VEECO INSTRUMENTS INC.VEECO INSTRUMENTS INC.INVESTOR PRESENTATIONINVESTOR PRESENTATION
JULY 26, 2005JULY 26, 2005
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VEECO PROVIDES ENABLING TECHNOLOGY VEECO PROVIDES ENABLING TECHNOLOGY FOR PROCESS EQUIPMENT AND METROLOGY FOR PROCESS EQUIPMENT AND METROLOGY
FOR MULTIPLE GROWTH MARKETSFOR MULTIPLE GROWTH MARKETS
1” Drives for CE; iPod, 90 and 65nm; 300mm HB-LEDs, Automotive, Nanotech & Life ScienceCell Phones, Perpendicular TFHs Camera Cell Phones, LCD TV
Data Storage Semiconductor LED/WirelesData Storage Semiconductor LED/Wireless s Scientific ResearchScientific Research
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ENABLING SOLUTIONS ADDRESS COMMON CHALLENGES ACROSS MULTIPLE END-MARKETS
Process Equipment
• Ion Beam Etch & Deposition
• Physical Vapor Deposition
• Molecular Beam Epitaxy
• Metal Organic CVD
• Diamond-Like Carbon
• Lapping, Dicing & Slicing
Metrology
• Automated Atomic Force Microscopes
• Research AFMs and SPMs
• Stylus Profilers/Optical Interferometers
Enabling SolutionsCore technologies, capable of R&D and manufacturing, key to multi-year technology road maps
Data Storage
Semiconductor LED/Wireless
Scientific Research
• Technology solutions for R&D and production challenges
• Smaller geometries• New/ difficult
materials• Higher performance• Lower costs
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ADD MATERIAL (DEPOSITION)
REMOVE MATERIAL
IMAGE, MEASURE & MONITOR
VEECO LEVERAGES CORE TECHNOLOGIES IN GROWTH MARKETS
MARKETS WE SERVE...
Multiple markets provide stable growth …Broader opportunities
than silicon semiconductor
2004 REVENUE ($390M;UP 40%)
WE PROVIDE “KEY TECHNOLOGIES” FOR DEVELOPMENT AND MANUFACTURING
% of Veeco Revenue
• Ion Beam Deposition (IBD)• Physical Vapor Deposition (PVD)• Molecular Beam Epitaxy (MBE)• Diamond-Like Coating (DLC)• Metal Organic CVD (MOCVD)
• Ion Beam Etch (IBE)• Reactive Ion Beam Etch (RIBE)• Precision Lapping/Slicing
• Atomic Force Microscopy (AFM)
• Scanning Probe Microscopy (SPM)
• Stylus Profilers
• Optical Profilers
• Interferometers
• Quasi-static Magnetic Measurements
Semiconductor
Data StorageWireless
25%25%
32%32%
14%14%
29%29%
Scientific Research
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OUR CORE TECHNOLOGIES SERVE MULTIPLE MARKETS
DATA STORAGE SEMI/WIRELESSSCIENTIFIC RESEARCH
KEY LEADERSHIP TECHNOLOGIES CREATE CRITICAL MASS IN STRATEGIC GROWTH MARKETS, AT MAJOR ACCOUNTS
METROLOGY
Auto AFM, Res AFM, Optical
PROCESS EQUIPMENT
IBE IBD PVD Lapping-Slicing MBE MOVCD$227M $163M
$124M $152M $114M
$ amounts represent 2004 revenues
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• In the post PC era…microdrives, HB-LEDs, color displays, and wireless technology will enable a wave of new high volume, digital consumer electronics for mass markets (installed base of1.5B cell phones)
• A diverse market and product mix allows Veeco a broader customer base than most other semi equipment companies
• Veeco well positioned to benefit from growth in “converging” data storage, semiconductor, HB-LED display opportunities…based on Veeco’s core technologies
VEECO INVESTMENT THEMES
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SERVING INDUSTRY LEADERS IN MULTIPLE MARKETS
Semiconductor
LED/Wireless
Data Storage
Scientific Research
#1 Equipment Supplier for TFMHs;
Etch, Deposition, Lapping, Slicing, Dicing and
Metrology
