Changewave Research: Semiconductor and Equipment Trends

ChangeWave Research: Semiconductor and Equipment Trends May 20, 2004

ChangeWave Research Report: Semiconductor and Semi Equipment Trends Industry Continues to Show Improvement

Overview Our previous Semiconductor survey (November 2003) provided strong evidence that the semi industry was picking up steam.

This report presents the findings from an April 20 – 26, 2004, survey of ChangeWave Alliance semiconductor industry members on current trends – as well as the sub- segments and companies most likely to win or lose in the semi chip and equipment marketplaces. A total of 60 Alliance members participated.

Key Findings: A. Semiconductor Industry Trends

 Future Growth. Better than three-quarters of respondents (78%) believe there will be double-digit growth for the semiconductor industry in the second half of 2004. This reflects a healthy increase from the previous survey (November 2003), when 63% of respondents believed there would be double digit growth for the industry.

 Strong Fab Capacity Utilization. Fifty-seven percent (57%) of respondents believe fab capacity utilization is now 90% or more – a huge 44-percentage point increase from November 2003. Another 25% believe fab capacity utilization currently falls between 75% and 89%. Only 3% see it as less than 75% overall.

 Best Performing Sub-Segments. RFID Chips (Net Difference Score +30) looks to be the best performing sub-segment over the next six months – it experienced a healthy 8 pt. increase in Net Difference Score from the previous survey. Also, Flash Memory (+23) looks poised to do well.

Of note, while Communications Chips for Telecom and Data Networking Gear still ranks near the bottom (-3), it did show the largest overall improvement from the previous survey – experiencing a 19 pt. increase in Net Difference Score.

 Worst Performing Sub-Segment. Microprocessor Chips (Net Difference Score -28) looks to be the weakest performing semiconductor sub-segment over the next six months. Moreover, its Net Difference Score has fallen 30 pts. since November 2003.

 Capital Spending Split. Better than one-third (35%) of respondents say that New 300mm Fab Construction will be the number one area of capital spending by chip companies over the next 12 months. Another 30% say Fab Upgrades to .18 Micron or Less will get the largest portion of the capital spending budget, while 22% say it will be Fab Upgrades to Support Increased Shipment Volume.

B. Semiconductor Companies: Best and Worst Performers

 Who Will Gain Market Share? Texas Instruments (Net Difference Score +42) still tops the list of companies our respondents believe will gain market share over the next six months, despite a 1 pt. dip from our last survey (November 2003).

Surprisingly, Nvidia’s Net Difference Score (+7) has jumped 15 pts. compared to November 2003 – the largest increase of any company – suggesting that they too should gain market share over the next six months.

And for the first time we included Silicon Images in our company pick list and they garnered the second highest Net Difference Score (+20), which suggests they are also poised to do well.

 Least Market Share Momentum. For the second consecutive survey, AMD (Net Difference Score -12) was the chip vendor seen as least likely to gain market share over the next six months. Interestingly, Intel’s Net Difference Score fell from +33 in our November 2003 survey to just +8 in the current survey, a 25 pt. downturn.

C. Semiconductor Equipment Sector

 Best Performing Semi Equipment Sub-Segments. ATE/Packaging and Wafer Processing (Net Difference Scores +15) both appear poised to perform well over the next six months. However, ATE/Packaging’s Net Difference Score improved 24 pts. from our previous survey (August 2003), while Wafer Processing showed just a 6 pt. gain.

 Worst Performing Semi Equipment Sub-Segments. Specialty equipment had the lowest Net Difference Score (-13), falling 12 pts. from our August 2003 survey. Automation/Material Handling and Software (Net Difference Score -12) also looks like it will not be performing as well over the next six months.

Bottom Line: The semiconductor industry continues to show improvement, bolstered by the performance of a few robust sub-segments such as RFID Chips and Flash Memory. The semi equipment sector is also showing signs of modest improvement, led by ATE/Packaging. According to our semi industry respondents, Texas Instruments is the company most likely to gain market share over the next six months, and it has a large and widening lead over Intel in terms of perceived market momentum.

