advanced reticle symposium 2003 san jose, ca 23 june 2003 photomask market outlook: growth returns...

Advanced Reticle Symposium 2003San Jose, CA • 23 June 2003

Photomask Market Outlook:Growth Returns

Klaus-Dieter Rinnen

Managing Vice President

Manufacturing and Design

Emerging Technologies and Semiconductors

Gartner Dataquest

2

Revenue Growth (%) 2002 2003 Base Up Base Down

World GDP +2.0 +2.2U.S. GDP +2.4 +2.4Electronic -1.4 +4Equipment* Semiconductor +1.9 +12 +8 +1

Capital Spending -37 +15 +7 -1

Photomask -3 +5 +2 -1

*Production revenue

Forecast Growth Scorecard

3

+2.

2

+3.

4

+2.

0

+1.

2

+4.

0

0

1

2

3

4

5

2000 2001 2002 2003 2004

Source: Global Insight

Real GDP Growth (Percent)

Global GDP Growth, 2000-2004

4

Key Economic Issues

Economic policy– United States gets high marks for very accommodative monetary and fiscal polices,

but eurozone is failing badly and hurting global recovery Capital spending

– Spending revival still key to a true, sustainable recovery; fundamentalsare improving, but lingering uncertainty remains a strong inhibitor

Consumer spending– U.S. consumers certainly have done their part but could fatigue any time; need

stronger consumer spending in Europe and Japan Dollar depreciation

– Dollar has dropped for temporary and more fundamental reasons; will likely continue depreciating going forward, hopefully at slow rate

Global trade– Trade continues to languish with weak economy but should revive with recovery;

depreciated dollar is shifting advantage to United States at expense of Europe and Japan.

Wild cards– SARS, terrorism, Middle East turmoil and South Korea tensions all

remain potential threats to global recovery (not to mention those wecan’t identify yet!).

5

Economics Health Score

Economic Policy

Capital Spending

Consumer Spending

Dollar Depreciation

GlobalTrade

SARS, South Korea, Terrorist Attacks

North AmericaEuropeJapanAsia/Pacific





2003North AmericaEuropeJapanAsia/Pacific

2004 2005

??Wild Cards

6

+2.

2

+3.

4

+2.

0

+1.

2

+4.

0

0

1

2

3

4

5

2000 2001 2002 2003 2004Source: Global Insight

Real GDP Growth (Percent)

2H03 revival still possible, but full recovery may be

pushed out to 1H04

U.S. tax cuts stimulate U.S. tax cuts stimulate strong strong U.S. consumer U.S. consumer spendingspending

Eurozone adopts looser Eurozone adopts looser economic policieseconomic policiesCapital spending revivesCapital spending revivesDollar depreciates slowlyDollar depreciates slowlyWild cards limitedWild cards limited

U.S. tax cuts fail to stimulate U.S. tax cuts fail to stimulate U.S. consumer spendingU.S. consumer spendingEurozone maintains tight Eurozone maintains tight

economic policieseconomic policiesCapital spending faltersCapital spending faltersDollar crashesDollar crashesWild cards wreak havocWild cards wreak havoc

Global GDP Growth, 2000-2004

7

-3

-2

-1

0

1

2

3

4

5

6

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

U.S. GDP Growth (Percentage of SAAR)

Fo

rec

as

t

Source: Global Insight and Gartner Dataquest (June 2003)

Macroeconomic Picture Brightens:Quarterly U.S. GDP Growth — June 2003

8

overall IT demand

9-Mar. 23-Mar. 6-Apr. 20-Apr. 4-May 18-May 1-Jun.

Week Ending

0

100

200

Untrended and Unweighted ProjectedUntrended and Unweighted Current

Index

Strong

demand

Weak

demand

War breaks outMajor combat finished

Major break in SARS news

CurrentProjected

IT Spending — Unweighted/Weekly: War With Iraq and SARS Outbreak Sway Sentiment

Trend: Current spending remains

below budgeted levels Stalled recovery in current

spending

Contributing factors:– War with Iraq– SARS outbreak– Slow economy

Technology manufacturing and communications vertical market lag current spending

Projected demand in 2004 slightly higher, but still below prewar level

9

Overall IT Trend — Weighted/Monthly:2003 Cautious Underspending; 2004 Increase

Trend: Current spending remains

below budgeted levels Stalled recovery in current

spending

Contributing factors:– War with Iraq– SARS outbreak– Slow economy

Technology manufacturing and communications vertical market lag current spending

Projected demand in 2004 slightly higher, but still below prewar level

10

Gartner Dataquest’s Index of Semiconductor Market Leading Indicators — June 2003

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Semiconductor Growth

Indicator

Actual Forecast

Semiconductor Revenue Growth

11

1H03 2H03 1H04 2H04

Cell Phones

PCs

SpendingConsumer Corporate

Communications

?

