BACUS Panel Discussion: The $6 Million Mask Set —

Truth and Consequences

Klaus-Dieter Rinnen

Chief Analyst and Director

Semiconductor & Electronics Manufacturing

Gartner Dataquest

E-mail: klaus.rinnen@gartner.com

BACUS Panel Discussion

At SPIE Microlithography 2003

Santa Clara, 24 February 2003

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Billions of Dollars

9%1%

28%

19%-6% 2%

Semiconductor Revenue Forecast: Recovery Gains Momentum in 2003

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Semiconductor Revenue Forecast: Cycles Are Nothing New

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Burning Questions for the Future ofthe Industry

Big Three?

Next “Killer Application?”

Terrorism?

When Is the Upturn?

The Red Brick Wall?

China: Friend or Foe?

Deflation?

End-Market Saturation

Consolidation: Impact?

Slowing Moore’s Law?

Declining ROI?

Commoditization of Silicon?

Limits to outsourcing?

From High-Tech to Appliance?

Show Me the Money?

Security?

Real Time?

Silicon to Carbon?Robotics?

Privacy?

Virtual Integration?Zero Inventory?

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Key Long-Term Trends in Semiconductor Industry

Crisis of confidence:

– Where is the “killer application”?

– Convergence of applications Serving a “demand-pull” market The “M” word:

– Is the industry maturing?

– Is the semiconductor industry CAGR slowing down?

– Pervasiveness of semiconductors

– Commoditization of silicon Big three — Consolidation and concentration of capital Structural changes — Super IDM Hype cycle — China, new technologies, applications: Friend or Foe? Moore’s Law — Slowing down? Where is the limit? What is next? Escalating cost for fab, design, masks: Raising barriers to entry?

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What Is the Demand-Pull Market?

Buying center is shifting from a high-margin corporate buyer to a low-margin consumer buyer

– Lower price point, lower premium for speed– Easy-to-use human functionality most important– Product cycles fast and fickle– Cost pressures

Market buys technology when cost is lower Money is wasted (lower profit) if technology comes to the

market too fast Industry reacts:

– Restructuring and consolidation – Speeding up ITRS to drive down cost and protect margins

(BUT, industry passes through cost savings!)

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Technology Cycles Are Speeding Up

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Technology Leaders’ Road Map

Technology Leaders

International Technology Road Map for SemiconductorsChanges to Technology Timing, 1997, 1999 and 2001 Semiconductor Process Technology Cycle Compression

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Impact on Suppliers

Time-collapsed development cycles– Reduced prospects for ROI– Delayed ROI because of technology gap – Less time means higher development cost per year and

higher overall cost, as speed is achieved with more money– Increased risk to develop product that will never come to

market Decreased product maturity equates to customer

dissatisfaction and higher support/manufacturing cost Spread-out technology adoption makes for slower

manufacturing learning and increased cost Extreme price pressure Question: Do I really want to serve this market?

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Source: Numerical Technologies

In the Age of Subwavelength Lithography, Photomasks Are the Enablers

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ITRS 2001: Leading-Edge SOC Design Cost

Note: Costs called out are for 8M gate PDA in 2001Source: International SEMATECH

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Stepper ASPs: Aggregate

Growth

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Photomask Set Cost in 2002

Thousands of Dollars

Note: Set cost is for 2002, best estimate.

0.5 m18 Layers

0.35 m20 Layers

0.25 m22 Layers

0.18 m28 Layers

0.13 m32 layers

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Photomask Set Cost for Second Year of Production

0.5 m18 Layers

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Thousands of Dollars

Note: Set cost is for 2002, best estimate.

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Thousands of Dollars

Note: Set cost is for 2002, best estimate.

45 nm

90 nm

65 nm 30 nm

Photomask Set Cost for Second Year of Production, Extended

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Photomask Set Cost for Second Year of Production, Extended

Thousands of Dollars

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45 nm

90 nm

65 nm 30 nm

Note: Set cost is for 2002, best estimate.

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Semiconductor vs. Photomask Revenue

Semiconductor Revenue(Billions of Dollars)

Photomask Revenue (Percentage of Semiconductor Revenue)

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Summary Points

Hype about photomask cost is off the charts Cost of a mask set is dependent on number of layers, distribution of

critical dimension layers, photomask technologies involved (PSM, OPC) and maturity of manufacturing tools. If you want a set for 32nm design today, $6 million will not be enough, if it could be done

For mainstream production, the “$6 million mask set” will not happen, as it cannot happen. Gartner Dataquest projects photomask set costs to remain below $6 million, even at 32nm in the second year of production

Wanted! New business models for photomask and ASIC maker There are myriad possibilities (in design, material, equipment process,

usage) to reduce photomask cost. However, where are the margins for the photomask maker to secure its own and the industry’s future? This is not a nonprofit business.

Photomask expenditure as a percentage of semiconductor revenue is not declining but also not appreciating, despite all the hype about photomask prices. Maybe photomask prices are too low to ensure options for an economically viable future?