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Table of Contents

Summary of Key Findings...... 3

The Findings...... 4

A. Semiconductor Industry Trends...... 5

B. Semiconductor Companies: Best and Worst Performers...... 9

C. Semiconductor Equipment Sector...... 15

ChangeWave Research Methodology...... 22

About ChangeWave Research...... 23

I. Summary of Key Findings

Semiconductor Semiconductor Companies Gaining Industry Continues Sub-Segments Market to Improve  Best Performers: Share  78% of respondents RFID Chips (Net Diff. Over Next believe there will be Score +30) will likely 6 Months double-digit growth in the perform best over the second half of 2004, a next 6 months. Flash  Texas Instruments (Net healthy increase from Memory (+23) also Diff. Score +42) still tops 63% in Nov ‘03 looks poised to do well the list of companies our  Strong Fab Capacity  Most Improved respondents believe will Utilization: 57% believe Sub-Segment: gain market share over capacity utilization is at Communications the next 6 months 90% or more–a huge Chips for Telecom and  Nvidia (Net Diff. Score increase over Nov ‘03 Data Networking Gear +7) jumped 15 pts. since  Bottom Line: The semi – (Net Diff. Score Nov ’03 – the most of any industry continues to increased 19 pts. company improve, bolstered by the since Nov ’03) Least Market Share performance of a few  Worst Performer: robust sub-segments Microprocessor Chips Momentu such as RFID Chips and – (Net Diff. Score fell m Flash Memory. The 30 pts. since Nov ’03)  AMD (Net Diff. Score equipment sector is also -12) is seen as least likely showing improvement. to gain market share over the next 6 months  Intel's Net Diff. Score fell

Overview

Our previous Semiconductor survey (November 2003) provided strong evidence that the semi industry was picking up steam - propelled by robust growth in cell phone communications chips, flash memory, RFID chips and Graphics/Video chips.

This report presents the findings from an April 20 – 26, 2004, survey of ChangeWave Alliance semiconductor industry members on current trends – and the sub-segments and companies most likely to win or lose in the semi chip and equipment marketplaces. A total of 60 Alliance members participated.

The survey results focus on three areas:

A. Semiconductor Industry Trends B. Semiconductor Companies: Best and Worst Performers C. Semiconductor Equipment Sector

II. The Findings

A. Semiconductor Industry Trends

(1) Question Asked: "Do you believe there will be double-digit growth for the semiconductor sector in the 2nd half of 2004?”

Current Previous Previous Previous Survey Survey Survey Survey Apr ‘04 Nov ‘03 Aug ‘03 Jul ‘02 Yes - Double-Digit Growth in 2nd half of 78% 63% 28% 15% 2004 Little Possibility of Double-Digit Growth in 20% 29% 52% 51% 2nd half of 2004 Absolutely No Possibility of Double-Digit 2% 2% 14% 31% Growth in 2nd half of 2004 Don't Know 0% 5% 6% 2%

*Note: In the current survey question we are asking about the 2nd half of 2004, whereas in the previous survey questions we asked about "either the 'current quarter' or 'next quarter.'"

Future Growth. Better than three-quarters of respondents (78%) believe there will be double-digit growth for the semiconductor industry in the second half of 2004. This reflects a healthy increase from the previous survey (November 2003), when 63% of respondents believed there would be double digit growth for the industry.

(2) Question Asked: "Some analysts claim many fabs are running at 90% of capacity or more. Others question these numbers. Which of the following statements best reflects what you are seeing and/or hearing in terms of fab capacity utilization?”

Current Previous Survey Survey Apr ‘04 Nov ‘03 Fab Capacity utilization is tight (90% or more) overall 57% 13% Fab Capacity utilization is firm (75% to 89%) overall 25% 65% Fab Capacity utilization is softer than expected (less than 75%) overall 3% 7% Don't Know 12% 7% Other 3% 7%

Strong Fab Capacity Utilization. Fifty-seven percent (57%) of respondents believe fab capacity utilization is now 90% or more – a huge 44-percentage point increase from November 2003. Another 25% believe fab capacity utilization currently falls between 75% and 89%. Only 3% see it as less than 75% overall.

