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Driving SemiconductorIndustry Optimization FromU.S.-Taiwan-China Relationships
Walden C. RhinesCHAIRMAN & CEOMentor Graphics Corporation
WCR, U.S.-Taiwan, December 20042
Copyright ©2004 Mentor Graphics Corporation.
U.S.-Taiwan-ChinaSemiconductor Optimization
� Growing the total semiconductor market� Efficiencies in the design of products� Increasing the pool of innovators� From litigation to cross-licensing
WCR, U.S.-Taiwan, December 20043
Copyright ©2004 Mentor Graphics Corporation.
U.S.-Taiwan-ChinaSemiconductor Optimization
� Growing the total semiconductor market� Efficiencies in the design of products� Increasing the pool of innovators� From litigation to cross-licensing
WCR, U.S.-Taiwan, December 20044
Copyright ©2004 Mentor Graphics Corporation.
Multi-Year Compound Growth Rate of theSemiconductor Industry is Decreasing
0%10%20%30%40%50%60%70%80%
49Years
45Years
40Years
35Years
30Years
25Years
20Years
18Years
15Years
10Years
5Years
Comp
ound
Ann
ual G
rowt
h Rate
(CAG
R) %
Transistors Produced Semiconductor Revenue
Source: Transistors Produced – SIA, Semiconductor Revenue – VLSI Research
Transistors
Semiconductor Revenue
WCR, U.S.-Taiwan, December 20045
Copyright ©2004 Mentor Graphics Corporation.
Integrated Circuit Unit Growth is StrongWhile Unit Prices are Flat
(Q1-1977 to Q3-2004)
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
Q177Q178 Q179Q180 Q181Q182 Q183Q184 Q185Q186 Q187Q188Q189 Q190Q191 Q192Q193 Q194Q195 Q196Q197 Q198Q199Q100 Q101Q102 Q103Q104
KUn
its
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
$ASP
Integrated Circuits (#K) Integrated Circuit ($ ASP)Source: SIA Blue Book Market Data
IC Unit Volume
IC Unit Prices
WCR, U.S.-Taiwan, December 20046
Copyright ©2004 Mentor Graphics Corporation.
300 mm Fab Capacity Staged andWaiting for Demand in 2002
7R&D/Pilot
655,500 -to- 825,50038Total Production Fabs
150,000 -to- 300,00012Others
225,000 -to- 245,00010Announced/In process
56,0004Companies with fabs ready to ramp upproduction
224,50012Fabs Completed to date and in volumeproduction
WSM at FullCapacity
Count
Source: VLSI Research & Mentor Graphics
WCR, U.S.-Taiwan, December 20047
Copyright ©2004 Mentor Graphics Corporation.
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
Q1/90
Q1/91
Q1/92
Q1/93
Q1/94
Q1/95
Q1/96
Q1/97
Q1/98
Q1/99
Q1/00
Q1/01
Q1/02
Q1/03
Q1/04
$KRe
venu
e
Integrated Circuits ($K)
Semiconductor Integrated CircuitRevenue is Near an All-time High Level
Difference from Q3/00 All Time High ….. – 4%Difference from Q3/01 Low …………...… + 78%
78%1995 Shortage DrivenUp-cycle
2000 InventoryDriven Up-cycle 2004 Unit Driven
Up-cycle
Source: SIA Blue Book Market Data
WCR, U.S.-Taiwan, December 20048
Copyright ©2004 Mentor Graphics Corporation.
Unit Volume Growing Faster than Revenue,Driven by Consumer and Wireless
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000Q1
90Q2
90Q3
90Q4
90Q1
91Q2
91Q3
91Q4
91Q1
92Q2
92Q3
92Q4
92Q1
93Q2
93Q3
93Q4
93Q1
94Q2
94Q3
94Q4
94Q1
95Q2
95Q3
95 Q495
Q196
Q296
Q396
Q496
Q197
Q297
Q397
Q497
Q198
Q298
Q398
Q498
Q199
Q299
Q399
Q499
Q100
Q200
Q300
Q400
Q101
Q201
Q301
Q401
Q102
Q202
Q302
Q402
Q103
Q203
Q303 Q403
Q104
Q204
Q304
Units
(# 00
0)
0.000
0.500
1.000
1.500
2.000
2.500
3.000
ASP
($)
IC Chip Units IC Chip ASP
1995High ASP due to Shortage
Units High, ASP Rising Late
2000Unit & ASP Both Peak
19%
Source: SIA Blue Book Market Data
WCR, U.S.-Taiwan, December 20049
Copyright ©2004 Mentor Graphics Corporation.
