC (38.0) (26.2) 48.2 190.8 16.2 (14.6) (73.0) NM NM NM NM NM NM NM NM XLNX [] XILINX INC # MAR 630.4 487.5 530.1 641.9 357.5 375.6 303.0 7.6 10.9 29.3 208 161 175 212 118

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 47

Net Income

Million $ CAGR (%) Index Basis (2003 = 100) Ticker Company Yr. End 2013 2012 2011 2010 2009 2008 2003 10-Yr. 5-Yr. 1-Yr. 2013 2012 2011 2010 2009 SEM ICONDUCTOR EQUIPM ENT‡ AEIS § ADVANCED ENERGY INDS INC DEC 32.1 20.2 36.9 53.6 (102.7) (1.8) (44.2) NM NM 59.0 NM NM NM NM NM AMAT [] APPLIED MATERIALS INC OCT 256.0 109.0 1,926.0 937.9 (305.3) 960.7 (149.1) NM (23.2) 134.9 NM NM NM NM NM BRKS § BROOKS AUTOMATION INC SEP (2.2) 136.8 128.4 59.0 (227.9) (236.6) (185.8) NM NM NM NM NM NM NM NM CCMP § CABOT MICROELECTRONICS CORP SEP 51.4 40.8 51.7 49.5 11.2 38.3 37.7 3.1 6.0 25.9 136 108 137 131 30 COHU § COHU INC DEC (33.4) (12.2) 15.7 24.6 (28.2) (5.4) (0.0) NM NM NM NM NM NM NM NM

KLAC [] KLA-TENCOR CORP JUN 543.1 756.0 794.5 212.3 (523.4) 359.1 137.2 14.8 8.6 (28.2) 396 551 579 155 (381) KLIC § KULICKE & SOFFA INDUSTRIES SEP 59.4 160.6 127.6 142.1 (58.0) (19.6) (76.7) NM NM (63.0) NM NM NM NM NM LRCX [] LAM RESEARCH CORP JUN 113.9 168.7 723.7 346.7 (302.1) 439.3 (7.7) NM (23.7) (32.5) NM NM NM NM NM MKSI § MKS INSTRUMENTS INC DEC 35.8 48.0 129.7 132.9 (212.7) 30.1 (16.4) NM 3.5 (25.5) NM NM NM NM NM NANO § NANOMETRICS INC DEC (14.1) 4.5 28.7 55.9 (16.3) (82.7) (17.5) NM NM NM NM NM NM NM NM

RTEC § RUDOLPH TECHNOLOGIES INC DEC 3.5 43.9 25.2 27.0 (29.6) (249.7) 1.8 6.9 NM (92.1) 195 2,478 1,425 1,526 (1,674) SUNE † SUNEDISON INC DEC (593.5) (152.2) (1,536.0) 34.4 (68.3) 387.4 116.6 NM NM NM (509) (131) (1,317) 29 (59) TER † TERADYNE INC DEC 164.9 217.0 347.9 379.7 (133.8) (398.6) (194.0) NM NM (24.0) NM NM NM NM NM TSRA § TESSERA TECHNOLOGIES INC DEC (157.6) (30.2) (19.3) 57.3 69.8 4.6 9.4 NM NM NM (1,685) (323) (206) 613 746 UTEK § ULTRATECH INC DEC (13.8) 47.2 39.2 16.8 2.1 11.8 7.6 NM NM NM (182) 624 519 222 28

VECO § VEECO INSTRUMENTS INC DEC (42.3) 26.5 190.5 260.5 (15.6) (71.1) (9.7) NM NM NM NM NM NM NM NM

OTHER COMPANIES RELEVANT TO INDUSTRY ANALYSIS CAVM CAVIUM INC DEC (3.0) (112.6) 0.0 37.1 (21.4) 1.5 NA NA NM NM ** ** ** ** NA FSL FREESCALE SEMICONDUCTOR LTD DEC (208.0) (102.0) (410.0) (1,053.0) 748.0 NA NA NA NA NM ** ** ** ** NA ONNN ON SEMICONDUCTOR CORP DEC 150.8 (90.6) 11.6 290.5 61.0 (380.1) (145.2) NM NM NM NM NM NM NM NM OVTI OMNIVISION TECHNOLOGIES INC # APR 95.0 42.9 65.8 124.5 6.7 (37.3) 58.7 4.9 NM 121.4 162 73 112 212 11 STM STMICROELECTRONICS NV -ADR DEC (500.0) (1,158.0) 650.0 830.0 (1,131.0) (786.0) 253.0 NM NM NM (198) (458) 257 328 (447)

TSM TAIWAN SEMICONDUCTOR -ADR DEC 6,167.5 5,719.8 4,433.5 5,545.8 2,792.4 3,050.5 1,390.4 16.1 15.1 7.8 444 411 319 399 201 UMC UTD MICROELECTRONICS -ADR DEC 422.7 269.2 350.5 817.8 100.9 (681.3) 412.5 0.2 NM 57.0 102 65 85 198 24

Note: Data as originally reported. CAGR-Compound annual grow th rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. **Not calculated; data for base year or end year not available.

48 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Return on Revenues (%) Return on Assets (%) Return on Equity (%) Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTORS‡ A MD † A DV A NCED MICRO DEV ICES DEC NM NM 7.5 7.3 7.0 NM NM 10.0 6.7 3.7 NM NM 38.0 56.7 108.5 ALTR [] ALTERA CORP DEC 25.4 31.2 37.3 40.1 21.0 8.3 12.5 19.2 25.9 12.0 12.9 17.6 29.0 45.9 26.6 ADI [] ANALOG DEVICES OCT 25.6 24.1 28.8 25.8 12.3 11.2 12.0 17.9 18.4 7.6 15.1 16.4 24.6 24.8 10.0 ATML † ATMEL CORP DEC NM 2.1 17.5 25.7 NM NM 2.1 19.8 27.8 NM NM 2.9 29.5 46.6 NM AVGO[]AVAGO TECHNOLOGIES LTD OCT 21.9 23.8 23.6 19.8 NM 17.6 21.2 24.0 20.1 NM 20.8 25.4 31.4 32.6 NM

BRCM [] BROADCOM CORP -CL A DEC 5.1 9.0 12.5 15.9 1.5 3.7 7.1 10.9 16.6 1.4 5.2 10.0 15.0 22.3 1.7 CEVA § CEVA INC DEC 13.7 25.5 30.8 25.3 21.7 3.1 6.3 9.1 6.7 5.7 3.5 6.9 10.1 7.4 6.4 CRUS § CIRRUS LOGIC INC # MA R 15.1 16.9 20.6 55.1 17.4 15.7 22.8 16.9 53.3 16.1 18.2 26.9 19.5 62.0 19.6 CREE † CREE INC JUN 6.3 3.8 14.8 17.6 5.4 3.0 1.7 6.3 8.5 2.3 3.2 1.8 6.8 9.4 2.6 CY † CY PRESS SEMICONDUCTOR CORP DEC NM NM 16.9 8.6 NM NM NM 17.8 7.6 NM NM NM 30.4 11.3 NM

DIOD § DIODES INC DEC 3.2 3.8 8.0 12.5 1.7 2.5 2.8 6.2 8.2 0.8 3.8 3.7 8.6 15.6 1.8 DSPG § DSP GROUP INC DEC 1.8 NM NM NM NM 1.4 NM NM NM NM 1.8 NM NM NM NM ENTR § ENTROPIC COMMUNICA TIONS INC DEC NM 1.4 11.0 30.8 NM NM 1.3 8.9 35.7 NM NM 1.5 9.7 40.8 NM EXA R § EXA R CORP # MA R 4.6 2.4 NM NM NM 1.9 1.0 NM NM NM 2.3 1.2 NM NM NM FCS † FA IRCHILD SEMICONDUCTOR INTL DEC 0.4 1.8 9.2 9.6 NM 0.3 1.3 7.7 8.5 NM 0.4 1.8 11.6 13.9 NM