(3A) Question Asked: "Which of the following semiconductor sub-segments do you think will perform the best over the next six months? (Choose No More Than Two)”

Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Apr ‘04 Nov ‘03 Aug ‘03 Nov ‘02 Mar ‘02 Communications Chips for Cell Phones 37% 42% NA NA NA RFID Chips 33% 31% NA NA NA Flash Memory 30% 33% NA NA NA Analog Chips 18% 11% NA NA NA Graphics/Video Chips 17% 24% 20% 22% 22% Communications Chips for Telecom and 17% 13% NA NA NA Data Networking Gear Memory Chips 17% 7% 4% 4% 19% Logic/Programmable Chips 8% 7% 14% 16% 32% Microprocessor Chips 5% 15% 4% 4% 5% *Note: In the Aug ‘03, Nov ‘02 and Mar ‘02 surveys, members could only choose one category, whereas in the current survey and the Nov ‘03 survey, members were able to choose up to two categories.

(3B) Question Asked: "Which of the following semiconductor sub-segments do you think will perform the worst over the next six months? (Choose No More Than Two)”

Current Previous Previous Previous Survey Survey Survey Survey Apr ‘04 Nov ‘03 Aug ‘03 Mar ‘02 Microprocessor Chips 33% 13% 20% 8% Memory Chips 22% 16% 24% 11% Communications Chips for Telecom and 20% 35% NA NA Data Networking Gear Analog Chips 18% 18% NA NA Communications Chips for Cell Phones 18% 15% NA NA Graphics/Video Chips 18% 9% 4% 5% Logic/Programmable Chips 10% 20% 10% 0% Flash Memory 7% 9% NA NA RFID Chips 3% 9% NA NA Communications Chips NA NA 22% 51% Other 2% NA NA NA *Note: In the Aug ‘03, Nov ‘02 and Mar ‘02 surveys, members could only choose one category, whereas in the current survey and the Nov ‘03 survey, members were able to choose up to two categories.

Net Difference Score – Current Survey (April 2004)

Net Perform Perform Difference Best Worst Score RFID Chips 33% 3% +30 Flash Memory 30% 7% +23 Communications Chips for Cell Phones 37% 18% +19 Analog Chips 18% 18% 0 Graphics/Video Chips 17% 18% -1 Logic/Programmable Chips 8% 10% -2 Communications Chips for Telecom and Data 17% 20% -3 Networking Gear Memory Chips 17% 22% -5 Microprocessor Chips 5% 33% -28

Change in Net Difference Score – Current Survey (April 2004) vs. Previous Survey (November 2003)

Current Previous Survey Survey Change Net Net in Net Difference Difference Difference Score Score Score Apr ‘04 Nov ‘03 Communications Chips for Telecom and Data -3 -22 +19 Networking Gear Logic/Programmable Chips -2 -13 +11 RFID Chips +30 +22 +8 Analog Chips 0 -7 +7 Memory Chips -5 -9 +4 Flash Memory +23 +24 -1 Communications Chips for Cell Phones +19 +27 -8 Graphics/Video Chips -1 +15 -16 Microprocessor Chips -28 +2 -30

Best Performing Sub-Segments. RFID Chips (Net Difference Score +30) looks to be the best performing sub-segment over the next six months – it experienced a healthy 8 pt. increase in Net Difference Score from the previous survey. Also, Flash Memory (+23) looks poised to do well.

Of note, while Communications Chips for Telecom and Data Networking Gear still ranks near the bottom (-3), it did show the largest overall improvement from the previous survey – experiencing a 19 pt. increase in Net Difference Score.

Worst Performing Sub-Segment. Microprocessor Chips (Net Difference Score -28) looks to be the weakest performing semiconductor sub-segment over the next six months. Moreover, its Net Difference Score has fallen 30 pts. since November 2003.

(4) Question Asked: "Which one of the following four categories do you see as the number one area for capital spending by chip companies over the next 12 months?”

Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Apr ‘04 Aug ‘03 Jan ‘03 Nov ‘02 May ‘02 New 300mm Fab Construction 35% 12% 32% 33% 22%

Fab Upgrades for Shrinking to . 30% 58% 37% 42% 50% 18 Micron or Less Fab Upgrades to Support 22% 8% 8% 9% 13% Increased Shipment Volume* New 200mm Fab Construction 3% NA NA NA NA

Don’t Know / No Answer 10% 20% 16% 7% 6%

*Note: In the previous surveys, this choice was “Fab Improvements to Support Increased Shipment Volume.”

Capital Spending Split. Better than one-third (35%) of respondents say that New 300mm Fab Construction will be the number one area of capital spending by chip companies over the next 12 months. Another 30% say Fab Upgrades to .18 Micron or Less will get the largest portion of the capital spending budget, while 22% say it will be Fab Upgrades to Support Increased Shipment Volume.

