The consensus view at Semicon West 2013 was demand for both devices and equipment will increase in 2014. Soon Buyers of both devices and at IDMs will face a key decisions point on purchasing strategy to insure. Done well there is an opportunity to create a competitive advantage for the organization.

1. Semiconductor Users and Device Manufacturers
Face Key Decision Point
For Purchasing Strategies and Plans
Semicon West 2013 consensus view:
Demand for Devices is expected to increase in 2014.
Demand for equipment is expected to increase substantially in 2014
Bill Kohnen July 2013

2. Background
• Semiconductor Usage is Forecast to rise in 2014
• Semiconductor Equipment Demand expected to increase
significantly in 2014
• Current inventory of Semiconductor devices low at users
and high at device manufactures
• Equipment manufacturers have very little inventory and as
seen during last cycle because of heavy reliance on
outsourced production they have trouble scaling quickly
• Inventory of used and refurbished equipment not large
• Materials Suppliers generally more responsive to upturn
but also more aggressive in optimizing revenue when
constraints are in place
Bill Kohnen July 2013

3. Timing factors for both Semiconductor end
Buyers and Device Manufacturers
0
2
4
6
8
10
12
14
16
18
Q3 Q4 Q1 Q2 Q3 Q4
Device Inventory
Device Leadtime
Equipment Leadtime
Inventory Used
Equipment
Cost
Bill Kohnen July 2013

4. The Sweet Spot for Action will be in Q4 and early Q1
• While the general situation applies across the
industry there is some variability based on:
– Application
– Device type
– Technology node
– Process
All Buyers of Devices, Equipment, and Materials will face cost and lead-time
challenges by Q2 2014
Bill Kohnen July 2013

5. Possible Actions
Approach Action Now Q4 Q1
Most Aggressive Early Competition of
Forecast.
Approach supply base
with forecast and
negotiate price.
Identify gaps and find
alternate sources options.
Ordering Most Critical
Items
Start building inventory on
most critical items
Budget Approvals Start
Ordering Underway
Building inventory
Alternate sources
qualified.
Requirements forecast out
to supply base
Visits to Suppliers to
confirm capacity
allocations
Budget Approvals
Complete
Receipt of Items.
Evaluate Inventory
position and continue
open pipeline from
suppliers if needed
Additional equipment
orders in place as
needed
Continued Sourcing
refurb or secondary
market
Higher Risk but Potential For Competitive Advantage based on Ability to Deliver and Cost
Bill Kohnen July 2013

6. Possible Actions
Approach Action Now Q4 Q1
Moderate Normal Planning and
Budgeting with extra
emphasis on gaps
Approach supply base
with current forecast
Identify plan to meet
gaps
Requirements
forecast out to supply
base
Start building
inventory on most
critical items
Budget Approvals In
process
Some Purchase
commitment for
critical gap items
Initiate Buying plan
adjusted on actual
forecast
More aggressive
sourcing from Used
and secondary
markets
Visits to suppliers to
confirm capacity
Monthly reviews to
increase Buy plan as
needed
Lower Risk upfront but Requires Very Professional Execution By Operations,
Purchasing, and Suppliers to Maintain Market PositionBill Kohnen July
2013

7. Possible Actions
Approach Action Now Q4 Q1
Low Normal Planning
Process
No special action
taken
Review forecast and
plans for signs of
increase and start to
plan for upside
Approach Supply Base
as needed for
increased
requirements
No upfront risk however high risk of missing opportunities, losing market share and
higher costs.
Bill Kohnen July
2013

8. Front End Areas to watch
Item Comment
Epi Wafers/Epi Systems With increased demand for mixed signal
integrated wafers companies that rely on
wafer suppliers for this could find
constrained capacity and higher prices
Implant Systems Particularly for lower technology nodes
that need to increase capacity. Good idea
to align now with outsource provider.
Test Wafers/Reclaim Relatively low cost to stock up now
Chemical and Gas Particularly those with raw materials and
demand from outside the semiconductor
industry
Lithography and Photo masks Particularly for mid sized device makers
not on leading edge process. Getting
support for equipment and aligning with
good merchant mask supplier is critical
Bill Kohnen July
2013

9. Back End Areas to watch
Item Comment
Handlers Consolidation of industry with players that focus
primarily on ‘big fish” A real area to buy early and/or
tap the refurb market. If smaller company can meet
your needs align with them early
Service and Support for Equipment If renegotiating a maintenance agreement might be
good to include onsite support. Particularly in Asia.
WLP/CSP Packaging Materials Not enough capacity overall. Need to qualify multiple
source and take inventory
Discrete Packaging Will emerge as a “surprise” constraint in this upturn
as some companies move focus to more lucrative
front end items, others companies continue
operational struggles. The preferred suppliers will
quickly reach capacity.
Substrates Following Japan Tsunami this was addressed but will
be challenged with further growth
Die Attach Material There occasionally are spot shortages and there has
been transfer of production to new factories that will
be tested be increased demand.
Bill Kohnen July 2013

10. For Semiconductor Buyers
Item Comment
Older Generation Parts Build inventory and go now to direct suppliers to
discuss application and be prepared to offer price
increase now to assure supply
Seek out Suppliers that are focused on developing in
your segment
It does not even have to be the entire company. It
could be a strong product line within a company.
Bringing in Suppliers now on early design projects will
create leverage for production items
Especially effective with companies focused on an
Engineering sales approach.
For US Based companies remember more regulation
on protecting against counterfeiting may curtail your
use of brokers
Means authorized distributors that may not stock
your high volume items if not widely used.
Device makers give preference to customers that are
demanding but fair and visit the factories
Especially effective is a benchmark technology review
which will get you time with the factory leaders If it is
just an audit you may not get past the site QA
Manager and Operations Supervisors.
Bill Kohnen July 2013