FSLR [] FIRST SOLAR INC DEC 10.7 NM NM 25.9 31.0 5.3 NM NM 17.2 23.4 8.7 NM NM 21.7 30.7 IDTI † INTEGRA TED DEV ICE TECH INC # MA R 23.0 NM 7.1 11.6 7.5 14.3 NM 5.2 9.8 5.6 16.3 NM 6.1 12.1 6.9 INTC [] INTEL CORP DEC 18.3 20.6 24.0 26.3 12.4 10.9 14.2 19.3 19.7 8.4 17.6 22.7 27.1 25.2 10.8 ISIL † INTERSIL CORP -CL A DEC 0.5 NM 8.8 3.2 6.3 0.2 NM 4.1 1.9 3.4 0.3 NM 6.3 2.5 3.8 IRF † INTL RECTIFIER CORP JUN NM NM 14.2 9.0 NM NM NM 10.7 5.7 NM NM NM 13.1 6.9 NM

KOPN § KOPIN CORP DEC NM NM 2.7 7.4 17.0 NM NM 1.9 4.8 11.3 NM NM 2.2 5.5 13.0 LLTC [] LINEA R TECHNOLOGY CORP JUN 31.7 31.4 39.1 30.9 32.4 20.6 22.9 36.1 24.0 20.9 47.4 64.1 213.0 NA NA MCRL § MICREL INC DEC 7.4 4.9 13.1 17.1 7.4 6.3 4.2 11.1 18.5 6.4 8.0 5.3 14.5 24.8 8.3 MCHP [] MICROCHIP TECHNOLOGY INC # MA R 20.5 8.1 24.3 28.9 22.9 10.0 3.7 11.1 15.7 8.8 19.4 6.5 17.7 25.7 17.2 MU [] MICRON TECHNOLOGY INC A UG 13.1 NM 1.9 21.8 NM 7.1 NM 1.1 14.2 NM 14.1 NM 2.0 29.2 NM

MSCC § MICROSEMI CORP SEP 4.5 NM 6.5 11.4 NM 2.3 NM 4.6 7.0 NM 4.5 NM 6.6 8.2 NM MPWR § MONOLITHIC POWER SYSTEMS INC DEC 9.6 7.4 6.8 13.5 11.9 7.0 5.6 4.8 11.3 9.0 7.9 6.3 5.4 12.9 10.4 NV DA [] NV IDIA CORP # JA N 10.7 13.1 14.5 7.1 NM 6.4 9.4 11.6 6.3 NM 9.5 12.5 15.9 8.7 NM PSEM § PERICOM SEMICONDUCTOR CORP JUN NM NM 8.1 7.3 4.7 NM NM 4.8 4.3 2.5 NM NM 5.8 5.0 2.9 POWI § POWER INTEGRATIONS INC DEC 16.5 NM 11.5 16.5 10.8 12.7 NM 7.9 12.7 7.1 14.7 NM 9.5 15.5 8.5

RFMD † RF MICRO DEV ICES INC # MA R 1.1 NM 0.1 11.8 7.3 1.4 NM 0.1 12.2 6.8 1.9 NM 0.1 20.6 15.9 SMTC † SEMTECH CORP # JAN NM 7.2 18.5 16.0 0.3 NM 4.4 12.9 12.4 0.2 NM 6.3 15.4 15.5 0.2 SLAB † SILICON LABORATORIES INC DEC 8.6 11.3 7.2 14.8 16.6 5.3 8.1 4.9 10.0 10.7 7.2 10.2 5.8 11.7 12.9 SWKS † SKYWORKS SOLUTIONS INC SEP 15.5 12.9 16.0 12.8 11.6 12.4 10.0 13.1 9.4 7.2 13.9 11.5 15.5 11.3 9.1 SYNA § SYNAPTICS INC JUN 14.9 9.9 10.7 10.3 11.5 16.1 10.9 14.7 13.4 15.9 21.5 14.7 20.4 20.9 32.4

TXN [] TEXAS INSTRUMENTS INC DEC 17.7 13.9 16.3 23.1 14.1 11.1 8.7 13.2 25.3 12.2 19.9 16.1 20.9 32.0 15.4 TQNT § TRIQUINT SEMICONDUCTOR INC DEC NM NM 5.4 21.7 2.5 NM NM 4.7 23.0 2.5 NM NM 5.4 27.0 2.9 XLNX [] XILINX INC # MAR 26.5 22.5 23.7 27.1 19.5 12.9 10.6 12.3 17.5 11.9 22.1 17.2 20.7 28.3 18.5

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 49

Return on Revenues (%) Return on Assets (%) Return on Equity (%) Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTOR EQUIPM ENT‡ AEIS § ADVANCED ENERGY INDS INC DEC 5.9 4.5 7.1 11.7 NM 5.4 3.8 7.1 12.6 NM 7.5 5.1 9.4 16.4 NM AMAT [] APPLIED MATERIALS INC OCT 3.4 1.3 18.3 9.8 NM 2.1 0.8 15.5 9.1 NM 3.6 1.4 23.6 12.8 NM BRKS § BROOKS AUTOMATION INC SEP NM 26.3 18.7 9.9 NM NM 19.8 22.2 12.7 NM NM 23.4 28.3 16.7 NM CCMP § CABOT MICROELECTRONICS CORP SEP 11.9 9.5 11.6 12.1 3.8 9.6 7.1 8.6 9.1 2.3 16.8 9.6 9.6 10.0 2.5 COHU § COHU INC DEC NM NM 5.1 7.6 NM NM NM 4.3 7.1 NM NM NM 5.6 9.3 NM

KLAC [] KLA-TENCOR CORP JUN 19.1 23.8 25.0 11.7 NM 10.5 15.5 18.5 5.6 NM 16.0 24.5 31.1 9.6 NM KLIC §KULICKE & SOFFA INDUSTRIES SEP 11.1 20.3 15.4 18.6 NM 7.1 20.8 19.5 28.6 NM 8.7 28.8 32.2 59.7 NM LRCX [] LA M RESEA RCH CORP JUN 3.2 6.3 22.4 16.2 NM 1.5 2.8 22.1 15.6 NM 2.4 4.4 34.2 21.5 NM MKSI § MKS INSTRUMENTS INC DEC 5.3 7.5 15.8 15.6 NM 3.0 4.3 12.3 15.1 NM 3.5 4.8 14.1 17.4 NM NANO § NANOMETRICS INC DEC NM 2.4 12.5 29.7 NM NM 1.7 11.8 30.5 NM NM 2.1 15.1 40.3 NM

RTEC § RUDOLPH TECHNOLOGIES INC DEC 2.0 20.1 13.5 13.8 NM 0.9 13.0 9.6 13.6 NM 1.3 17.8 12.4 16.1 NM SUNE † SUNEDISON INC DEC NM NM NM 1.5 NM NM NM NM 0.8 NM NM NM NM 1.6 NM TER † TERADYNE INC DEC 11.6 13.1 24.3 23.6 NM 6.5 9.4 17.4 24.9 NM 8.8 13.2 26.5 42.5 NM TSRA § TESSERA TECHNOLOGIES INC DEC NM NM NM 19.0 23.3 NM NM NM 8.6 12.5 NM NM NM 9.3 13.7 UTEK § ULTRATECH INC DEC NM 20.1 18.5 11.9 2.2 NM 11.9 12.4 6.5 0.9 NM 14.1 14.9 7.8 1.1

VECO § VEECO INSTRUMENTS INC DEC NM 5.1 19.5 27.9 NM NM 2.8 18.3 29.7 NM NM 3.4 25.0 46.5 NM

OTHER COM PANIES RELEV ANT TO INDUSTRY ANALYSIS CAVM CAVIUM INC DEC NM NM 0.0 18.0 NM NM NM 0.0 15.1 NM NM NM 0.0 19.0 NM FSL FREESCA LE SEMICONDUCTOR LTD DEC NM NM NM NM 21.3 NM NM NM NM NA NA NA NA NA NA ONNN ON SEMICONDUCTOR CORP DEC 5.4 NM 0.3 12.6 3.4 4.6 NM 0.3 10.9 2.6 10.7 NM 0.8 24.7 7.3 OVTI OMNIVISION TECHNOLOGIES INC #APR 6.5 3.0 7.3 13.0 1.1 7.5 3.7 6.2 13.6 0.9 10.4 5.3 8.7 19.4 1.3 STM STMICROELECTRONICS NV -A DR DEC NM NM 6.7 8.0 NM NM NM 5.1 6.1 NM NM NM 8.6 11.3 NM

TSM TA IWA N SEMICONDUCTOR -A DR DEC 30.8 32.8 31.4 38.5 30.2 16.4 19.6 17.6 25.6 15.7 23.3 25.0 21.9 31.5 18.6 UMC UTD MICROELECTRONICS -ADR DEC 10.2 6.8 9.1 18.8 3.5 4.3 2.8 3.7 9.3 1.4 6.1 3.9 4.9 11.5 1.6 Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.