B. Semiconductor Companies: Best and Worst Performers

(1A) Question Asked: "Let's focus on the chip companies themselves. Based on your own knowledge and what you are seeing in the industry, which of the following chip vendors are most likely to pick-up market share over the next six months? (Choose All That Apply)”

Current Previous Previous Survey Survey Survey Apr ‘04 Nov ‘03 Aug ‘03 Texas Instruments 50% 45% 36% Intel 23% 40% 34% Analog Devices 22% 15% 12% Silicon Images 22% NA NA Sandisk 18% 29% 32% Xilinx 17% 16% 36% AMD 15% 15% 12% Broadcom 15% 11% 16% National Semiconductor 15% 11% 6% Nvidia 15% 16% 16% Zoran 13% 22% 22% Maxim Integrated 12% 13% 14% Circuits ST Micro 12% NA NA Altera 8% 11% 8% Genesis Microchip 7% 9% NA LSI Logic 7% 7% 8% ATI Technologies 5% 15% 14% Intersil 5% 4% 6% Pixelworks 5% 0% NA Vitesse Semiconductor 2% 0% 8% Cirrus Logic 0% 7% NA ESS Technology 0% 0% NA Other 10% NA NA

(1B) Question Asked: "And which of the following chip vendors are most likely to lose market share over the next six months? (Choose All That Apply)”

Current Previous Previous Survey Survey Survey Apr ‘04 Nov ‘03 Aug ‘03 AMD 27% 24% 46% Intel 15% 7% 14% National Semiconductor 15% 15% 28% LSI Logic 12% 11% 16% Analog Devices 10% 7% 8% ESS Technology 10% 2% NA ST Micro 10% NA NA Cirrus Logic 8% 11% NA Nvidia 8% 24% 14% Sandisk 8% 2% 6% Texas Instruments 8% 2% 8% Altera 7% 4% 8% Broadcom 7% 11% 12% Intersil 7% 13% 8% Genesis Microchip 5% 5% NA Vitesse Semiconductor 5% 7% 14% Zoran 5% 7% 0% Maxim Integrated 3% 5% 8% Circuits Xilinx 3% 2% 2% ATI Technologies 2% 5% 2% Pixelworks 2% 5% NA Silicon Images 2% NA NA Other 2% NA NA

Gain Lose Net Market Market Difference Share Share Score Texas Instruments 50% 8% +42 Silicon Images 22% 2% +20 Xilinx 17% 3% +14 Analog Devices 22% 10% +12 Sandisk 18% 8% +10 Maxim Integrated 12% 3% +9 Circuits Broadcom 15% 7% +8 Intel 23% 15% +8 Zoran 13% 5% +8 Nvidia 15% 8% +7 ATI Technologies 5% 2% +3 Pixelworks 5% 2% +3 Genesis Microchip 7% 5% +2 ST Micro 12% 10% +2 Altera 8% 7% +1 National Semiconductor 15% 15% 0 Intersil 5% 7% -2 Vitesse Semiconductor 2% 5% -3 LSI Logic 7% 12% -5 Cirrus Logic 0% 8% -8 ESS Technology 0% 10% -10 AMD 15% 27% -12

Change in Net Difference Score – Current Survey (April 2004) vs. Previous Survey (November 2003)

Current Previous Survey Survey Change Net Net in Net Difference Difference Difference Score Score Score Apr ‘04 Nov ‘03 Nvidia +7 -8 +15 Broadcom +8 0 +8 Pixelworks +3 -5 +8 Intersil -2 -9 +7 Analog Devices +12 +8 +4 National Semiconductor 0 -4 +4 Vitesse Semiconductor -3 -7 +4 Maxim Integrated +9 +8 +1 Circuits Xilinx +14 +14 0 Texas Instruments +42 +43 -1 LSI Logic -5 -4 -1 Genesis Microchip +2 +4 -2 AMD -12 -9 -3 Cirrus Logic -8 -4 -4 Altera +1 +7 -6 ATI Technologies +3 +10 -7 Zoran +8 +15 -7 ESS Technology -10 -2 -8 Sandisk +10 +27 -17 Intel +8 +33 -25 Silicon Images +20 NA -- ST Micro +2 NA --

Who Will Gain Market Share? Texas Instruments (Net Difference Score +42) still tops the list of companies our respondents believe will gain market share over the next six months, despite a 1 pt. dip from our last survey (November 2003).

