2018 Semiconductor Equipment and Materials Market: Have we Reached an Inflection Point? Lara Chamness, Senior Market Analyst, Manager, SEMI

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1 2018 Semiconductor Equipment and Materials Market: Have we Reached an Inflection Point? Lara Chamness, Senior Market Analyst, Manager, SEMI

2 Outline Industry Overview Equipment Materials Summary Copyright 2018 SEMI. All Rights Reserved

3 3 Current SEMI Market Data Product Portfolio Fab Forecast Semiconductor, MEMS & Sensors, LED, Power Devices Equipment & Component Market Materials Market Semiconductor Materials Device Packaging and Testing Market Globalfoundries SEMI China IC Ecosystem Report a new comprehensive report contains in-depth analysis of China s wide-ranging IC manufacturing ecosystem within the global semiconductor industry. New in October `18 SEMI FabView New Update World Fab Forecast World Fab Watch Global 200mm Fab Outlook to 2022 Aug `18 Aug `18 June `18 Opto/LED Fab Forecast Opto/LED Fab Watch Customized Fab Reports Equipment Market Data Subscription New Update Semiconductor Equipment Market Statistics New Update (WWSEMS) New Equipment Forecast Mass Flow Controller Market Statistics New Update Material Market Data Subscription New Update Photomask Characterization Report Silicon Reclaim Wafer Characterization Worldwide OSAT Manufacturing Sites Database Sept, 2018 Global Semiconductor Packaging Materials Outlook May `18 China Semiconductor Packaging Market Outlook May `18

4 Industry Overview

5 3 Eras of Demand Source: VLSI Research, ISS US January 2018 Copyright 2018 SEMI. All Rights Reserved

6 Explosion of Data Generation Source: Applied Materials, SEMICON West July 2018 Copyright 2018 SEMI. All Rights Reserved

7 Semiconductor Revenue by Key Market Segments $168.7 $161.6 $8.8 $9.1 $25.0 $32.3 $144.9 $25.7 $162.6 $29.4 $83.6 $81.9 $44.1 $ $45.3 $60.6 $70.9 $69.5 $3.0 $ $59.0 $57.4 $20.0 $21.3 $22.0 $20.3 $12.9 $9.7 $4.8 $ $43.3 $19.6 $62.2 $29.2 $16.9 $13.2 $2.4 $4.5 $8.1 $ $44.6 $22.6 $54.7 $29.3 $9.9 $12.4 $4.3 $7.8 $9.8 $ $27.8 $29.2 $5.9 $6.3 $15.9 $16.9 $2.7 $3.4 $2.9 $ CAGR 1.1% CAGR 2.9% CAGR -0.7% CAGR 9.5% CAGR 5.2% CAGR 1.2% Memory Application Specific MPU / MCU / DSP Other Copyright 2018 SEMI. All Rights Reserved Source: IDC Source: Semiconductor Application Forecaster, IDC, June 2018 (1) Industrial includes Retail, Energy, Medical, Military, Aero (2) Comm Infrastructure includes Wireless Infrastructure from Wireless Comm Industry (3) Wireless Comm excludes Wireless Infrastructure

8 Semiconductor Revenue ($US Billion) Semiconductor Industry Revenues 2017 Soars Past $400 billion $450 $400 $ years $ 300B 4 years $ 400B $300 $250 $200 $ 200B $150 $100 $50 $0 Source: SIA/WSTS historical year end reports Copyright 2018 SEMI. All Rights Reserved

9 US$ Billions Total Equipment Revenue vs. Total Material Revenue Trends $60 $50 Irrational Exuberance 300 mm ramp $40 $ mm ramp $20 $10 $0 Equipment $B Materials $B Source: Equipment: SEMI/SEAJ Materials: Rose and Associates , SEMI 2000-present

10 2018 Semiconductors Forecasts Upward Revision WSTS Nov-17, 7.0% Aug-18, 15.7% Gartner Jan-18, 7.5% Jul-18, 14.0% IC Insights Nov-17, 8.0% Mar-18, 14.0% VLSI-IC Jan-18, 7.7% Jun-18, 14.9% IHS Markit Jan-18, 7.4% Jul-18, 14.9% Cowen LRA Jan-18, 5.9% Aug-18, 16.3% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Mid-Year Initial Early Year Forecast Average = 7.3% Mid-Year Average = 15.0% Source: August 2018, SEMI