* Note: Adjusted for Inflation Source: SIA, Federal Reserve Bank
As Unit Prices Stabilize, SemiconductorRevenue Growth Should Increase
1,000,000
10,000,000
100,000,000
1,000,000,000
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
$KRe
venu
e (20
03 D
ollar
s) &
K Un
its
0.1
1.0
10.0
100.0
$Unit
Pric
e (20
03 D
ollar
s)
Semiconductor Units (#K) Semiconductor Revenue ($K *) Semiconductor Unit Prices ($*)
Revenue
Units
Unit Price *
WCR, U.S.-Taiwan, December 200410
Copyright ©2004 Mentor Graphics Corporation.
Semiconductor Driven by ConsumerOriented End-Markets
World Semiconductor Consumption by End-Market
46% 42%
11% 16%
15% 16%6% 8%
15% 8%6% 8%
2%1%
0%
20%
40%
60%
80%
100%
1998 2003
Data processing / Computer
Wireless Communications
Consumer Electronics
Automotive ElectronicsWired CommunicationsIndustrial ElectronicsMilitary / Aerospace
78%82%
Source: Gartner/Dataquest
WCR, U.S.-Taiwan, December 200411
Copyright ©2004 Mentor Graphics Corporation.
Taiwan Has Been Leading theConsumer Growth Markets
* Note: Adjusted for Inflation Source: Taiwan Ministry of Economic Affairs, 2002
Foundry ServicesMask ROM
IC PackagingNotebook OEM
LCD MonitorCD-R
CD-RWDVD
PC CameraEthernet Card
HUBADSL Modem
Wireless LAN (WLAN)Analog Modem
71.0%48.0%30.4%49.0%39.2%83.3%70.3%74.5%58.0%66.0%74.8%59.6%60.0%41.7%
WCR, U.S.-Taiwan, December 200412
Copyright ©2004 Mentor Graphics Corporation.
China & Taiwan DominateMotherboard Production
PC Desktop Motherboard Production
75%72%71%
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Other WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200413
Copyright ©2004 Mentor Graphics Corporation.
China/Taiwan Dominatethe Graphics Card Industry
Graphics Cards
77% 77% 78%
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Others WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200414
Copyright ©2004 Mentor Graphics Corporation.
China/Taiwan Leading inNotebook Production
PC Notebook Computers (Subsystems)
64%62%61%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Others WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200415
Copyright ©2004 Mentor Graphics Corporation.
China Leading the OpticalDisk Drive Industry
Optical Disk Drives
39% 41% 44%
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Others WW ShareSource: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200416
Copyright ©2004 Mentor Graphics Corporation.
China/Taiwan DominateFlat Panel Monitors
Flat Panel Monitors
67%67%65%
0
5,000
10,000
15,000
20,000
25,000
30,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Others WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200417
Copyright ©2004 Mentor Graphics Corporation.
China’s Cellular Phone Production
Source: IC Insights Emerging Markets 2004
33%31%
0
100
200
300
400
500
600
2002 2003
Millio
ns of
Cell
ular H
ands
ets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Perc
ent o
f Wor
ldwide
Sha
re
Local Chinese Firms Cell Phone Production Foreign Firms China Cell Phone ProductionWorldwide Cell Phone Production China's Productions Share
WCR, U.S.-Taiwan, December 200418
Copyright ©2004 Mentor Graphics Corporation.
China/Taiwan Lead in Ink-Jet PrintersInk-Jet Printers
52%53%50%
0
2,000
4,000
6,000
8,000
10,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Others WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200419
Copyright ©2004 Mentor Graphics Corporation.
China/Taiwan Only a Quarter of thePC Desktop Systems Market
PC Desktop Computers (CPU & Memory)
24%23%21%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Other WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200420
Copyright ©2004 Mentor Graphics Corporation.
China/Taiwan Lag in Entry-Level ServersEntry-Level Servers
9% 9% 9%
0
5,000
10,000
15,000
20,000
25,000
2003 2004 2005
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong Taiwan All Others WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200421
Copyright ©2004 Mentor Graphics Corporation.
China Growing in 2.5G Digital Cellular(Taiwan not Available)
2.5G Digital Cellular
20%
38% 39%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2003 2004
Prod
uctio
n -$ M
illion
s
0%
20%
40%
60%
80%
100%
Glob
al Sh
are
China/Hong Kong All Others WW Share
Source: Gartner/Dataquest, 2004
WCR, U.S.-Taiwan, December 200422
Copyright ©2004 Mentor Graphics Corporation.