Surprisingly, Nvidia’s Net Difference Score (+7) has jumped 15 pts. compared to November 2003 – the largest increase of any company – suggesting that they too should gain market share over the next six months.

And for the first time we included Silicon Images in our company pick list and they garnered the second highest Net Difference Score (+20), which suggests they are also poised to do well.

Least Market Share Momentum. For the second consecutive survey, AMD (Net Difference Score -12) was the chip vendor seen as least likely to gain market share over

Copyright ©2004 ChangeWave Research 12 All rights reserved. ChangeWave Research: Semiconductor and Equipment Trends the next six months. Interestingly, Intel’s Net Difference Score fell from +33 in our November 2003 survey to just +8 in the current survey, a 25 pt. downturn.

(2) Question Asked: "Is your company primarily focused on the communications marketplace (telecom and data networking), business marketplace (computer and data storage hardware) or consumer marketplace (electronics)? (Choose All That Apply)”

Current Previous Survey Survey Apr ‘04 Nov ‘03 Communications Marketplace (Telecom and Data Networking) 27% 18% Consumer Marketplace (Electronics) 22% 22% Business Marketplace (Computer and Data Storage Hardware) 15% 31% All of the Above 38% 42%

Communications Marketplace on the Rise. Twenty-seven percent (27%) of respondents say their companies’ primary focus is on the Communications Marketplace, up from 18% in November 2003. Interestingly, the percentage of respondents saying their companies’ primary focus is on the Business Marketplace fell to 15% – better than a 50% drop from our last survey (November 2003).

(3) Question Asked: "Nanotechnology is playing an increasingly central role in the chip manufacturing process. Can you identify any key emerging nanotechnologies and/or small nanotech-focused companies that you believe will be superior performers over the next 12 months? Please tell why?”

(a) Key Nanotechnologies:

 JES5813 writes, "65nm wireless."

 COS2687 writes, "Nanomaterials, nanobiotechnology, nanoinstruments."

 SHU6149 writes, "Flash memory."

 BEC2885 writes, "MEMS. (Micro-gyroscopes, accelerometers, and other devices.) There is also the micro-fluidics field."

 WAN8216 writes, "TXN, INTC, LSI."

 RUS0368 writes, "Bio-engineering."

 MHE6157 writes, "IBM."

 HFC8959 writes, "Intel."

 KDP6740 writes, "Only large corporations like IBM can afford R&D. No commercial application in near future."

 ELL2754 writes, "Device fabrication for biotech."

 W.S1509 writes, "IMOS."

(b) Small Nanotech-focused Companies:

 JES5813 writes, "Intel and TI."

 COS2687 writes, "Nanosys, nanomuscle, ntera, nano-tex."

 SHU6149 writes, "Nanosys."

 BEC2885 writes, "Affymetrix. Aviva. Coventor."

 RUS0368 writes, "NANO."

 KJO9758 writes, "Tegal (TGEL)"

 KDP6740 writes, "Universal display group (PANL) is a leader in OLED technology."

 ASH8301 writes, "VECO, FEI."

 ELL2754 writes, "NanoVance, Inc."

 W.S1509 writes, "MRGE."

 LEE6396 writes, "Samsung."

C. Semiconductor Equipment Trends

(1A) Question Asked: "Which one of the following Semi Equipment sub-segments do you think will perform the best over the next six months? (Please Choose Only One)”

Current Previous Previous Survey Survey Survey Apr ‘04 Aug ‘03 Jan ‘03 Wafer Processing 25% 23% 26% ATE/Packaging 25% 15% 16% Lithography 15% 25% 16% Automation/Materials Handling and Software 13% 12% 13% Specialty 7% 15% 8%

(1B) Question Asked: "On the down side, which one of the following Semi Equipment sub-segments do you think will perform the worst over the next six months? (Please Choose Only One)”

Current Previous Survey Survey Apr ‘04 Aug ‘03 Automation/Materials Handling Software 25% 20% Specialty 20% 16% Wafer Processing 10% 14% Lithography 10% 14% ATE/Packaging 10% 24%

Net Perform Perform Difference Best Worst Score Wafer Processing 25% 10% +15 ATE/Packaging 25% 10% +15 Lithography 15% 10% +5 Automation/Materials Handling and Software 13% 25% -12 Specialty 7% 20% -13