11 2019 Semiconductor Forecasts Gartner (Jul 18), 7.0% WSTS (Aug 18), 5.2% Cowan LRA (Aug 18), 5.0% IC Insights (Mar 18), 4.0% IHS Markit (Jul 18), 4.0% IDC (Sept 18), 0.7% VLSI-IC (Jun 18), -3.4% -6% -4% -2% 0% 2% 4% 6% 8% 10% Source: September 2018, SEMI Copyright 2018 SEMI. All Rights Reserved

12 Trade Dispute U.S. and China Recent Developments Earlier this year, there was the ZTE ban US has set a 25% tariff on $50 billion of Chinese goods ($34B since early July and $16B started on Aug. 23) On Sept 17, U.S. released the final $200 billion tariff list that will be subject to a 10% tariff, effective Sept 24 (& will increase to 25% on January 1) China has responded in equivalent manner; placing tariffs on $110 billion worth of goods and has restricted Micron sales into China On Oct. 30, DOC restricted U.S. companies from selling equipment, software, and materials to Jin Hua Semiconductor on the grounds of national security Impacts The trade war will further strengthen China s resolve to develop local semiconductor capability and accelerate China s technological development The trade war will have supply chain managers to adjust their sourcing and production strategy in order to diversify the risk MNCs may need to reconsider their future (capacity) investments in China

13 Equipment Trends

14 Fab Investment by Regions Korea and China Drive the Growth US$ billion $20 Fab Equipment Spending by Region Region Change (%) 2018 to 2019 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 Americas China Europe & Mideast Japan Korea SE Asia Taiwan Source: Prelim. World Fab Forecast Reports, October 2018, SEMI China 25% Americas 24% Taiwan 15% Japan -12% Korea -16% SE Asia -8% EMEA -25% Disclaimer: The forecast is based on current announcements and is subject to change depending on actual execution.

15 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Index Monthly Trends- Equipment, Silicon, & Semi Units YoY (through September) +21% Equipment +8% Silicon +9% Devices Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Equip Billings Index Silicon Shipments Semi Units Note: Index is based on 3-month moving average, Base = January 2014 Copyright 2018 SEMI. All Rights Reserved Source: SEMI Equipment Market Data Subscription, November 2018, SEMI SMG, November 2018 WSTS Bluebook, October 2018

16 Year-to-Date Equipment Billings Worldwide SEMS Billing Trends (U.S. Dollars in Millions) 2018 Year-to Year-to- Date Date Y/Y % Region (September) (September) Change Europe $3,309 $2, % Japan $6,805 $4, % North America $3,869 $4, % Korea $14,906 $13, % Taiwan $7,365 $8, % China $10,533 $6, % ROW $3,245 $1, % Total $50,031 $41, % Billings through September for these regions are already higher than their respective 2017 totals Source: SEMI Equipment Market Data Subscription, November 2018 Copyright 2018 SEMI. All Rights Reserved

17 Quarterly Equipment Billings Trends by Region US$ Billion $7 $6 $5 $4 $3 $2 $1 $0 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 Europe Rest of the World North America Japan Taiwan Korea China Source: SEMI Equipment Market Data Subscription, November 2018 Copyright 2018 SEMI. All Rights Reserved

18 US$ Billions SEMI 2018 Fall Equipment Forecast By Market Region $80 $70 $60 Taiwan SEA/ROW North America Korea Japan Europe China $75.04 $62.01 $63.61 $56.62 Most regions will see healthy growth in 2018, except for Taiwan, Korea, & N. America $50 $40 $30 $20 $10 $36.53 $41.23 $ E 2019F 2020F China Europe Japan Korea North America SEA/ROW Taiwan may end higher while 2019 could be flat Korea will remain the largest equipment market through 2020 China expected to come out strong in 2019 but trade tensions loom New front-end and back-end equipment. Totals may not add due to rounding Source: Equipment Market Data Subscription, November 2018, SEMI

