Recession?

1. 2009: Recession or
Depression?
Mark Stromberg
Gartner
Speaker Name, Company Name/Logo - Slide 1

2. Key Issues Addressed
• What is the outlook for 2009 and 2010?
• When will the economic pain end? How bad will this get?
• What are the stages of recovery from the current
semiconductor down cycle?
• How will manufacturing providers be affected?
• What are the long-term implications of the current crises
for the semiconductor industry and the macro economy?
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 2

3. Growth Forecast for Supply Chain
Revenue Growth (%) 2008 2009 2010
Global Real GDP +2.5 +0.2 +2.5
U.S. Real GDP +1.3 -2.5 +2.2
Elec. Equipment1 +1.8 -3.2 +4.2
Semiconductor2 -4.4 -16.3 +14.6
Foundry +2.8 -24.1 +25.1
SATS -2.4 -18.6 +11.8
Capital Spending -27.3 -34.1 +13.9
Equip. Spending -30.6 -31.7 +17.7
WFE Equipment -30.9 -33.1 +16.3
P&A Equipment -28.6 -30.7 +26.0
AT Equipment -30.0 -19.8 +18.9
Silicon -5.3 -22.4 +15.1
1
Production revenue
2
Including solar
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 3

4. Global Economic Environment for
2009
• The U.S. recession will be one of the deepest—if not the deepest—of
the postwar period. (vs. 1982)
• The downturn will be the worst in Europe over the last couple of
decades and the worst in Japan since 1998.
• Growth in emerging markets will decelerate dramatically.
• The U.S. Federal Reserve and other central banks will keep easing
monetary policy. (At what point does this become inflationary?)
• More fiscal stimulus will go into the pipeline.
• Commodity prices will remain at depressed levels for much of year.
• Inflationary fears are currently replaced by concerns about deflation.
• Global imbalances will improve markedly.
• Can the US dollar maintain it’s dominance with this level of fiscal and
monetary stimulus?
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 4

5. All Eyes Are on the US for a Recovery:
Quarterly US GDP Forecast
US Real GDP Growth (Annual Rate)
• Return to GDP expansion
5%
is forecast in 3Q 09, most
likely forecast scenario
3%
• Downside risk remains
1%
for longer recession
• Remaining G7 country
-1%
recovery follows US with
-3%
time delay
• A lagging Europe could
Most Likely
-5% Downside
hamper a global
Upside
-7% recovery.
07
08
08
09
09
10
10
3Q
1Q
3Q
1Q
3Q
1Q
3Q
Source: Global Insight
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 5

6. Signs of Recovery
Economy & Finance Semiconductor Industry
• Enterprise IT spending returns
• Reduced volatility in financial
• Consumer spending rises
market, sustained rise in equity
• PCB Book to bill
• Easing of commercial and
• Contract electronics
consumer credit standards manufacturer orders rise
• Bottoming of housing market • Distributor orders rise
• Rise in consumer confidence • Inventory normalization
• Semi materials orders improve
• Pick up in retail sales (autos)
• Increase in semiconductor
• Rise in ISM Manufacturing Index prices
• Layoffs slow, unemployment • Increase in SATS orders
claims slow • Increase in foundry outlook
• Firming in commodity prices
• Economic forecasts become
more balanced, positive
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 6

7. Dataquest Semiconductor Lead Index:
Macroeconomic Issues Impact Semis In 2009
Dataquest Index vs. Device Forecast Dataquest Index Predictions for 2009
Semiconductor Revenue Growth Semiconductor Revenue Growth
15%
30%
10%
20%
5%
10%
0%
-5%
0%
-10%
-10%
-15%
-20%
w
07
08
08
08
08
No
4Q
1Q
2Q
3Q
4Q
2003 2005 2007 2009
DQ Indicator Semiconductor Growth
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 7

8. Semiconductor Forecast:
Slashing Market Outlook as Economy Weakens
Mid-cycle Semiconductor Forecast Update
1Q08 2Q08 3Q08 4Q08 2008
 Preliminary semiconductor market share
results show 4.4% decline in 2008
Revenue
67.5 69.0 71.4 54.0 261.9
($B)
 4Q08 revenues have ‘collapsed’
Q/Q Growth -5.1% 2.2% 3.5% -24% -4.4%
 Last six weeks have seen vendors reduce
guidance for 1Q09
1Q09 2Q09 3Q09 4Q09 2009
Causing Gartner to re-calibrate its device
Revenue
51.7 51.4 55.4 60.8 219.2 forecast. Key assumptions for our mid-cycle
($B)
Semiconductor Forecast Update are:
Q/Q Growth -4.3% -0.6% 7.8% 9.9% -16%
 PC unit growth in 2009 will be negative 5%,
down from plus 5.1% in our 4Q08 forecast
 First revenue decline since the quot;dot-comquot; crash of
2001  Cell phone unit growth will be negative 10%,
down from plus 2.9% in our 4Q08 forecast
 Only fifth revenue decline in the last 25 years
 Total consumer unit growth will be negative
(others were 1985, 1996, 1998 and 2001)
15%, down from negative 1.8% in our 4Q08
 2009 will be the first time that semiconductor forecast
industry has seen two consecutive years of revenue
decline
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 8