Change in Net Difference Score – Current Survey (April 2004) vs. Previous Survey (August 2004)

Current Previous Survey Survey Change Net Net in Net Difference Difference Difference Score Score Score Apr ‘04 Aug ‘03 ATE/Packaging +15 -9 +24 Wafer Processing +15 +9 +6 Automation/Materials Handling & Software -12 -8 -4 Lithography +5 +11 -6 Specialty -13 -1 -12

Best Performing Semi Equipment Sub-Segments. ATE/Packaging and Wafer Processing (Net Difference Scores +15) both appear poised to perform well over the next six months. However, ATE/Packaging’s Net Difference Score improved 24 pts. from our previous survey (August 2003), while Wafer Processing showed just a 6 pt. gain.

Worst Performing Semi Equipment Sub-Segments. Specialty equipment had the lowest Net Difference Score (-13), falling 12 pts. from our August 2003 survey. Automation/Material Handling and Software (Net Difference Score -12) also looks like it will not be performing as well over the next six months.

(1C) Question Asked: "Why did you choose these particular Semi Equipment sub- segments as the best/worst performers?”

(A) Wafer Processing

Best Performer - Reasons:

 BIG4363 writes, “We are adding more wafer processing equipment and more operators as well.”

 HAM5839 writes, “Wafer shortage.”

 W.S1509 writes, “New 200 and 300 mm wafer technology.”

 WTH1202 writes, “More diversion. Better profit margins.”

 MIK5770 writes, “Larger wafers, lower cost per chip.”

 CLA8139 writes, “Increased margins.”

 DEN5033 writes, “Here at work our books are filled, (3rd Q, might slow down) but for now we see lots of pick up, its a rush to get the 200mm tools out the door.”

 CTS5820 writes, “Good Processings & Yeilds produce profits.”

 CHI8142 writes, “Focus remains with wafer capability.”

 MIK2846 writes, “Demand due to new construction/capacity expansion.”

 LEE6396 writes, “Capacity is tight.”

 PHI1286 writes, “This is key for transition below .18.”

Worst Performer - Reasons:

 BEC2885 writes, “This segment is dominated by Applied Materials.”

 KDP6740 writes, “There are still many used wafer equipment in the market.”

 RUS0368 writes, “Slow on copper technology adaptation.”

 MHE6157 writes, “Lagging technology.”

 GEN8705 writes, “Front end capacity last to be expanded.”

(B) ATE/Packaging

 ASH8301 writes, “Volume increases for semi revenue growth.”

 KJO9758 writes, “Units are increasing; prices firming; M&A will continue (consolidation and expansion); IDM's will continue to spin-out non-core business units that test or assemble - which folks like Amkor, ASE or STATS-ChipPAC will suck up.”

 AMU8461 writes, “Time on the tester is a bottleneck because vector sets have gotten huge, so vector sets must be loaded in subsets. This causes chips to spend too much time on a tester, or they must spend time on a series of testers for complete verification. New test vector compression techniques such as Embedded Deterministic Test can drastically reduce the cost of test by eliminating or postponing tester upgrades, and by allowing full vector sets to be loaded in a single session.”

 KEV8408 writes, “They are beyond capacity today.”

 BEC2885 writes, “The relative cost of ATE/Packaging as a percentage of total end- product cost is small enough to allow good margins in a capacity constrained environment.” Copyright ©2004 ChangeWave Research 18 All rights reserved. ChangeWave Research: Semiconductor and Equipment Trends

 KIM0900 writes, “Testing is key bottleneck to supplying immediate demand.”

 WTK2295 writes, “outsourcing trend.”

 KDP6740 writes, “LCD is replacing CRT in TV and PC monitors.”

 IRO0617 writes, “Chip volume after shrink.”

 ETH1183 writes, “ATE/Packaging will ride the homeland security changewave.”

 GEN8705 writes, “Assy/Test capacity first to be expanded.”

 MIK2846 writes, “Still unused capacity existing in ATE/test.”

 DEN7210 writes, “Packaging is fairly mature.”

 ESH4187 writes, “Increased integration means more devices in the same # of packages.”

 BLA0579 writes, “Competition.”

 W.S1509 writes, “ATE Cost of testers.”

(C) Lithography

 SBG5506 writes, “technology upgrading.”