19 Materials

20 US$ Billions Materials Forecast By Segment $60 Wafer Fab Materials Packaging Materials $50 $40 $30 0% -4% 10% 5% 9% 3% 3% 1% 2018 will surpass the market peak set in 2011 Wafer Fab materials set record level in 2017 Growth is driven by silicon in 2017 & 2018 Packaging materials market is facing headwinds $20 13% 13% $10 3% 4% $ F 2019F Source: SEMI Materials Market Data Subscription August 2018

21 Silicon Wafer Market Recovery in Aggregated Average Selling Price Annual Silicon Wafer Trends 14,000 $1.60 Peak revenues back in ,000 $ ,000 8,000 6,000 4,000 2,000 Declining ASPs Record shipments $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 Several year period of declining ASPs while shipments increased 2017 rebound in ASPs to propel +17% revenue growth 0 $ MSI Revenue ($M) ASP Source: Materials Market Data Subscription, August 2018, SEMI Even with rebound in pricing, ASPs remain well below 2007 peak Copyright 2018 SEMI. All Rights Reserved

22 Packaging Trends and Transitions Wire bond is not dead.but industry evolving to increased packaging and assembly at the wafer level Memory industry at an inflection point in interconnect technology Leadframe to organic substrate packages WB to FC FO-WLP is a disruptive technology Traditional model: Wafer is processed in fab Wafer sent to assembly facility for singulation, assembly, and test New model: Some wafers stay at the foundry for packaging and assembly Some OSATs install wafer processing ( like ) equipment to create package on the wafer Image Source: TechSearch International 2018 TechSearch International, Inc. Copyright 2018 SEMI. All Rights Reserved 22

23 Summary Semiconductor Industry Outlook Solid growth forecasted for 2018 and 2019 Longer term prospects are positive as technology innovation advances Fab Investment & Equipment Market 3D NAND, DRAM, Foundry investments are key drivers to spending Total Equipment forecast +10% in 2018 and +3% in 2019 Trade tensions between China-US present significant downside risk to 2019 Materials +9% in 2018 new record! +3% in 2019 Copyright 2018 SEMI. All Rights Reserved

24 POLICIES - INVESTMENTS - TECHNOLOGY - CAPACITIES 25 new fab construction projects Leading segments: Foundry, DRAM and 3D NAND Enhanced technology and advanced capabilities in Packaging and Test New development in equipment and materials segments Request a Sample Report china-ic-ecosystemreport To order, call SEMI Global Customer Service at (toll free)

25 Worldwide OSAT Manufacturing Sites Database Over 120 companies and 300 facilities Over 90 facilities offering leadframe CSP Over 25 bumping facilities, including 20 with 300mm wafer bumping capacity More than 45 facilities offering WLCSP technology 92 facilities in China, 89 in Taiwan, 39 in Southeast Asia To Request a Sample Report To order, call SEMI Global Customer Service at (toll free)

26 Automotive, IoT (Internet of Things), and mobile applications are driving the need for devices such as power, analog, MEMS and Sensors in 200 mm manufacturing. Data report with forecast to To Request a Sample Report m-outlook-report-sample To order, call SEMI Global Customer Service at (toll free)

27 Global Semiconductor Packaging Materials Outlook to 2021 Insight to technology trends, market size and forecast Key package offerings and technologies, supplier market share Improve business analysis and empower with verified, validated, and credible data To Request a Sample Report ng-material-sample-report To order, call SEMI Global Customer Service at (toll free)

28 POLICIES INVESTMENTS TECHNOLOGY - CAPACITIES New 2018 Edition Economic and political implications of China's IC policy and funding China IC packaging market value chain Identify market opportunities and challenges To Request a Sample Report edition To order, call SEMI Global Customer Service at (toll free)

29 FOUNDRY - MEMORY - MEMS & SENSORS POWER - OPTO - COMPOUND Worldwide Fab Forecast to 2019 Fab Data. Online. 24/7 Access Downloadable for customized analysis To Request a Sample Report To order, call SEMI Global Customer Service at (toll free)

30 Connect to the Latest Fab Details with SEMI World Fab Forecast Past, Present, and Future Outlook FOUNDRY - MEMORY - MEMS & SENSORS POWER - OPTO - COMPOUND To Request a Sample Report To order, call SEMI Global Customer Service at (toll free)