Manufacturing Labor Not Driving USSemiconductor Cost
17% 15%
32% 31%
19% 16%
13% 16%
8% 4%
10% 17%1% 1%
0%
20%
40%
60%
80%
100%
1992 2002
Taxes & Other
Manufacturing Labor
Non-Labor Manufacturing
Sales, General & Administration
Research & DevelopmentNet IncomeDepreciation
Source: Semiconductor Industry Association, 2003 Databook
Cost Structure of US-Based Merchant Producers – 1992 vs. 2002
WCR, U.S.-Taiwan, December 200423
Copyright ©2004 Mentor Graphics Corporation.
Machinery and Equipment Drive Fab Cost
WCR, U.S.-Taiwan, December 200424
Copyright ©2004 Mentor Graphics Corporation.
U.S.-Taiwan-ChinaSemiconductor Optimization
� Growing the total semiconductor market� Efficiencies in the design of products� Increasing the pool of innovators� From litigation to cross-licensing
WCR, U.S.-Taiwan, December 200425
Copyright ©2004 Mentor Graphics Corporation.
0
10
20
30
40
50
60
.35 micron .25 micron .18 micron .13 micron 90 nm
Desig
n Cos
t ($M
illion
)Hardware Design Cost Software Design Cost
Cost of Design is Becoming a MajorPortion of Total Semiconductor Cost
2 MillionLogic Transistors
80 MillionLogic Transistors
40 MillionLogic Transistors
20 MillionLogic Transistors
5 MillionLogic Transistors
Source: IBS, Analysis of the Relationship Between EDA Expenditures and Competitive Positioning of IC Vendors
WCR, U.S.-Taiwan, December 200426
Copyright ©2004 Mentor Graphics Corporation.
Source: Dataquest, ASIC/SOC: “Rebuilding After the Storm”, 11/19/02
Design Flexibility and Cost are DrivingDesign Starts to Field Programmable Logic
05,000
10,00015,00020,00025,00030,000
1995 1996 1997 1998 1999 2000 2001 2002 2003
#of D
esig
n St
arts
ASIC COT PLDs >100K
WCR, U.S.-Taiwan, December 200427
Copyright ©2004 Mentor Graphics Corporation.
SoC Design Requires Integrationof Disparate Parts
WCR, U.S.-Taiwan, December 200428
Copyright ©2004 Mentor Graphics Corporation.
Semiconductor Support ofOriginal Design Manufacturers
Then
Now� Datasheet
� Pricing� Production Commitment
� Application Notes
� Reference Designs
� Embedded RTOS� Firmware Modification
� Customization
� Application Software
� Application Engineers
WCR, U.S.-Taiwan, December 200429
Copyright ©2004 Mentor Graphics Corporation.
Cost-Effective Custom IC Design RequiresRaising the Level of Abstraction
Performancedriven HWR3G ENGINE
BlueTooth Controller
IR &RS232
Compression& Encryption
Engine
CPUCore
DSPCore
RTOSBlueTooth DriverComp/Enc DriverIR/RS232 Driver FPGA
FunctionalDifferentiation
Software
Transistor
Gate
RTL
IP Blocks & Buses
WCR, U.S.-Taiwan, December 200430
Copyright ©2004 Mentor Graphics Corporation.
Platforms Enable Simplified SoC Design� Customer demands
— Fast turn-around time— Easy access to pre-qualified
building blocks— Web enabled
� Design technology— Core platforms— ‘Big’ IP— Emerging SoC bus standards— Embedded software— HW/SW co-verificationFar Peripherals
Near PeripheralsCore
WCR, U.S.-Taiwan, December 200431
Copyright ©2004 Mentor Graphics Corporation.
And Automation ofIP Selection & Integration
WCR, U.S.-Taiwan, December 200432
Copyright ©2004 Mentor Graphics Corporation.
Shift in System/SoC Design EmpowersGrowing Number of Engineers
IP & Platform Creation
5,000+Designers
100,000+Designers
WCR, U.S.-Taiwan, December 200433
Copyright ©2004 Mentor Graphics Corporation.
Semiconductor Learning Curve
1.00E-071.00E-061.00E-051.00E-041.00E-031.00E-021.00E-011.00E+001.00E+011.00E+021.00E+03
1.00E+00 1.00E+02 1.00E+04 1.00E+06 1.00E+08 1.00E+10 1.00E+12 1.00E+14 1.00E+16 1.00E+18 1.00E+20
Cummulative Transistors Shipped
Price
/Tra
nsist
or (a
djus
ted
for i
nflat
ion)
System Cost Reduction MakesNew Applications Possible
Source: Mentor Graphics, SIA, Woodrow Federal Reserve Bank
WCR, U.S.-Taiwan, December 200434
Copyright ©2004 Mentor Graphics Corporation.