Only Broad line Equipment and Metrology Supplier
MBE, MOCVD (Epitaxial Deposition) and Metrology
#1 3D AFM Metrology
Automated Atomic Force Microscopy and Optical
Profilers
#1 AFMs, SPMs and Optical Profilers
Breadth of research solutions
MARKETS PRODUCTS CUSTOMERS
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VEECO MULTI-MARKET GROWTH OPPORTUNITY
Data Storage Microdrive growth to enable new wireless consumer products (iPod, MP3 players, camera/cell phones). Development of next generation 160/200 GB drives and advanced development of perpendicular heads for 2006/2007. Industry to add capacity to double HDD unit manufacturing in 3 years
Semiconductor Complete deployment of 90/65nm, 300mm (8-10 AFMs per fab)
Wireless New application opportunity for Blue/White LED’s for backlighting of color displays, handheld camera/ cell phone, large area color displays, PDA, Wi Max, automotive, and solid state lighting
Scientific Research Continued strength of research AFMs/SPMs, characterization of new materials. Nanoscience emerges (life sciences, material sciences, genomics)
The content of Veeco’s enabling technologies increases in new consumer and nanotech applications
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THE NEXT BIG GROWTH OPPORTUNITY…beyond the PC
A $150B DIGITAL CONSUMER
ELECTRONICS MARKET BY 2007
$150B
$ 60B
Consumer Electronics Opportunities
High Chip, LED, color display, storage content (40%)
Capital Equip. required (17%)
Compared to:
IC capital equipment 2004… a 22% expansion to traditional market size
$ 10B
$ 45B
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DRAMATIC CONSUMER PRODUCT GROWTH (CG’04-’08)
Flat Panel Display Backlighting
HB-LED Headlights
Home Media Server
Enabled by the convergence of
semiconductor chips, wireless chips,
microdrives, high resolution color
displays, and high brightness LEDs
HDD for DVR/DVT
HDD for GPS; Auto Nav.
HDD for Digital Cameras, Audio/
Video PlayerWireless Mobile
Consumer Products
+35.9% CAGR
+61.4% CAGR
+33.6% CAGR
+145.7% CAGR
+159.2% CAGR
+71.2% CAGR
Sources: IDC, 2004; Strategies Unlimited 2004
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NEW CONSUMER ELECTRONICS BASED ON MICRODRIVE, HB LED, COLOR DISPLAY TECHNOLOGY
Apple iPod includes 6,10, 20 GB small
drives with content (higher ASP)
Palm One Camera-Equipped Smart Phone
Samsung introduces cell phone with small
drive
Seagate introduces 5 GB palm size,
pocket hard drives
Verizon to introduce music/TV downloads
for smart phones
Palm One sold 300,000 camera equipped Smart
Phones in 3 months
Nokia WiFi-equipped Communicator Cell Phone targets traveling executives
Apple sold 15 million units(sold 5M at Christmas)
iPod, MP3, smart cell phones, will converge Opportunity for small drives, HB LED growth
MARKET TRENDSMARKET TRENDS
DATA STORAGEDATA STORAGE
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DATA STORAGE… growth continues, orders up 33% to $60M, following increases in Q105 and Q404
• Record orders of $60M included Veeco Ion Beam, Slider, Optical Metrology and Auto AFM buys…multi million dollar orders from all 5 leading hard drive head manufacturers
• Drive manufacturers are reporting near 100% utilization rates in wafer and slider factories…essentially selling every drive they manufacture…many are reviewing capexspending increases quarterly
• Veeco record Data Storage revenue of $47M increased 85% in Q2. Ion Beam product revenue $46.6M; GM 43%