50 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Debt as a % of Current Ratio Debt / Capital Ratio (%) Net Working Capital Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTORS‡ AMD † ADVANCED MICRO DEVICES DEC 1.8 1.6 1.8 2.1 1.9 78.6 79.1 49.0 68.4 68.9 157.8 234.7 104.9 114.0 205.9 ALTR [] ALTERA CORP DEC 5.4 6.8 3.9 5.1 4.2 29.8 13.0 0.0 17.7 31.5 47.4 15.9 0.0 17.6 32.2 ADI [] ANALOG DEVICES OCT 9.6 8.9 8.4 5.4 6.4 15.5 16.2 18.7 11.1 12.9 17.8 19.3 22.6 14.1 18.0 ATML † ATMEL CORP DEC 2.9 2.8 3.1 2.6 2.5 1.0 1.2 1.0 1.0 2.1 1.8 2.0 1.6 1.5 2.8 AVGO[]AVAGO TECHNOLOGIES LTD OCT 4.3 4.9 4.0 1.9 1.4 0.0 0.1 0.2 0.3 18.2 0.1 0.1 0.4 0.8 100.9

BRCM [] BROADCOM CORP -CL A DEC 2.6 2.2 5.2 3.3 2.5 14.2 15.0 15.3 10.6 0.0 57.6 66.4 25.7 23.9 0.0 CEVA § CEVA INC DEC 10.3 10.3 11.8 10.1 9.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CRUS § CIRRUS LOGIC INC # MA R 5.8 4.8 4.8 6.1 4.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CREE † CREE INC JUN 7.3 7.8 10.4 11.3 4.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CY † CY PRESS SEMICONDUCTOR CORP DEC 1.0 1.1 1.2 2.2 2.2 57.0 58.4 5.7 0.0 0.0 NM NM 30.8 0.0 0.0

DIOD § DIODES INC DEC 4.1 4.3 3.9 2.2 1.9 20.7 6.2 0.6 0.9 22.0 37.1 11.9 1.2 1.6 35.7 DSPG § DSP GROUP INC DEC 2.3 2.6 2.7 2.7 2.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ENTR § ENTROPIC COMMUNICATIONS INC DEC 6.9 6.4 9.3 7.9 6.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EXAR § EXAR CORP # MAR 5.2 6.1 6.0 6.4 6.0 0.0 0.6 1.7 4.9 4.7 0.0 0.7 2.0 6.2 6.5 FCS † FA IRCHILD SEMICONDUCTOR INTL DEC 4.5 4.1 3.3 3.0 4.0 12.6 15.2 18.2 20.7 30.6 31.2 39.9 50.5 56.5 79.7

FSLR [] FIRST SOLAR INC DEC 2.4 2.6 2.7 3.4 3.4 3.5 12.1 14.5 5.7 5.2 7.4 28.9 37.8 18.9 15.3 IDTI † INTEGRA TED DEV ICE TECH INC # MA R 7.6 5.9 6.1 4.3 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 INTC [] INTEL CORP DEC 2.4 2.4 2.2 3.4 2.8 17.4 19.4 12.7 4.0 4.6 71.1 71.2 51.2 9.3 15.1 ISIL † INTERSIL CORP -CL A DEC 2.6 3.3 3.8 4.1 4.1 0.0 0.0 15.6 20.8 0.0 0.0 0.0 42.5 59.4 0.0 IRF † INTL RECTIFIER CORP JUN 4.1 4.1 3.5 4.3 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

KOPN § KOPIN CORP DEC 10.6 6.3 6.5 7.4 8.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 LLTC [] LINEA R TECHNOLOGY CORP JUN 1.7 8.8 6.8 2.2 8.7 0.0 49.1 56.1 83.8 117.0 0.0 60.4 73.9 112.5 145.8 MCRL § MICREL INC DEC 3.6 3.5 4.1 2.9 2.9 0.0 0.0 0.0 0.0 1.5 0.0 0.0 0.0 0.0 2.8 MCHP [] MICROCHIP TECHNOLOGY INC # MA R 5.9 6.5 8.1 5.2 7.9 28.6 29.8 12.9 13.6 15.1 61.4 51.9 20.1 24.2 24.2 MU [] MICRON TECHNOLOGY INC A UG 2.2 2.6 2.4 2.3 1.8 32.7 28.3 18.0 17.0 28.7 93.0 86.4 55.5 45.4 184.2

MSCC § MICROSEMI CORP SEP 4.7 3.6 3.8 6.1 4.5 39.1 45.0 28.0 0.4 0.4 138.7 192.4 85.0 0.8 0.8 MPWR § MONOLITHIC POWER SYSTEMS INC DEC 7.6 9.1 8.1 7.7 8.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NVDA [] NVIDIA CORP # JAN 5.9 4.9 4.2 3.4 3.2 22.9 0.4 0.5 0.7 0.9 29.4 0.5 0.7 1.0 1.4 PSEM § PERICOM SEMICONDUCTOR CORP JUN 5.0 6.1 4.2 6.2 6.2 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.0 1.2 POWI § POWER INTEGRATIONS INC DEC 5.5 4.1 7.7 5.3 6.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

RFMD † RF MICRO DEVICES INC # MAR 2.4 2.8 3.8 4.4 3.6 0.0 11.4 15.0 20.5 34.7 0.0 24.8 28.3 38.2 73.2 SMTC † SEMTECH CORP # JAN 3.5 2.6 6.4 3.8 2.9 33.6 28.8 0.0 0.0 0.0 96.7 113.7 0.0 0.0 0.0 SLAB † SILICON LABORATORIES INC DEC 4.2 4.4 5.5 6.2 5.9 10.6 12.8 0.0 0.0 0.0 25.0 26.3 0.0 0.0 0.0 SWKS † SKYWORKS SOLUTIONS INC SEP 6.0 4.8 3.3 3.9 3.0 0.0 0.0 0.0 1.8 4.1 0.0 0.0 0.0 4.2 12.0 SYNA § SYNAPTICS INC JUN 3.7 4.2 4.0 3.2 2.2 0.4 0.6 0.7 0.8 0.0 0.6 0.7 0.8 1.0 0.0

TXN [] TEXAS INSTRUMENTS INC DEC 2.9 2.4 2.2 3.6 3.9 26.8 26.6 26.7 0.0 0.0 78.9 87.2 97.3 0.0 0.0 TQNT § TRIQUINT SEMICONDUCTOR INC DEC 4.5 4.2 4.7 4.3 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 XLNX [] XILINX INC # MAR 3.1 5.9 7.1 7.1 5.3 24.8 21.5 22.2 24.0 12.8 47.8 48.3 43.0 39.5 22.9

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 51

Debt as a % of Current Ratio Debt / Capital Ratio (%) Net Working Capital Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTOR EQUIPM ENT‡ AEIS § ADVANCED ENERGY INDS INC DEC 3.4 4.2 4.3 3.5 5.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 AMAT [] APPLIED MATERIALS INC OCT 2.3 2.3 3.7 2.3 2.9 21.4 20.7 18.0 2.6 2.7 60.8 68.6 25.8 5.3 5.4 BRKS § BROOKS AUTOMATION INC SEP 3.6 4.3 3.3 3.0 3.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 CCMP § CABOT MICROELECTRONICS CORP SEP 5.4 5.0 7.7 7.1 8.0 31.5 36.2 0.0 0.0 0.3 50.6 63.6 0.0 0.0 0.5 COHU § COHU INC DEC 3.1 6.1 4.7 3.4 3.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

