Case Okmetic: Expertise, innovation and competitiveness · Founded 1985 by Outokumpu and Nokia • #8 silicon material company in the world, #1 by profitability since 2010 • 85%

Case Okmetic: Expertise, innovationand competitiveness

30 October 2015Helsinki, Finland

Agenda

IntroductionSome perpectives on• Expertise• Innovation• CompetitivenessWrap-up

/ President Kai Seikku / 30 October 20152

Okmetic

• Founded 1985 by Outokumpu and Nokia• #8 silicon material company in the world, #1 by profitability since

2010• 85% higher TSR than industry average, 40% higher TSR than any

other silicon material company since 2010• Global operations (over 65% of sales outside the EU) but main

industrial base and almost all capex in Finland


Unbranded materials early in the electronics value chain

Polycrystallinesupplier

Silicon wafersupplier8 BUSD

(Foundry) Semiconductorproducer

325 BUSD

(System supplier)

End productproducer

1,49 TrillionUSD


E.g. automotive, consumer

electronics, IoT, healthcare,

process industry

Okmetic is typically 2nd – 5th tier raw material supplier to IC industry’s Sensor and Discrete&Analog manufacturers which do not follow Moore’s law as a design rule

But everyone here carries a little something fromOkmetic in his/her pocket…


Micro-mirror for pico-projectorsand scanners

Motion sensors:• Accelerometer and

gyroscope for screenorientation

• Gameplay and navigation

BAW Filter for WLAN(WiFi and 4G WiMAX

connectivity) 2-4 Microphones for noise-cancellation and voice control

Oscillator for timing

Fuel cell for longer use

Compass for navigation

Pressure sensor for navigation

Humidity sensorSwitch mode powersupplyAuto-focus actuator

for camera4G LTE radio front-end:

• BAW duplexers• RF Switch / Variable Capacitor

…not to mention in the parking lot


Barometric pressure sensor, inertialsensor and compass for navigation Bolometer for night-vision

Micro-mirror for smartheadlamps & head-up display

Pressure sensors, flowsensors and strain gauges

for engine management

Inclinometers for zero set, theft alarm, e-park brake,

headlight level

IR imager for pedestrian detection

Pressure sensorfor brake-booster

Pressure sensor, TPMS

Microphones for hands-free phone

Gyroscopes and accelerometersfor electronic stability control and

roll detection

Bluetooth connectivity

Smart power for peripherals

Radars for collisionavoidance and gesture

recognition

Vehicle radio link

Power electronics for hybridand electric vehicles

Or just about everywhere, surrounding us




Okmetic’s strengths


Okmetic is the market leader in silicon-based solutions in its chosen market segmentsas well as a technological pioneer.

Crystal growing High-performancewafer manufacturing

Agilesupply chain

Customer relations

Long-term focus on selected niches


Market size estimate for 2015, BUSD• Two segments: Sensor wafers and

Discrete&Analog wafers• Both segments building on shared

capabilities: 150 and 200mm technology, SOI technology and crystal properties

• Dominant categories; memory, logicand micro circuits on 300 mm platform remain outside Okmetic’sscope.

Data source: World SemiconductorTrade Statistics WSTS, Q2 2015

Importance of customer coverage: Supplying over80% of top 30 sensor manufacturers


Hewlett Packard

Avago Technoliges

Knowles ElectronisTexas InstrumentsQorvo

CanonRobert Bosch

InfineonST Micro-electronics

Flir Systems

Source: Modified from Yole Développement

UlisMelexis

Invensense

Freescale Analog DevicesSensata

Amphenol Honeywell

UTC Aerospace Systems MeasurementSpecialities Inc.

Kionix

DensoPanasonic AKM

Murata ALPS ElectricSeiko Epson Omron

Goertek

MEMS part of Sensor segment

Importance of customer coverage: Supplying morethan 80% of discrete semiconductor manufacturers


Fairchild

Vishay

MicrosemiON Semiconductors

Powerflex

NXPInfineon

IxysST Micro-electronics

ABB

Mitsubishi ElectricHitachi

Fuji ElectricRohm

ToshibaSanKen

PanasonicShindengen

Source: Modified from Yole Développement

Renesas

IGBT and power MOSFET key areas of D&A segment

Supply chain based on specialization and partialoutsourcing


Vantaa plant, Finland• Crystal growth• Sensor wafers• Demanding Discrete&Analog wafers• Advanced wafers (SOI)

Allen plant, Texas, USA• Value-added wafers (EPI)

Fab lite (outsourced) capacity, Japan and China• Discrete&Analog wafers

Agile operations key capability

• Operations to support fast changes in demand, or in product mix.