Monitoring Phased Recovery Through 2004

Recovery under way but:– Equipment markets slow

– Cell phones the only bright spot, but can it be sustained?

– PC market remains sluggish Continued recovery depends on:

– Cell phone strength

– Corporate PC replacement cycle beginning in 2H03

– General improvement in electronic equipment production (especially communications) in 2004

12Optimistic PessimisticMost Likely

30

35

40

45

50

55

60

65

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

Billions of Dollars

2002

1.9%

Scenarios

OptimisticMost LikelyPessimistic

2003

+12.3% +8.3% +1.3%

Quarterly Semiconductor Revenue: Market Expands on 2H03 Improvement

13

0

50

100

150

200

250

300

1996 1998 2000 2002 2004 2006

Billions of Dollars

8%2%

23%

22%-5%

6%

Semiconductor Revenue Forecast:Recovery Gains Momentum in 2003

14

Key Conclusions:Inventory days peaked in 1Q01

Healthy drop in 1Q03

Gartner Dataquest Semiconductor Inventory Index

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1Q99 1Q00 1Q01 1Q02 1Q03

Supply Outlook: Semiconductor Inventory

15

Ratio of Silicon Consumed to Fab Capacity

40%

50%

60%

70%

80%

90%

100%

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

Leading Edge

Overall Wafer Fab Utilization

16

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1996 1998 2000 2002 2004 2006 2008

Millions of Dollars

2002

-2.9%

Scenarios

OptimisticMost LikelyPessimistic

2003

+5.4% +2.2% -1.2%

Photomask Revenue Forecast:After Two-Year Decline, Growth Returns in 2003

17

0

50

100

150

200

250

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Semiconductor Revenue(Billions of Dollars)

Photomask Revenue (Percentage of Semiconductor Revenue)

Semiconductor vs. Photomask Revenue

18

0%

20%

40%

60%

80%

100%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Sub-0.25 Micron

0.25 to 0.7 Micron

0.7 Micron and Above

Photomask Revenue by Layer Linewidth: Sub-0.25 Micron Is Driving Force

19

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

1996 1998 2000 2002 2004 2006 2008

Photomask Units (Plates)

Photomask Unit Forecast:Growth Returns in 2003, but Muted

20

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1996 1998 2000 2002 2004 2006 2008

Aggregate Photomask ASP ($)

Aggregate Photomask ASP Forecast:Mix Drives Strong Growth

21

0

100

200

300

400

500

600

700

1992 1995 1998 2000/1 2003

Photomask Set Cost: Cost in Second Year of Production

0.5 Micron18 Layers

0.35 Micron20 Layers




Thousands of Dollars

Note: Set cost is best estimate for 2002.

22

Wanted! Needed! New Business Models

for Photomask and ASIC

Classifieds

Some Thoughts to Ponder on Mask Cost

Myriad possibilities (in design, material, equipment process, usage) for reducing photomask cost– Is there really any price elasticity?– Where are the margins for photomask maker to secure its and the

industry’s future? Is this a nonprofit business?

Photomask expenditure as a percentage of semiconductor revenue is not declining but also not appreciating – Are photomask prices too low to ensure options for an

economically viable future?

23

193-nm immersion: Will the industry dip in? 157 nm: To live or not to live? EUV: Eternal bridesmaid or happily ever after 32? Maskless, nano-imprint and other technologies:

Is there a chance to break into the market? When?

Bottom LineThe longer incumbent technologies are extended and maskless technology is delayed or muted, the better for photomasks.

But please, no bifurcation in lithography technologies.

What Does the Future Hold for Lithography?

24

Conclusions Economy

Expect improvement in 2003, albeit back-end-loaded Weakness in Europe and Japan sharpens need for U.S. improvements

Electronic equipment Expect gradually improving macro conditions to spur phased recovery Start of Y2K PC replacement cycle expected; strength is questionable Corporate spending returns in 2003; strength depends on economy

Semiconductors Expect revenue growth of 8 percent in 2003 Expect tightening capacity utilization and better demand to drive 2004

Photomasks Photomask revenue to grow slowly in 2003 Long-term CAGR of 8.8 percent is ASP-driven Rising photomask cost is reality and will lead to lower usage Not business as usual anymore:

Consolidation a must for photomask merchants Will captive component of mask market increase? Will lithography demand bifurcate?

advanced reticle symposium 2003 san jose, ca 23 june 2003 photomask market outlook: growth returns...

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