KLAC [] KLA-TENCOR CORP JUN 5.1 4.8 4.2 3.7 4.3 17.7 18.4 20.7 24.9 25.4 21.4 22.6 26.7 36.1 40.6 KLIC §KULICKE & SOFFA INDUSTRIES SEP 9.7 5.8 2.9 3.8 2.4 0.0 0.0 0.0 22.3 39.3 0.0 0.0 0.0 28.3 63.8 LRCX [] LA M RESEA RCH CORP JUN 2.7 3.1 4.8 3.1 3.5 15.0 12.9 23.0 1.0 2.7 33.0 25.5 28.5 1.5 4.8 MKSI § MKS INSTRUMENTS INC DEC 6.8 10.9 9.2 6.9 7.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NANO § NANOMETRICS INC DEC 3.9 6.3 4.9 5.2 4.1 0.0 2.0 3.1 5.3 10.7 0.0 2.7 4.2 7.0 16.6

RTEC § RUDOLPH TECHNOLOGIES INC DEC 9.1 7.9 9.1 7.0 7.5 15.6 15.3 17.3 0.0 0.0 20.2 19.1 19.9 0.0 0.0 SUNE † SUNEDISON INC DEC 1.3 1.3 1.3 1.4 2.5 92.6 79.3 70.7 21.3 15.1 641.3 701.0 396.2 134.7 51.9 TER † TERADYNE INC DEC 3.0 4.2 2.9 3.2 2.7 0.0 8.6 9.5 11.7 17.3 0.0 18.2 22.0 18.5 29.5 TSRA §TESSERA TECHNOLOGIES INC DEC 10.2 8.9 14.1 13.8 12.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 UTEK § ULTRATECH INC DEC 10.8 7.9 6.7 5.8 7.7 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.1 0.1

VECO § VEECO INSTRUMENTS INC DEC 4.8 6.6 4.5 2.7 3.3 0.2 0.3 0.3 0.3 21.7 0.4 0.3 0.4 0.4 31.8

OTHER COM PANIES RELEV ANT TO INDUSTRY ANALYSIS CAVM CAVIUM INC DEC 3.1 3.0 3.8 3.6 2.9 5.3 10.5 0.2 1.2 3.5 10.8 26.3 0.6 2.5 8.7 FSL FREESCA LE SEMICONDUCTOR LTD DEC 2.3 2.4 2.8 2.4 3.0 343.9 337.8 308.1 280.5 202.4 563.6 537.5 460.2 514.9 416.0 ONNN ON SEMICONDUCTOR CORP DEC 2.1 1.7 1.7 1.9 1.9 34.3 32.2 36.0 35.2 42.1 85.4 98.4 98.2 116.3 132.4 OVTI OMNIVISION TECHNOLOGIES INC #APR 4.4 3.3 3.5 4.9 4.6 3.1 4.1 4.9 5.3 7.8 4.6 6.2 7.4 7.2 10.5 STM STMICROELECTRONICS NV -ADR DEC 2.4 2.2 2.2 2.1 2.8 14.1 9.7 9.8 12.1 24.4 33.0 22.8 27.4 30.2 57.0

TSM TA IWA N SEMICONDUCTOR -A DR DEC 1.8 1.8 1.9 2.1 3.3 20.2 10.2 3.1 0.9 1.2 136.9 74.7 18.9 4.0 3.2 UMC UTD MICROELECTRONICS -ADR DEC 1.8 2.0 2.0 2.1 2.9 12.0 13.7 9.2 3.0 0.4 70.0 78.6 51.3 14.1 1.1 Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.

52 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %) Ticker Company Yr. End2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTORS‡ A MD † A DV A NCED MICRO DEV ICES DEC NM - NM NM - NM 14 - 616- 822- 4NMNM0000.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 A LTR [] A LTERA CORP DEC 29 - 22 24 - 17 21 - 13 15 - 827- 16 36 21 12 9 24 1.6 - 1.3 1.2 - 0.9 0.9 - 0.6 1.1 - 0.6 1.4 - 0.9 A DI [] A NA LOG DEV ICES OCT 23 - 19 20 - 16 15 - 10 16 - 11 38 - 21 60 53 33 35 94 3.2 - 2.6 3.4 - 2.7 3.2 - 2.2 3.2 - 2.2 4.5 - 2.5 A TML † A TMEL CORP DEC NM - NM NM - 62 24 - 11 14 - 5NM- NM NM 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 A V GO [] A V A GO TECHNOLOGIES LTD OCT 24 - 14 17 - 12 18 - 12 17 - 9NM- NM 36 24 16 0 NM 2.6 - 1.5 2.0 - 1.4 1.3 - 0.9 0.0 - 0.0 0.0 - 0.0

BRCM [] BROA DCOM CORP -CL A DEC 51 - 31 31 - 22 28 - 16 22 - 12 NM- NM 59 31 21 15 0 1.9 - 1.2 1.4 - 1.0 1.3 - 0.8 1.2 - 0.7 0.0 - 0.0 CEVA § CEVA INC DEC 70- 45 53 - 22 44 - 26 44 - 19 31 - 12 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 CRUS § CIRRUS LOGIC INC # MA R 19 - 10 21 - 719- 97- 212- 4000000.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 CREE † CREE INC JUN NM - 42 90 - 55 51 - 15 56 - 32 NM- 45 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 CY † CY PRESS SEMICONDUCTOR CORP DEC NM - NM NM - NM 23 - 13 40 - 21 NM- NM NM NM 18 0 NM 5.1 - 3.3 6.1 - 2.8 1.3 - 0.8 0.0 - 0.0 0.0 - 0.0

DIOD § DIODES INC DEC 50 - 31 52 - 24 31 - 15 16 - 8NM- 31 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 DSPG § DSP GROUP INC DEC 85 - 47 NM- NM NM - NM NM - NM NM - NM 0NMNMNMNM 0.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 ENTR § ENTROPIC COMMUNICA TIONS INC DEC NM - NM NM - 68 45 - 11 14 - 3NM- NM NM 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 EXA R § EXA R CORP # MA R NM - 72 NM- NM NM - NM NM - NM NM - NM 0 0 NM NM NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 FCS † FA IRCHILD SEMICONDUCTOR INTL DEC NM - NM 84 - 59 18 - 913- 6NM- NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

FSLR [] FIRST SOLAR INC DEC 18 - 6NM- NM NM - NM 20 - 13 27 - 13 0 NM NM 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 IDTI † INTEGRA TED DEV ICE TECH INC # MA R 15 - 9NM- NM 34 - 18 15 - 10 31 - 17 0 NM 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 INTC [] INTEL CORP DEC 13 - 10 13 - 910- 812- 927- 15 46 40 32 31 71 4.5 - 3.5 4.5 - 3.0 4.1 - 3.0 3.6 - 2.6 4.6 - 2.6 ISIL † INTERSIL CORP -CL A DEC NM - NM NM - NM 29 - 18 81 - 47 52 - 26 NM NM 91 229 150 6.7 - 4.1 7.6 - 4.0 4.9 - 3.1 4.9 - 2.8 5.7 - 2.9 IRF † INTL RECTIFIER CORP JUN NM - NM NM - NM 15 - 727- 15 NM- NM NM NM 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

KOPN § KOPIN CORP DEC NM - NM NM - NM 87 - 51 35 - 19 18 - 5NMNM0000.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 LLTC [] LINEA R TECHNOLOGY CORP JUN 28 - 20 20 - 17 14 - 10 22 - 16 22 - 14 59 57 37 57 61 3.0 - 2.1 3.5 - 2.8 3.7 - 2.6 3.5 - 2.6 4.2 - 2.8 MCRL § MICREL INC DEC 35 - 28 60 - 42 27 - 16 17 - 933- 22 46 98 27 17 54 1.7 - 1.3 2.3 - 1.6 1.7 - 1.0 1.9 - 1.0 2.4 - 1.6 MCHP [] MICROCHIP TECHNOLOGY INC # MA R 23 - 16 60 - 44 24 - 17 16 - 11 25 - 14 71 216 79 60 115 4.4 - 3.2 4.9 - 3.6 4.7 - 3.3 5.4 - 3.8 8.4 - 4.6 MU [] MICRON TECHNOLOGY INC A UG 20 - 6NM- NM 70 - 23 5 - 3NM- NM 0NM0 0NM0.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

