Advancing Industry Productivity

Transcription

1 Advancing Industry Productivity Iddo Hadar Joint Productivity Working Group Session Austin, Texas Thursday, October 12, 2006 F O U N D A T I O N E N G I N E E R I N G G R O U P

2 Safe Harbor Statement This presentation contains forward-looking statements, including those relating to the outlook for the semiconductor industry and R&D investment. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements including, without limitation: the sustainability of demand in the semiconductor and semiconductor equipment industries, which is subject to many factors, including global economic conditions, business spending, consumer confidence, demand for electronic products and integrated circuits, and geopolitical uncertainties; customers capacity requirements, including capacity utilizing the latest technology; the timing, rate, amount and sustainability of capital spending for new technology, such as 300mm and sub- 100 nanometer applications; and other risks described in Applied Materials SEC filings on Forms 10-K, 10-Q and 8-K. All forward-looking statements are based on management s estimates, projections and assumptions as of October 12, 2006, and Applied Materials undertakes no obligation to update any such statements. 2

3 Agenda Why are we here? What have we done? Is there a basis for moving forward? 3

4 The Productivity Challenge Average Fab Costs per Transistor Source: ISMI 4

5 The Challenge Revisited Average Fab Costs (μ- /transistor) $ Modeled (ISMI) : -29% : -29% / : -28% $1.000 $0.100 $0.010 $ F 2013F Source: Applied analysis of ISMI s Economic Model 5

6 Oh, By the Way The standard deviation of the annual transistor cost trend is 12% A 1%-2% difference in slopes is statistically insignificant A 1%-2% difference in slopes is also minuscule compared to the level of uncertainly in the thousands of assumptions built into the ISMI Economic Model 6

7 The Challenge Revisited Average Fab Costs (μ- /transistor) $ Modeled (ISMI) : -29% : -29% / : -28% $1.000 $0.100 $0.010 $ F 2013F Source: Applied analysis of ISMI s Economic Model 7

8 The Challenge Interpreted We have discovered and confirmed via sensitivity analysis the root cause of the (minor) shift of the 2000 s In order to extend the extraordinarily rapid rate of reduction in cost/ transistor during the late 1990 s we need to extend the extraordinary market/economic conditions of the late 1990 s Rapid demand growth funding accelerated technology progress We can t extrapolate the effect without extrapolating the cause! 8

9 Economic Implications 174 Fewer Fabs: Revenue loss to equipment industry: $261B Historical Extrapolation Source: ISMI analysis, JPWG, May

10 Equipment R&D Gap $16 $12 Historical R&D Spending Projected R&D Demand (200/300mm only) Affordable R&D Forecast R&D ($B) $8 $4 >$20B Short By 2012 $0 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06E '08F '10F Note: Affordable R/D forecast assumes 14% of equipment industry revenues Sources: S&P, SIA, SEMI, Infrastructure Advisors 10

11 Spec for the Analytical Tool Simple, transparent models few variables less precise but more accurate and correct easy/quick to calculate and adjust Single vertically-integrated company Affordable investment based on cost/benefits and expected risks and return 11

12 General Approach Total Affordability View Economic Spec Screening Cost/ Benefit Evaluation Industry Development View High-Level Cost/Benefit Experimentation/ Demonstration Portfolio View 12

13 Economic Spec Economic Context for Fab Initiatives Max. Affordable Investment ($B) $12 $10 $8 $6 $4 $2 $0 10% 20% 30% 40% 50% Adoption Rate: Long-term Penetration Per-Wafer Gain (net, % of CoO) 25% 20% 15% 10% 5% Note: 20% required rate of return; 7-year development time 13

14 Economic Impact of Wafer Size Transition Manufacturing Cost Trend Mfrg Costs ($/Cm 2 ) mm 300mm Note: Year 3 of production, Leading Edge Memory Source: Applied analysis of ISMI s Economic Model Technology Generation (nm) 14

15 Case 1: Implications: 450mm Economic Context for Fab Initiatives Max. Affordable Investment ($B) $12 $10 $8 $6 $4 $2 $0 10% 20% 30% 40% 50% Adoption Rate: Long-term Penetration Per-Wafer Gain (net, % of CoO) 25% 20% 15% 10% 5% Note: 20% required rate of return; 7-year development time 15

16 Case 2: 300mm Prime Cost/Benefit Economic Context for Fab Initiatives Max. Affordable Investment ($B) $12 $10 $8 $6 $4 $2 $0 10% 20% 30% 40% 50% Adoption Rate: Long-term Penetration Per-Wafer Gain (net, % of CoO) 25% 20% 15% 10% 5% Note: Illustration of small-lot impact 16

17 Case 3: Technology Cost/Benefit Economic Context for Fab Initiatives Max. Affordable Investment ($B) $12 $10 $8 $6 $4 $2 $0 10% 20% 30% 40% 50% Adoption Rate: Long-term Penetration Per-Wafer Gain (net, % of CoO) 25% 20% 15% 10% 5% Note: Illustration of one-time, 1-year acceleration in pace of technology 17

18 Summary of JPWG Status (1/2) Topic Agreement Disagreement Slope of cost per xtor vs. time trend Root cause for slow down in decline of cost per transistor vs. time R&D Funding Gap Not changing from -29% to -22% Pace of technology advance (as funded by demand growth) R&D gap is increasing, requiring us to set priorities Changing to -26% or -28% What is key concern: Only IC maker R&D, or IC maker & equipment supplier 300 mm Prime This should be the focus of the industry 300mm Prime is a 300mm productivity program, or a 450mm transition plan New initiative proposals Screen with simple, transparent model intrinsic cost /benefit, rate of penetration and investment Benefits: industry-wide or sector silo/parochial view IEM as golden standard, or as a tool to be tested/challenged 18

19 Summary of JPWG Status (2/2) Topic Agreement Disagreement Industry Productivity Continuous improvement is critical to the industry Definition of productivity Cost per unit area Cost per transistor Cost per function Entitlement: technology advancement, or other sources Productivity goals: edict or analysis 19

20 Agenda Why are we here? What have we done? Is there a basis for moving forward? 20

21 ISMI Economic Model Demand level & mix (from Semico) + assumed technology & productivity trends capacity allocation to installed base of fabs invest to bridge gap overlay business cycle Very large # of assumptions, some of which are not verifiable Fab owner perspective Static fab model Top-down, centrally planned, no competition Limited data for most advanced processes 21

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