9. DRAM Forecast:
Supply Side Downturn to Demand Side Downturn
• Bad News
• DRAM industry has been in a supply side driven downturn for the last 18
months
• Losses during 2007 and 2008 will be $12 billion and many vendors are have
financial problems and negative cash flows (much worse than 2001
downturn)
• Recently some vendors have reacted with fab closures, production cutbacks
and expansion delays
• Pricing is still at or below cash cost for many vendors
• Now the industry faces a demand side downturn due to economic
environment
• Good News
• It is so bad, that it can not continue like this for much longer
bad
• Vendors will HAVE to scale back supply growth further, or weaker players
will be forced into bankruptcy – either way supply must be restrained
• Significant pricing upside once supply/demand correct itself
Speaker Name, Company Name/Logo Stromberg, Gartner
Mark - Slide 9

10. Inventory Problems Brewing for 2009
Inventory Index
1.8
1.6
1.4
1.2
1
0.8
00
00
01
01
02
02
03
03
04
04
05
05
06
06
07
07
08
08
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
Legend: Less than 0.95 — Moderate to severe shortages
0.95 to 1.10 — Normal inventory levels
1.10 to less than 1.20 — Moderately inflated
Greater than 1.20 — Severe excess inventory
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 10

11. Waves of Recovery in Device
Application Sectors
IF US GDP growth returns in 3Q 09 ...
Inventory 2009 2010 2011
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
4Q08 1Q09
Data Processing
Comms - Wired
Comms - Wireless
Consumer
Automotive
Legend: Bottom
First Growth
Sustainable
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 11

12. Wafer Fab Utilization
Ratio of Silicon Consumed
to Fab Capacity
100%
Leading Edge
90%
80%
70%
60%
50%
40%
10
10
0
0
1
1
2
2
3
3
4
4
5
5
6
6
7
7
8
8
9
9
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
Q1/
Q3/
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 12

13. Foundry Capacity Utilization
Ratio of Silicon Consumed
Supply/Demand Trends
to Fab Capacity
•Utilization rate fell to ~60% in 4Q08 & is
100% expected to plunge to 47% in Q109 as
demand weakens further
90%
•While orders cut are across the board,12-
80% inch fabs are hit the hardest with some
utilization rate falling below 30%
70%
•Overall leading edge utilization rate
dropped from >90% in 3Q08 to 54% in
60%
4Q08 & is expected to bottom to <40% by
1Q09.
50%
•Capacity is expected to increase
40% moderately by mid-to-high percentage in
2009 & 2010
30%
•Wafer shipment is estimated to plummet
0
0
1
1
2
2
3
3
4
4
5
5
6
6
7
7
8
8
9
9
0
0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q1
3Q1 23% in 2009 before posting a 28%
recovery growth in 2010
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 13

14. Foundry Service Market:
Quarterly Revenue Scenarios
Quarterly Revenue ($Billion) Annual Growth (%)
8
30%
20%
7
10%
6 0%
-10%
5
-20%
-30%
4
2008 2009 2010
3
Alternative 1 Most Likely Alternative 2
1Q08 3Q08 1Q09 3Q09 1Q10 3Q10
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 14

15. Capital Spending:
Declining Further in 2009
Billions of Dollars
• Memory bubble bursts
70
• Production cuts and capacity
60
delays drive reductions
50
• Smaller companies focusing
40
on technology advances, not
capacity
30
• All segments responding to
20
grim economic news
10
• New capacity projects
0
delayed
2003 2005 2007 2009 2011 2013
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 15

16. Capital Spending by Device Type
$M CapEx
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
00
01
02
03
04
05
06
07
08
09
10
11
12
13
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Logic/Mixed Signal Memory Other
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 16

17. Capex Details:
Memory Leads Decline
Total Capex ($ Billion) 2007 2008 2009
Logic (incl. Mixed Signal) $ 23,264 $ 19,438 $ 14,354
• 2009 Memory spending
Memory $ 35,791 $ 22,412 $ 12,674
DRAM $ 21,794 $ 12,286 $ 6,553
down 65% from 2007
NAND Flash $ 11,776 $ 8,450 $ 5,183
Other MMRY $ 2,220 $ 1,677 $ 938
• DRAM down 70%
Other Devices $ 4,263 $ 4,206 $ 3,328
IDM $ 52,615 $ 37,861 $ 24,689
• NAND down 56%
Foundry $ 7,237 $ 4,993 $ 3,162
SATS $ 3,466 $ 3,202 $ 2,505
• 2009 Logic/mixed signal
Total Capex $ 63,319 $ 46,056 $ 30,356
down 38% from 2007
Capex Growth (%) 2007 2008 2009
Logic (incl. Mixed Signal) -14.8% -16.4% -26.2%
• 2009 Foundry and SATs
Memory 27.7% -37.4% -43.4%
spending down 47% from
DRAM 33.5% -43.6% -46.7%
NAND Flash 19.5% -27.6% -39.6%
2007
Other MMRY -26.3% -24.5% -44.1%
Other Devices -9.7% -1.4% -20.9%
IDM 7.7% -28.0% -34.8%
Foundry -2.9% -31.0% -36.7%
SATS -7.6% -7.6% -21.8%
Total Capex 5.4% -27.3% -34.1%
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 17