MSCC § MICROSEMI CORP SEP 55 - 39 NM- NM 38 - 22 34 - 19 NM- NM 0NM0 0NM0.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 MPWR § MONOLITHIC POWER SY STEMS INC DEC 57 - 34 51 - 32 48 - 24 31 - 18 44 - 19 0 222 0 0 0 0.0 - 0.0 6.9 - 4.3 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 NV DA [] NV IDIA CORP # JA N 22 - 16 19 - 12 27 - 12 43 - 20 NM- NM 41 8 0 0 NM 2.6 - 1.9 0.7 - 0.4 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 PSEM § PERICOM SEMICONDUCTOR CORP JUN NM - NM NM - NM 21 - 12 30 - 19 51 - 21 NM NM 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 POWI § POWER INTEGRA TIONS INC DEC 31 - 17 NM- NM 37 - 24 26 - 15 43 - 19 16 NM 17 11 12 0.9 - 0.5 0.7 - 0.4 0.7 - 0.5 0.8 - 0.4 0.6 - 0.3

RFMD † RF MICRO DEV ICES INC # MA R NM - NM NM - NM NM - NM 17 - 822- 3 0 NM NM 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 SMTC † SEMTECH CORP # JA N NM - NM 48 - 35 22 - 14 22 - 13 NM- NM NM 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 SLAB † SILICON LABORATORIES INC DEC 41 - 32 32 - 21 61 - 37 33 - 21 30 - 13 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 SWKS † SKYWORKS SOLUTIONS INC SEP 19 - 13 29 - 15 30 - 11 38 - 16 26 - 7000000.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 SY NA § SY NA PTICS INC JUN 19 - 10 24 - 14 19 - 12 22 - 15 26 - 10 0 0 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

TXN [] TEXA S INSTRUMENTS INC DEC 23 - 16 22 - 17 19 - 13 13 - 823- 12 55 47 29 18 39 3.4 - 2.4 2.8 - 2.1 2.3 - 1.5 2.2 - 1.4 3.3 - 1.7 TQNT § TRIQUINT SEMICONDUCTOR INC DEC NM - NM NM - NM 52 - 14 11 - 578- 17 NM NM 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 XLNX [] XILINX INC # MAR 20 - 15 20 - 16 19 - 13 12 - 920- 12 42 47 38 26 46 2.9 - 2.1 2.9 - 2.3 2.9 - 2.0 2.8 - 2.2 4.0 - 2.4

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 53

Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %) Ticker Company Yr. End2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTOR EQUIPM ENT‡ A EIS § A DV A NCED ENERGY INDS INC DEC 33 - 17 28 - 20 20 - 915- 9NM- NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 A MA T [] A PPLIED MA TERIA LS INC OCT 87- 54 NM- NM 12 - 721- 15 NM- NM 181 378 21 37 NM 3.3 - 2.1 3.4 - 2.4 3.1 - 1.8 2.5 - 1.7 2.9 - 1.7 BRKS § BROOKS AUTOMATION INC SEP NM- NM 6 - 37- 412- 6NM- NM NM 15 4 0 NM 3.9 - 2.9 4.6 - 2.5 1.1 - 0.5 0.0 - 0.0 0.0 - 0.0 CCMP § CA BOT MICROELECTRONICS CORP SEP 21- 14 29 - 15 23 - 14 20 - 14 76 - 38 0 829 0 0 0 0.0 - 0.0 54.2 - 28.2 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 COHU § COHU INC DEC NM- NM NM - NM 26 - 14 17 - 11 NM- NM NM NM 37 23 NM 2.8 - 1.8 3.0 - 1.7 2.7 - 1.4 2.2 - 1.4 3.4 - 1.7

KLA C [] KLA -TENCOR CORP JUN 21- 14 12 - 10 11 - 733- 22 NM- NM 49 31 21 48 NM 3.4 - 2.4 3.2 - 2.5 3.0 - 1.9 2.2 - 1.5 3.9 - 1.6 KLIC § KULICKE & SOFFA INDUSTRIES SEP 17- 13 6 - 47- 45- 2NM- NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 LRCX [] LA M RESEA RCH CORP JUN 83- 55 33 - 23 10 - 619- 12 NM- NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 MKSI § MKS INSTRUMENTS INC DEC 46- 37 38 - 25 14 - 89- 6NM- NM 96 68 24 0 NM 2.6 - 2.1 2.8 - 1.8 3.0 - 1.8 0.0 - 0.0 0.0 - 0.0 NA NO § NA NOMETRICS INC DEC NM- NM NM - 65 17 - 96- 3NM- NM NM 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

RTEC § RUDOLPH TECHNOLOGIES INC DEC NM- 92 10 - 616- 813- 7NM- NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 SUNE † SUNEDISON INC DEC NM- NM NM - NM NM - NM NM - 61 NM- NM NM NM NM 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 TER † TERA DY NE INC DEC 22- 16 16 - 11 10 - 67- 4NM- NM 0 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 TSRA § TESSERA TECHNOLOGIES INC DEC NM- NM NM - NM NM - NM 21 - 13 22 - 7 NMNMNM0 0 4.4- 3.1 2.3 - 1.5 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 UTEK § ULTRA TECH INC DEC NM- NM 21 - 14 22 - 10 31 - 18 NM- NMNM0000 0.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

V ECO § V EECO INSTRUMENTS INC DEC NM- NM 56 - 31 12 - 48- 4NM- NM NM 0 0 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0

OTHER COM PANIES RELEV ANT TO INDUSTRY ANALYSIS CA V M CA V IUM INC DEC NM- NM NM - NM NM - NM 48 - 26 NM- NM NM NM NM 0 NM 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 FSL FREESCA LE SEMICONDUCTOR LTD DEC NM- NM NM - NM NM - NM NA - NA NA - NA NM NM NM NA NA 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 NA - NA NA - NA ONNN ON SEMICONDUCTOR CORP DEC 26- 20 NM- NM NM - NM 15 - 965- 23 0 NM 0 0 0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 OV TI OMNIV ISION TECHNOLOGIES INC # A PR 12- 726- 15 32 - 915- 5NM- 39 00000 0.0- 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 0.0 - 0.0 STM STMICROELECTRONICS NV -A DR DEC NM- NM NM - NM 18 - 711- 7NM- NM NM NM 50 26 NM 5.6 - 4.0 8.9 - 4.7 6.9 - 2.7 3.7 - 2.2 4.8 - 1.8

TSM TA IWA N SEMICONDUCTOR -A DR DEC 17- 13 16 - 11 16 - 12 12 - 922- 12 42 45 60 44 84 3.2 - 2.5 4.1 - 2.8 4.8 - 3.7 5.0 - 3.7 6.8 - 3.8 UMC UTD MICROELECTRONICS -A DR DEC 14- 10 25 - 16 25 - 13 13 - 898- 41 40 75 137 24 0 3.8 - 2.8 4.7 - 3.0 10.8 - 5.4 3.1 - 1.8 0.0 - 0.0 Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.

54 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $) Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEMICONDUCTORS‡ AMD † ADVANA ED MICRO DEVICES DEC (0.11) (1.60) 0.68 0.66 0.46 (0.51) (0.16) 1.80 0.96 (0.09) 4.65 - 2.26 8.35 - 1.81 9.58 - 4.31 10.24 - 5.53 10.04 - 1.86 ALTR [] ALTERA CORP DEC 1.37 1.74 2.39 2.55 0.85 10.56 10.43 J 9.30 J 7.27 3.66 39.18 - 30.62 41.63 - 29.59 49.59 - 30.39 38.14 - 20.89 23.18 - 13.92 ADI [] ANALOG DEVICES OCT 2.19 2.18 2.88 2.39 0.85 14.23 12.78 11.77 9.85 7.78 51.20 - 41.71 42.73 - 34.25 43.28 - 29.23 38.60 - 26.28 31.91 - 17.82 ATML † C,DMEL CORP DEC (0.05) 0.07 0.69 0.92 (0.24) 1.88 2.02 2.25 2.15 1.49 8.40 - 5.89 10.74 - 4.37 16.80 - 7.36 12.68 - 4.29 4.80 - 2.87 AVGO [] AV O TECHNOLOGIES LTD OCT 2.23 2.30 2.25 1.74 (0.20) 8.04 7.40 5.41 3.17 0.94 54.54 - 30.57 39.22 - 28.02 39.45 - 26.42 28.94 - 16.50 19.00 - 14.33