• Vantaa plant specialized in high value-added products and flexiblesmall-batch production

• In sudden demand shifts, wafer capacity can be increased without investment by using fab lite (outsourced) capacity. Okmetic the onlysilicon wafer supplier utilizing competitors’ production capacity for partof its deliveries.


Agile operations in high demand


100-200 mm SOI

200 mm SSP

100-200 mm DSP

150-200 mm CAP

150 mm SSP

200 mm fab lite 150 mm fab lite

Highvalue-added

products

Vantaa wafer capacity

Agile operations in lower demand


100-200 mm SOI

200 mm SSP

100-200 mm DSP

150-200 mm CAP

150 mm SSP

150 mm fab lite


200 mm fab lite

Highvalue-added

products

SOI Substrates

200 mm SSP

100-200 mm DSP

150-200 mm CAP

200 mm fab lite 150 mm fab lite


150 mm SSP

Many competences need to be built to enable flexibleproduction


Multiskilled personnel

Process tools capable for different product mix

and wafer size

Fast new product creation and culture to manufacture various

small batch specifications

Qualified products

Qualified products

Fab litepartners with

• overcapacity• adequate

technicalcapability and cost structure

Vantaa always at capacity= cost effective

manufacturing process

Highvalue-added

products

People make the difference

• Personnel’s competence internationally competitive

• All production personnel have at least basic degree in chemical technology

• Multiskillness developed for more than 10 years

• Every 7th white-collar employee has a PhD

• All personnel groups are within the scope of incentive schemes

• Very good cooperation with Aalto University in recruiting new talent (summer interns (40+) most important source)


Quality absolutely key in obtaining and retaining business

• All relevant quality and environmentalcertificates (ISO 9001, TS 16949, ISO 14001)

• Compliance with industry regulation(REACH, RoHS directive and the GADSL)

• Quality and environmental certificationrequired also from subcontractors (ISO 9001, ISO 14001)

• Improvements driven by Six Sigma and Lean manufacturing tools

• Okmetic’s production lines and systems audited continuously by main customers




New products to account for over 40% of business by 2020 – constant need for innovation


0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

2015 2016 2017 2018 2019 2020

New customers &new products

Current customers &new products

Current customers &current products

E E E E E E

Differentiation through joint material development / shared R&D with customers


Benefits: cost reduction, faster cycles, shorter time to market and process streamlining

Volumemanufacturing

PrototypeDesign

Wafertailoring

R&D roadmaps extend beyond 2020, guiding investments and setting customer priorities


2015 2020

Crystal development

Laser TSV

Advanced HRS product

New power products

Enhanced platform product for RF

Substrate for Smart Power

CompletesensorplatformImproved C-SOI product

200

mm

pla

tform SOI

development

Okmetic’s R&D model – utilisation of external reseachpartners and close cooperation with customers


Local siliconcluster

Sciencecommunities Customers

Silicon clustersaround the world

Ideas, weak signals, market knowledge, technology development

Refining andrejecting ideas

Ideas for new productdevelopment

24

Financial instruments:• Tekes• EU• Otherinvestors

Innovation a prerequisite for survival

• In electronics, value chain is always looking for cost efficiency• Innovation can relate to process, use of tools, raw materials,

logistics etc. • Targets can be defined by customer or own needs and priorities• Roadmaps should never replace out-of-the box thinking• Important to indentify innovation – capable engineers (not everyone

is), and free up their time




ASP erosion makes silicon wafers a very tough, low-growth industry


0

2000

4000

6000

8000

10000

12000

2010 2011 2012 2013 2014 Forecast 2015 Forecast 2016

Mill

ions

Silicon wafer market value USD

Source: SEMI, May 2015 and October 2014

Focusing on high-value products, Okmetic has managed to escape commotidization and develop a price premium


Average Silicon Wafer Price, $/Sqi

>20%~100%

Market price figures provided by SEMI

How did we get there and how to maintain pricepremium in a competitive market?

• 100% customer penetration in main segments• Readiness to sacrifice any products that get commodotized, every

year• Strong focus on customer-driven NB pipeline• Embrace complexity and verify, time after time, Okmetic’s

commitment to develop the most ”impossible” wafers and materials• Dare invest in capability first and foremost. Capacity is secondary• Have faith in Finnish engineers.




Focused offering and business model for continuous success

• Technology advancing on a broad front, providing a growth market well into the foreseeable future

• Shared technology platforms leveraged across both customer segments

• Capex for capacity and capability• Flexible supply chain• Continued focus on cost efficiency in a highly competitive industry• Resilience to ASP erosion through specialization and long-term

development of technologies


Thank you.


Documents

Case Okmetic: Expertise, innovation and competitiveness · Founded 1985 by Outokumpu and Nokia • #8 silicon material company in the world, #1 by profitability since 2010 • 85%