 DEN7210 writes, “Shrink to sub-.2 um.”

 ELL2754 writes, “Front end leader.”

 HSM4473 writes, “AMAT/Industry Leader.”

 SHU6149 writes, “AMAT dominance.”

 HFC8959 writes, “90nm is the trend, which make Lithography and Packaging more challenging.”

 COS2687 writes, “Still problems below 130nm.”

 ETH1183 writes, “Printing semiconductors is an old idea and a clever one, but I just don't see where it gains over wafer processing and other new technologies.”

 WTK2295 writes, “No specialty requirement.”

 IRO0617 writes, “How many 300mm fabs?”

(D) Automation/Materials Handling and Software

 BLA0579 writes, “Speed and automation of process equipment to increase productivity.”

 HAC5852 writes, “It's yield that drives bottom line.”

 RUS0368 writes, “Increase capacity.”

 COS2687 writes, “Capacity crunch.”

 CBI9651 writes, “Because in our company field we see a demand for increased handling automation, in order to avoid human errors.”

 KJO9758 writes, “Unneeded capital purchase for yld or capacity.”

 HFC8959 writes, “That is just a routine work.”

 CTS5820 writes, “Software can be a problem.”

 HAM5839 writes, “Materials handling has seen its peak.”

 ASH8301 writes, “Limited new fabs to drive automation sub-sector.”

 CHI8142 writes, “IMO, SW will suffer to focus attention on wafers.”

 SBG5506 writes, “Good to have.”

 ELL2754 writes, “Gains will come later.”

(E) Specialty

 ESH4187 writes, “Shrinking design rule on the old production equipment means more measurement and control are required.”

 MHE6157 writes, “New products.”

 SIM3624 writes, “A lot of made to order specific chips.”

 HAC5852 writes, “Tech is away from specialty application.”

 LEE6396 writes, “Processing becomes standard.”

 SHU6149 writes, “NVLS losing market shares.”

 WTH1202 writes, “High margins but smaller market.”

 MIK5770 writes, “Growth of necessary standards.”

 CLA8139 writes, “Decreased margins.”

(2) Question Asked: "LCD sales are booming. What semi capital equipment supplier stands to benefit the most from the growth in LCDs?

 ESH4187 writes, "AMAT."

 SHU6149 writes, "AMAT."

 HSM4473 writes, "AMAT."

 CTS5820 writes, "AMAT."

 KDP6740 writes, "Applied Materials."

 ASH8301 writes, "PHTN, AMAT."

 HIT8477 writes, "GNSS."

 DEN7210 writes, "Genesis Microchip."

 CHE4929 writes, "All."

 HAM5839 writes, "Sharp."

 BEC2885 writes, "Photon Dynamics. - This company makes non-contact test equipment for LCD screens. The technology allows engineers at the LCD manufacturers to have much more process control data available than would be available with destructive contact testing."

 MIK5770 writes, "Zoran."

 KIM0900 writes, "KLAC."

 KJO9758 writes, "Unclear to me - there are so many players here. If I knew, I'd buy them. Advantest (ATE supplier - Japan) will get some share. "

 WTH1202 writes, "TEL."

 ELL2754 writes, "Nikon."

 W.S1509 writes, "Taiwain Semi."

III. ChangeWave Research Methodology

This report presents the findings from an April 20 – 26, 2004, survey of ChangeWave Alliance semiconductor industry members on current trends – as well as the sub- segments and companies most likely to win or lose in the semi chip and equipment marketplaces. A total of 60 Alliance members participated.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four- year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

IV. About ChangeWave Research

ChangeWave Research, of Phillips Investment Resources, Inc. is a market research intelligence network powered by thousands of accredited and organized front-line professionals – the ChangeWave Alliance.

ChangeWave is the alternative to traditional “sell-side” investment research. The company publishes ChangeWave Investing, the investment advisory service for individual investors dedicated to researching and discovering growth stocks that profit from radical change, and Weekly WaveWire, a free e-mail newsletter distributed to nearly 200,000 investors.

ChangeWave has a very unique asset in its 4,500-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as Internet e-commerce, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies – credentialed professionals who spend their everyday lives working on the frontline of technological change.

ChangeWave Research Reports provide a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy – well in advance of other available sources. ChangeWave surveys its 4,500 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at www.ChangeWaveResearch.com

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

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