BRCM [] BROADCOM CORP -CL A DEC 0.74 1.29 1.72 2.13 0.13 5.91 4.09 7.95 7.02 4.87 37.85 - 23.25 39.66 - 28.60 47.39 - 27.59 47.00 - 26.40 32.29 - 15.31 CEVA § CEVA INA DEC 0.30 0.60 0.80 0.54 0.42 7.29 7.19 6.98 5.86 5.02 21.10 - 13.49 31.80 - 12.96 35.60 - 20.53 24.00 - 10.37 13.06 - 5.10 CRUS § CIRRUS LOGIC INA # MA ,C 1.72 2.12 1.35 3.00 0.59 9.83 8.37 6.86 6.00 2.90 31.97 - 16.46 45.49 - 15.69 25.48 - 12.52 21.20 - 6.23 6.91 - 2.16 CREE † CREE INA JUN 0.75 0.39 1.35 1.49 0.35 15.32 13.52 16.72 14.90 9.00 76.00 - 31.22 35.09 - 21.38 69.21 - 20.25 83.38 - 47.30 57.32 - 15.59 CY † CYPRESS SEMICONDUCTOR CORP DEC (0.31) (0.15) 1.02 0.47 (1.03) 0.50 0.47 2.33 3.87 3.67 13.23 - 8.61 19.25 - 8.70 23.95 - 13.67 18.61 - 9.73 11.66 - 4.25

DIOD § DIODES INA DEC 0.57 0.53 1.12 1.74 0.18 12.09 11.86 11.92 9.93 7.72 28.46 - 17.49 27.57 - 12.95 34.67 - 16.74 27.98 - 14.50 22.17 - 5.50 DSPG § DSP GROUP INA DEC 0.12 (0.37) (0.70) (0.32) (0.36) 6.06 5.93 5.97 6.74 6.33 10.14 - 5.63 6.95 - 4.85 9.24 - 5.12 9.10 - 5.34 9.41 - 3.83 ENTR § ENTROPIC COMMUNICC,DIONS INA DEC (0.73) 0.05 0.31 0.86 (0.19) 2.40 3.04 3.42 2.92 0.94 5.82 - 3.57 7.38 - 3.40 13.96 - 3.36 12.25 - 2.91 3.53 - 0.42 EXA R § EXA ,C CORP # MA ,C 0.12 0.06 (0.64) (0.81) (0.64) 4.05 4.65 4.65 5.08 5.45 13.85 - 8.61 9.02 - 6.24 7.25 - 5.40 7.78 - 5.40 7.98 - 4.94 FCS † A,EIRCHILD SEMICONDUCTOR INTL DEC 0.04 0.19 1.15 1.23 (0.49) 9.19 9.06 8.64 7.56 6.32 15.75 - 11.48 15.90 - 11.14 21.02 - 10.25 16.09 - 7.71 11.48 - 2.83

FSLR [] FIRST SOLA,C INA DEC 3.77 (1.11) (0.46) 7.82 7.67 43.22 40.58 41.35 35.20 27.77 65.99 - 24.46 50.20 - 11.43 175.45 - 29.87 153.30 - 98.71 207.51 - 100.90 IDTI † INTEGRC,DED DEV ICE TECH INA # MA ,C 0.75 (0.11) 0.26 0.47 0.24 3.86 2.98 3.39 2.99 2.65 11.36 - 6.48 7.52 - 4.60 8.74 - 4.70 7.28 - 4.82 7.44 - 4.03 INTC [] INTEL CORP DEC 1.94 2.20 2.46 2.06 0.79 8.58 7.13 6.08 7.99 6.59 26.04 - 20.10 29.27 - 19.23 25.78 - 19.16 24.37 - 17.60 21.27 - 12.05 ISIL † INTERSIL CORP -CL A DEC 0.02 (0.30) 0.53 0.21 0.32 2.63 2.74 3.19 2.73 5.62 11.78 - 7.17 11.88 - 6.31 15.63 - 9.80 16.97 - 9.80 16.76 - 8.39 IRF † INTL RECTNA IER CORP JUN (1.28) (0.79) 2.35 1.13 (3.42) 16.15 17.27 17.16 15.77 14.73 26.74 - 17.62 24.96 - 14.32 35.26 - 17.28 30.74 - 17.50 22.38 - 11.45

KOPN § KOPIN CORP DEC (0.40) (0.33) 0.06 0.14 0.29 2.11 2.28 2.52 2.56 2.40 4.48 - 3.06 4.20 - 2.78 5.22 - 3.07 4.84 - 2.71 5.14 - 1.46 LLTC [] LINEA,C TECHNOLOGY CORP JUN 1.72 1.71 2.52 1.59 1.41 4.15 3.11 2.18 0.11 (1.29) 47.55 - 34.21 34.70 - 28.28 36.14 - 25.41 35.07 - 25.87 31.07 - 20.26 MCRL § MICREL INA DEC 0.31 0.21 0.55 0.82 0.26 3.50 3.56 4.04 3.63 2.96 10.92 - 8.60 12.54 - 8.89 14.98 - 8.81 13.96 - 7.18 8.63 - 5.81 MCHP [] MICROCHIP TECHNOLOGY INA # MA ,C 1.99 0.65 1.76 2.29 1.18 7.07 5.76 9.35 8.75 7.86 44.95 - 32.38 38.88 - 28.92 41.50 - 29.30 36.41 - 25.54 29.56 - 16.23 MU [] MICRON TECHNOLOGY INA AUG 1.16 (1.04) 0.17 2.09 (2.29) 8.38 7.20 8.18 7.74 5.08 23.67 - 6.45 9.16 - 5.16 11.95 - 3.97 11.40 - 6.36 10.87 - 2.55

MSCC § MICROSEMI CORP SEP 0.49 (0.35) 0.65 0.73 (0.34) (0.78) (2.90) 1.36 4.84 4.89 26.72 - 18.96 22.30 - 16.57 24.96 - 14.49 24.68 - 13.83 18.05 - 7.06 MPWR § MONOLITHIC POWER SYSTEMS INA DEC 0.61 0.45 0.39 0.83 0.57 8.45 J 7.24 J 7.18 J 7.04 6.06 34.76 - 20.64 23.07 - 14.58 18.56 - 9.49 25.34 - 14.75 25.26 - 10.67 NVDA [] NVIDIA CORP # JAN 0.75 0.91 0.96 0.44 (0.12) 6.19 6.28 5.19 4.29 3.87 16.32 - 11.91 16.90 - 11.15 26.17 - 11.47 18.96 - 8.65 18.95 - 7.08 PSEM § PERICOM SEMICONDUCTOR CORP JUN (0.93) (0.09) 0.54 0.42 0.24 8.42 8.36 8.23 8.59 8.01 9.67 - 6.10 9.22 - 6.80 11.58 - 6.57 12.53 - 7.90 12.26 - 5.10 POWI § POWER INTEGRC,DIONS INA DEC 1.95 (1.20) 1.20 1.78 0.86 10.52 7.45 12.20 11.61 10.26 60.30 - 33.80 44.62 - 27.20 43.88 - 28.83 46.30 - 26.26 37.15 - 16.75

RFMD † RF MICRO DEV ICES INA # MA ,C 0.04 (0.19) 0.00 0.46 0.27 1.82 1.57 1.85 1.80 1.23 6.20 - 4.30 5.69 - 3.45 8.48 - 4.95 7.99 - 3.65 5.85 - 0.73 SMTC † SEMTECH CORP # JAN (2.44) 0.64 1.37 1.16 0.02 1.75 1.43 6.68 5.07 3.13 37.45 - 22.57 30.46 - 22.22 29.47 - 19.16 25.05 - 14.65 19.16 - 10.18 SLAB † SILICON LBORC,DORIES INA DEC 1.17 1.51 0.82 1.63 1.62 8.84 10.24 10.07 10.47 10.55 47.41 - 37.57 48.50 - 32.00 50.27 - 30.36 53.17 - 34.10 49.08 - 20.40 SWKS † SKYWORKS SOLUTIONS INA SEP 1.48 1.09 1.24 0.78 0.56 6.58 5.26 4.61 4.54 3.50 28.64 - 19.57 31.44 - 16.48 37.82 - 13.72 29.75 - 12.64 14.58 - 3.88 SYNA § SYNAPTICS INA JUN 3.03 1.64 1.87 1.57 1.60 14.66 11.10 10.10 8.36 6.33 56.50 - 29.29 39.89 - 22.58 34.94 - 21.97 33.95 - 23.82 40.94 - 16.35