18. 2009 Top 20 Capex Plans
2009 Rank Company 2008 2009 Change (%)
1 Samsung 6,550.0 4,500.0 -31.3
2 Intel 5,000.0 4,150.0 -17.0
3 Toshiba 3,608.2 2,654.7 -26.4
4 TSMC Group 1,790.0 1,425.0 -20.4
5 Micron Technology 1,675.0 900.0 -46.3
6 Hynix 2,400.0 800.0 -66.7
7 Advanced Micro Devices 600.0 750.0 25.0
8 Sony 1,081.5 742.6 -31.3
9 Sandisk 1,700.0 700.0 -58.8
10 STMicroelectronics 950.0 500.0 -47.4
11 Panasonic (was Matsushita) 658.7 482.2 -26.8
12 NEC 589.9 482.2 -18.3
13 Renesas 589.9 482.2 -18.3
13 Texas Instruments 800.0 400.0 -50.0
15 IBM Microelectronics 525.0 400.0 -23.8
16 Rohm 344.1 393.5 14.4
17 Chartered Group 630.0 375.0 -40.5
18 Rexchip 600.0 350.0 -41.7
18 Tech Singapore 793.0 330.4 -58.3
20 Nanya Technology 650.0 326.1 -49.8
Top 20 Companies Total* 31,535.4 21,144.0 -33.0
Total Worldwide Capital Spending 46,055.9 30,356.1 -34.1
Top Company (Percentage) 68.5 69.7
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 18

19. Wafer Fab Equipment
Quarterly Revenue Scenarios
Quarterly Revenue ($Billion) Annual Growth (%)
40%
9
30%
20%
8
10%
0%
7
-10%
-20%
6
-30%
-40%
5
-50%
2008 2009 2010
4
3 Alternative 1 Most Likely Alternative 2
1q08
3q08
1q09
3q09
1q10
3q10
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 19

20. WFE for 2009 and Beyond
• How many vendors can actually afford advanced
wafer process tooling?
• How quickly will volume production requests
return foundry service providers?
• Will there be additional consolidation
requirements for device makers and their
vendors?
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 20

21. Dataquest P&A Utilization Index
Factory Utilization
100%
Leading Edge
90%
80%
70%
60%
50%
40%
30%
2
2
3
3
4
4
5
5
6
6
7
7
8
8
9
9
0
0
00
00
01
01
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q0
3Q0
1Q1
3Q1
Q1/
Q3/
Q1/
Q3/
Note: Leading edge is defined as BGA, CSP, flip chip, 3-D and
SiP.
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 21

22. SATS Market: Quarterly Revenue
Forecast Scenarios
Quarterly Revenue (Billions of Dollars) Annual Growth (%)
7
25%
15%
6
5%
-5%
5
-15%
-25%
4
-35%
2008 2009 2010
3
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
Alternative 1 Most Likely Alternative 2
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 22

23. Back-End Equipment Market:
Quarterly Revenue Forecast Scenarios
Quarterly Revenue (Billions of Dollars) Annual Growth (%)
40%
2.5
30%
20%
2.0
10%
0%
-10%
1.5
-20%
-30%
1.0
-40%
2008 2009 2010
0.5
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
Alternative 1 Most Likely Alternative 2
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 23

24. Package Unit Forecast
(Millions of units)
2005 2006 2007 2008 2009 2010
Plastic DIP 8,080 8,789 8,961 8,894 7,626 7,962
QFP 14,979 15,320 15,565 15,502 13,420 14,399
Ceramic Chip Carrier 384 407 499 532 429 460
SO 50,327 57,612 60,986 58,844 48,613 52,765
TSOP 9,577 9,801 9,719 8,921 6,984 7,025
Total SOIC 59,904 67,413 70,705 67,765 55,597 59,790
Ceramic BGA 79 62 56 47 34 35
Plastic BGA 6,373 7,173 7,874 8,128 6,786 7,609
Bare Chip 10,767 13,947 17,465 18,624 16,433 19,201
Leadless-Leadframe 6,928 10,446 13,888 18,937 19,171 24,665
FBGA 6,813 9,430 13,617 16,120 15,885 20,138
Others 1,325 1,612 1,773 1,954 1,557 1,851
Total 115,631 134,600 150,404 156,500 136,938 156,109
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 24

25. BEE for 2009 and Beyond
• How soon will SATS companies recover? Will we
bottom in Q109, letting the utilization picture
firm?
• When will TSV processes really go into volume
production for memory and logic?
• If the recession continues, much more
consolidation will be required. This will include
service and equipment providers.
Speaker Name, Company Name/Logo -Stromberg, Gartner
Mark Slide 25