U.S.-Taiwan-ChinaSemiconductor Optimization
� Growing the total semiconductor market� Efficiencies in the design of products� Increasing the pool of innovators� From litigation to cross-licensing
WCR, U.S.-Taiwan, December 200435
Copyright ©2004 Mentor Graphics Corporation.
Increasing the Number of InnovatorsIncreases Innovation
WCR, U.S.-Taiwan, December 200436
Copyright ©2004 Mentor Graphics Corporation.
Increasing the Number of InnovatorsIncreases Innovation
WCR, U.S.-Taiwan, December 200437
Copyright ©2004 Mentor Graphics Corporation.
Geographic Distribution ofElectronics Innovators is Changing
0
50,000
100,000
150,000
200,000
250,00019
7519
7619
7719
7819
7919
8019
8119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
01
China Japan South Korea United States United Kingdom Germany
Growth Analysis CAGR 1990 –to-- 2000China ………………………….. 6.1%Japan …………………..…….. 2.4%South Korea …………...……. 7.2%United States ………………… -0.5%United Kingdom ……………... 7.7%Germany …………………….... -0.9%
Source: National Science Foundation, Science & Engineering Indicators - 2004
ENGINEERING GRADUATES
WCR, U.S.-Taiwan, December 200438
Copyright ©2004 Mentor Graphics Corporation.
Design Work Will Be DoneConcurrently At Many Locations
Master
Split &JoinDesigner-to-Designer
Updates
Digital Designer
Analog DesignerDigital Designer
RF Designer
� Divide design into sections� Layout sections in parallel� Share progress with other designers� Merge sections back into master
design
� Simultaneous design on a commondatabase
� Dynamic update of designer’s views� Heterogeneous design tool environment
WCR, U.S.-Taiwan, December 200439
Copyright ©2004 Mentor Graphics Corporation.
Manufacturing Yield ImprovementRequires “Design for Manufacturing”
� DRC Rules– Checks design
compliance withprocess rules
� DFM Rules– Define the optimal layout
for highest yield– Must be implemented in
an RET-awareenvironment
WCR, U.S.-Taiwan, December 200440
Copyright ©2004 Mentor Graphics Corporation.
Design Guidelines vs. Design Rules� Designers need to know which design features most
affect manufacturing yield
DRCRule
DFMRule
Priority Fixes
WCR, U.S.-Taiwan, December 200441
Copyright ©2004 Mentor Graphics Corporation.
Designers Need to Know Effects ofManufacturing Variability
12% Underdose 8% Underdose 4% Underdose
SiliconValidation
Identify weak post-RET regions
Probability to failure report
Probability offailure ranking
Best
Worst
Process Models
Litho EtchCMP
Overlay
WCR, U.S.-Taiwan, December 200442
Copyright ©2004 Mentor Graphics Corporation.
Next Wave of Growth inNumber of Designers
110
1001000
10000100000
1000000
1970 1980 1990 2000 2010
~5,000
~50,000~500,000
Number ofDesigners
Custom ICASIC
FPGA
~5,000,000
Platform-basedDesign
WCR, U.S.-Taiwan, December 200443
Copyright ©2004 Mentor Graphics Corporation.
U.S.-Taiwan-ChinaSemiconductor Optimization
� Growing the total semiconductor market� Efficiencies in the design of products� Increasing the pool of innovators� From litigation to cross-licensing
WCR, U.S.-Taiwan, December 200444
Copyright ©2004 Mentor Graphics Corporation.
The Most Rapid Period of Innovationin History 1947 - 1987
� AT & T provides open licensing of transistor patents.� Patent-holders not favored in litigation – No Federal
Circuit dedicated to patent appeals� Broad cross-licensing for relatively low fees
WCR, U.S.-Taiwan, December 200445
Copyright ©2004 Mentor Graphics Corporation.
Litigation Slows Innovation andInhibits Market Growth
� ITC used for fast track to block import of productsviolating U.S. patents
� Extreme cost of litigation favors the wealthy� Use of patents to prevent innovative competition� Licensing companies buying up patents and
demanding fees or threatening litigation
WCR, U.S.-Taiwan, December 200446
Copyright ©2004 Mentor Graphics Corporation.
Business Innovation Occurs Everywhere
� $17.6B sales 2004� 200+ stores worldwide� 400 million store visitors
annually� 84,000 employees in 44
countries� Ingvar Kamprad the #1 or
#2 wealthiest person in theworld
IKEA
WCR, U.S.-Taiwan, December 200447
Copyright ©2004 Mentor Graphics Corporation.
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