TXN [] TEXA,C INSTRUMENTS INA DEC 1.94 1.53 1.91 2.66 1.16 3.79 3.52 2.98 7.91 6.90 44.09 - 31.39 34.24 - 26.06 36.71 - 24.34 33.93 - 22.28 27.00 - 13.70 TQNT § TRIQUINT SEMICONDUCTOR INA DEC (0.24) (0.16) 0.29 1.22 0.11 5.30 5.48 5.48 4.97 3.53 8.98 - 4.31 7.26 - 4.30 15.20 - 3.97 13.29 - 5.75 8.59 - 1.82 XLNX [] XILINX INA # MA,C 2.37 1.86 2.01 2.43 1.30 9.55 10.50 9.57 8.52 7.32 48.12 - 34.98 37.74 - 30.25 37.37 - 26.55 29.40 - 22.75 25.45 - 15.00

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 55

Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $) Ticker Company Yr. End 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 2013 2012 2011 2010 2009 SEM ICONDUCTOR EQUIPM ENT‡ AEIS § ADVANA ED ENERGY INDS INA DEC 0.81 0.52 0.85 1.25 (2.45) 7.09 7.40 7.56 6.40 6.48 26.55 - 13.48 14.53 - 10.30 17.00 - 7.56 18.53 - 10.93 15.30 - 5.36 AMAT [] APPLIED MC,DERIALS INA OCT 0.21 0.09 1.46 0.70 (0.23) 2.24 1.97 5.55 4.45 4.19 18.18- 11.39 13.94 - 9.95 16.93 - 9.70 14.94 - 10.27 14.22 - 8.19 BRKS § BROOKS AUTOMC,DION INA SEP (0.03) 2.10 1.99 0.92 (3.62) 6.76 7.85 5.87 5.04 3.99 10.97- 8.23 12.65 - 7.00 14.59 - 7.40 10.82 - 5.46 9.11 - 3.30 CCMP § CBOT MICROELECTRONICS CORP SEP 2.22 1.81 2.26 2.14 0.48 11.69 9.77 22.26 19.91 17.58 45.85 - 31.36 53.15 - 27.69 52.69 - 32.52 42.92 - 29.60 36.38 - 18.47 COHU § COHU INA DEC (1.34) (0.50) 0.65 1.04 (1.20) 5.44 8.25 8.68 7.91 6.80 13.40 - 8.63 14.16 - 7.96 17.18 - 8.99 17.35 - 11.16 14.45 - 7.00

KLAC [] KLA-TENA OR CORP JUN 3.27 4.53 4.75 1.24 (3.07) 18.87 17.59 14.64 10.72 10.00 67.05- 47.37 55.43 - 43.21 51.83 - 33.20 40.44 - 26.69 37.71 - 15.27 KLIC § KULICKE & SOFA,E INDUSTRIES SEP 0.79 2.17 1.77 2.01 (0.93) 8.82 7.85 5.48 3.64 1.13 13.70- 10.08 13.69 - 8.05 12.72 - 6.71 9.58 - 4.55 6.68 - 1.15 LRCX [] LAM RESEA,CCH CORP JUN 0.67 1.36 5.86 2.73 (2.41) 12.05 13.10 18.23 12.16 9.42 55.47- 36.84 45.29 - 31.17 59.10 - 34.81 52.91 - 32.07 39.80 - 18.24 MKSI § MKS INSTRUMENTS INA DEC 0.67 0.91 2.49 2.66 (4.31) 16.07 16.11 16.17 13.92 10.81 31.00 - 24.64 34.99 - 22.45 33.85 - 20.01 24.88 - 15.94 20.60 - 11.38 NANO § NANOMETRICS INA DEC (0.61) 0.19 1.26 2.56 (0.87) 7.98 8.35 7.92 7.39 4.64 19.94- 13.32 20.99 - 12.39 21.56 - 11.89 15.80 - 6.60 14.06 - 1.05

RTEC § RUDOLPH TECHNOLOGIES INA DEC 0.11 1.36 0.79 0.86 (0.96) 7.43 7.62 6.55 5.41 4.38 14.10- 10.08 13.52 - 8.09 12.75 - 6.02 10.98 - 6.14 8.46 - 1.95 SUNE † SUNEDISON INA DEC (2.46) (0.66) (6.68) 0.15 (0.31) 0.53 1.99 2.55 8.15 8.08 13.83- 3.27 5.95 - 1.44 15.04 - 3.65 16.99 - 9.19 21.36 - 11.32 TER † TERADYNE INA DEC 0.86 1.16 1.88 2.11 (0.77) 7.15 5.91 4.14 5.49 2.93 18.73- 14.05 18.01 - 12.95 19.19 - 10.37 14.44 - 8.84 10.96 - 3.24 TSRA § TESSERA TECHNOLOGIES INA DEC (2.95) (0.58) (0.38) 1.15 1.43 6.72 9.85 10.26 10.38 9.01 22.59- 15.84 20.52 - 12.77 23.18 - 11.13 24.29 - 14.96 32.17 - 10.13 UTEK § ULTRC,DECH INA DEC (0.49) 1.76 1.51 0.69 0.09 13.31 13.40 11.44 9.32 8.36 43.00 - 23.33 37.37 - 24.07 33.85 - 15.81 21.29 - 12.23 16.00 - 9.74

VECO § VEECO INSTRUMENTS INA DEC (1.09) 0.69 4.80 6.60 (0.48) 14.48 18.67 17.51 17.20 6.92 43.18- 28.23 38.39 - 21.12 57.67 - 20.35 54.50 - 29.21 34.84 - 3.22

OTHER COM PANIES RELEV ANT TO INDUSTRY ANALYSIS CAVM CAVIUM INA DEC (0.06) (2.26) 0.00 0.83 (0.52) 3.29 2.17 3.16 3.20 1.71 42.41- 28.65 38.67 - 22.30 48.30 - 24.20 40.12 - 21.43 24.50 - 7.14 FSL FREESCALE SEMICONDUCTOR LTD DEC (0.81) (0.41) (1.82) NA NA (18.01) (18.45) (18.55) (5.18) (4.62) 17.82 - 10.38 17.84 - 7.63 20.97 - 9.43 NA - NA NA - NA ONNN ON SEMICONDUCTOR CORP DEC 0.34 (0.20) 0.03 0.67 0.14 2.38 2.05 2.07 2.00 1.20 8.73- 6.80 9.85 - 5.70 11.95 - 6.53 9.97 - 6.07 9.12 - 3.17 OVTI OMNIVISION TECHNOLOGIES INA # APR 1.71 0.80 1.16 2.25 0.13 16.19 14.42 13.02 11.73 10.14 20.48- 12.06 21.11 - 11.82 37.04 - 10.15 33.00 - 12.12 17.48 - 5.13 STM STMICROELECTRONICS NV -ADR DEC (0.56) (1.31) 0.74 0.94 (1.29) 5.99 6.61 6.67 6.58 5.99 10.05- 7.11 8.60 - 4.51 13.53 - 5.34 10.73 - 6.51 10.28 - 3.73

TSM TAIWAN SEMICONDUCTOR -ADR DEC 1.19 1.10 0.86 1.07 0.54 5.32 4.76 3.98 3.76 2.96 20.30- 15.70 17.47 - 12.14 14.05 - 10.75 12.73 - 9.30 11.94 - 6.67 UMC UTD MICROELECTRONICS -ADR DEC 0.17 0.11 0.14 0.33 0.04 2.69 2.74 2.71 3.00 2.62 2.44- 1.77 2.77 - 1.75 3.52 - 1.77 4.24 - 2.50 3.92 - 1.65

Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. J-This amount includes intangibles that cannot be identif ied.

The analysis and opinion set forth in this publicC,Dion A,Ce provided by S&P Capital IQ Equity ReseA,Cch and A,Ce prepA,Ced sepA,CC,Dely from any other analytic Ctivity of StandA,Cd & Poor’s. In this regA,Cd, S&P Capital IQ Equity ReseA,Cch hA,C no Ccess to nonpublic informC,Dion received by other units of StandA,Cd & Poor ’s . The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.

56 SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 INDUSTRY SURVEYS

Notice to all Non US Residents: General Disclaimers S&P Capital IQ’s Industry Surveys may be distributed in certain localities, countries and/or jurisdictions (“Territories”) by independent third parties S&P Capital IQ’s Industry Surveys Reports (the “Industry Surveys”) have or independent intermediaries and/or distributors (the “Intermediaries” or been prepared and issued by S&P Capital IQ and/or one of its affiliates. In “Distributors”). Intermediaries are not acting as agents or representatives the United States and United Kingdom, the Industry Surveys are prepared of S&P Capital IQ. In Territories where an Intermediary distributes S&P and issued by Standard & Poor’s Financial Services LLC; in Hong Kong, Capital IQ’s Industry Surveys, the Intermediary, and not S&P Capital IQ, by Standard & Poor’s Investment Advisory Services (HK) Limited, which is solely responsible for complying with all applicable regulations, laws, is regulated by the Hong Kong Securities Futures Commission; in rules, circulars, codes and guidelines established by local and/or regional Singapore, by McGraw Hill Financial Singapore Pte. Limited, which is regulatory authorities, including laws in connection with the distribution regulated by the Monetary Authority of Singapore; in Malaysia, by of third-party investment research, licensing requirements, supervisory and Standard & Poor’s Malaysia Sdn Bhd, which is regulated by the Securities record keeping obligations that the Intermediary may have under the Commission of Malaysia; in Australia, by Standard & Poor’s Information applicable laws and regulations of the territories where it distributes the Services (Australia) Pty Ltd, which is regulated by the Australian Securities Industry Surveys. & Investments Commission; and in Japan, by McGraw Hill Financial Japan KK, which is registered by Kanto Financial Bureau. Industry Surveys are not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any No content (including ratings, credit-related analyses and data, valuations, locality, state, country or other jurisdiction where such distribution, model, software or other application or output therefrom) or any part publication, availability or use would be contrary to law or regulation or thereof (Content) may be modified, reverse engineered, reproduced or which would subject S&P Capital IQ or its affiliates to any registration or distributed in any form by any means, or stored in a database or retrieval licensing requirements in such jurisdiction. system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content Industry Surveys are not directed to, or intended for distribution to or use shall not be used for any unlawful or unauthorized purposes. S&P and any by, any person or entity who is not in a class qualified to receive Industry third-party providers, as well as their directors, officers, shareholders, Surveys (e.g., a qualified person and/or investor), as defined by the local employees or agents (collectively S&P Parties) do not guarantee the laws or regulations in the country or jurisdiction where the person is accuracy, completeness, timeliness or availability of the Content. S&P domiciled, a citizen or resident of, or the entity is legally registered or Parties are not responsible for any errors or omissions (negligent or domiciled. otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the S&P Capital IQ’s Industry Surveys are not intended for distribution in or user. The Content is provided on an “as is” basis. S&P PARTIES directed to entities, residents or investors in: Albania, Belarus, Bosnia, DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, Burma, Cote d’Ivoire, Croatia, Cuba, Democratic Republic of the Congo, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF Former Yugoslav Republic of Macedonia, Herzegovina, Iran, Iraq, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE Kosovo, Lebanon, Libya, Montenegro and Serbia, North Korea, Somali, OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR Sudan, Syria, Taiwan, Yemen and Zimbabwe. DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE For residents of Australia: Industry Surveys are issued and/or distributed in WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no Australia by SPIS. Any express or implied opinion contained in an Industry event shall S&P Parties be liable to any party for any direct, indirect, Survey is limited to “General Advice” and based solely on consideration of incidental, exemplary, compensatory, punitive, special or consequential the investment merits of the financial product(s) alone. The information in damages, costs, expenses, legal fees, or losses (including, without an Industry Survey has not been prepared for use by retail investors and limitation, lost income or lost profits and opportunity costs or losses has been prepared without taking account of any particular investor’s caused by negligence) in connection with any use of the Content even if financial or investment objectives, financial situation or needs. Before advised of the possibility of such damages. acting on any advice, any investor using the advice should consider its appropriateness having regard to their own or their clients’ objectives, Credit-related and other analyses, including ratings, and statements in the financial situation and needs. Investors should obtain a Product Disclosure Content are statements of opinion as of the date they are expressed and Statement relating to the product and consider the statement before not statements of fact. S&P’s opinions, analyses and rating making any decision or recommendation about whether to acquire the acknowledgment decisions (described below) are not recommendations to product. Each opinion must be weighed solely as one factor in any purchase, hold, or sell any securities or to make any investment decisions, investment decision made by or on behalf of any adviser and any such and do not address the suitability of any security. S&P assumes no adviser must accordingly make their own assessment taking into account obligation to update the Content following publication in any form or an individual’s particular circumstances. format. The Content should not be relied on and is not a substitute for the SPIS holds an Australian Financial Services License Number 258896. skill, judgment and experience of the user, its management, employees, Please refer to the SPIS Financial Services Guide for more information at: advisers and/or clients when making investment and other business www.spcapitaliq.com/financialservicesguide decisions. S&P does not act as a fiduciary or an investment adviser except where registered as such. While S&P has obtained information from For residents of China: Industry Surveys are not distributed in or directed sources it believes to be reliable, S&P does not perform an audit and to residents in The People’s Republic of China. Neither S&P Capital IQ undertakes no duty of due diligence or independent verification of any nor its affiliates target investors in China. information it receives. For residents of Kuwait: The Distributor, and not S&P Capital IQ, is S&P keeps certain activities of its business units separate from each other responsible for complying with all relevant licensing requirements as set in order to preserve the independence and objectivity of their respective forth by the Kuwait Capital Markets Law (“CML”) and Kuwait Capital activities. As a result, certain business units of S&P may have information Markets Authority (“CMA”) and with all relevant rules and regulations that is not available to other S&P business units. S&P has established set out in the CML and CMA rule books. policies and procedures to maintain the confidentiality of certain non- public information received in connection with each analytical process. For residents of Malaysia: All queries in relation to Industry Surveys should be referred to Ahmad Halim at [email protected]. S&P provides a wide range of services to, or relating to, many organizations, including issuers or underwriters of securities or obligors, For residents of Mexico: S&P Capital IQ is not regulated or supervised by investment advisers, broker-dealers, investment banks, other financial the Mexican National Banking and Securities Commission (“CNBV”). institutions and financial intermediaries. As a result, S&P may receive fees S&P Capital IQ has a licensed rating agency affiliate in Mexico (Standard or other economic benefits from organizations whose securities or services & Poor’s, S.A. De C.V.), of which S&P maintains firewalls and seeks to it may recommend, analyze, rate, include in model portfolios, evaluate, avoid conflicts of interest, pursuant to approved policies. price or otherwise address. For residents of Qatar: The Distributor, and not S&P Capital IQ, is The Industry Surveys are not intended to be investment advice and do not responsible for complying with all relevant licensing requirements as set constitute any form of invitation or inducement by S&P Capital IQ to forth by the Qatar Financial Markets Authority or the Qatar Central engage in investment activity. This material is not intended as an offer or Bank, and with all relevant rules and regulations set out in the Qatar solicitation for the purchase or sale of any security or other financial Financial Markets Authority’s rule book, including third party branded instrument. Any opinions expressed herein are given in good faith, are investment research distribution of securities that are admitted for trading subject to change without notice, and are only current as of the stated date on a Qatari securities exchange (Admitted Securities). of their issue. Past performance is not necessarily indicative of future results. Copyright © 2014 Standard & Poor’s Financial Services LLC. All rights reserved. STANDARD & POOR’S, S&P, S&P 500, S&P EUROPE 350 For details on the S&P Capital IQ conflict-of-interest policies, please visit: and STARS are registered trademarks of Standard & Poor’s Financial www.spcapitaliq.com/policies Services LLC. S&P CAPITAL IQ is a trademark of Standard & Poor’s Financial Services LLC.

INDUSTRY SURVEYS SEMICONDUCTORS & EQUIPMENT / NOVEMBER 2014 57