• Q1/Q2 buys reflect increases to current capacity and investment in technology for development of perpendicular heads for next generation areal density requirements
• Increased capex spending appears better aligned to increased demand than in previous cycles (volatility still a concern)
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DATA STORAGE… growth continues, orders up 33% to $60M, following increases in Q105 and Q404
• Digital consumer electronics will drive growth in the HDD industry over the next several years… CE forecasted to grow 39%/year through 2008… Sub 1.8” drives to penetrate
– set top boxes (DVR/DTV) – digital cameras/cell phones (could be 100 million drives) Nokia, Samsung– information appliances – “pocket” drives– automotive GPS
• Continued proliferation of new consumer drive products…approaching 20GB microdrives and 1TB desktop
• Overall industry drive revenue forecasted to grow 20% in 2005 (consumer applications)
• Heads per drive are increasing with 2005 forecasted growth (up 20%) to 900 million heads from 740 million in 2004
• Veeco breadth of technology provides strategic value to our customers…will allow introduction of new products ALD/PVD/DLC/next generation slider mechanical processing…in 2006
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0200400600800
1000120014001600
1956
1966
1976
1986
1996
2006
M U
nits
–A
nnua
l HD
D S
hipm
ents
PC era
3.5” 2.5”
3rd era 20
16
Mainframe era
24”, 14”
1st era Minicomputer era
8”, 5.25”
2nd era
2004
Consumer era
2.5” 1.8” 1”3.5”
DVD/HDD recorder since 2002
MP3 HDD since 2001
4th era
Source : Hitachi GST Estimate
CONSUMER APPLICATIONS ENABLE EXPONENTIAL GROWTH
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TiVo/DVR
Entertainment Centers/PCs
Laptop
Game (Xbox, PlayStation, etc)
Automobile GPS Navigation
MP4 Video
DATA STORAGE HOME OF THE (NEAR) FUTURE
Mobile Phone
By 2010 each household will include 10 HDDs*
MP3 Music (i.e., iPod)
Home Applications
Mobile Applications
New Microdrive(.85 dia.)
Home Media Server
* Source: Hitachi Global Storage Technologies
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Xbox
DATA STORAGE …Hard Disk Drive Unit Growth
1980 1985 1990 1995 2000 2005 2010 2015
Uni
t Driv
e Sh
ipm
ents
(mill
ions
)
800
700
600
500
400
300
200
100
0
Consumer Electronics
Laptop PC
Desktop PC
Enterprise
Servers
Desktop
Laptop
TiVo
iPodGPS
MobilePhones
Approx30%
ofHDDsby
2006
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DATA STORAGE HARD DRIVE GROWTHCONSUMER ELECTRONICS ADOPTION
Source: IDC Mar2005
ConsumerElectronics
Traditional (PC,Laptop, Enterprise)
CAGR(2004-2008)
39%
9%
15%Total0
100
200
300
400
500
600
CY04 CY05 CY06 CY07 CY08
HD
D U
nits
(Mill
ions
)
CE 1 out of 7
CE 1 out of 3
Growth in CE and traditional computer markets
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UNPRECEDENTED TECHNOLOGY AND FORM FACTOR CHANGES OCCURRING SIMULTANEOUSLY
1000
100
10
1
100
10
1
100
10
1
100
10
100
10
100
10
100
10
100
10
100
10
1
100
10
1
100
10
1
100
10
100
10
100
10
100
10
100
10
00 01 02 03 04 05 06 07
Are
alD
ensi
ty (G
bit/i
n2 )2 )
Perpendicular
Recording
Longitudinal Recording
CPP
GMR
TMR
Reader & Writer Development
Pico Slider
Femto Slider
Mini Micro Namo Pico Femto(100%) (70%) (50%) (30%) (20%)
1975
19871990
1995 2004?
Mini Micro Namo Pico Femto(100%) (70%) (50%) (30%) (20%)
1975
19871990
1995 2004?
Slider Shrinks
Microdrives
MicrodrivesTFMH Technology Changes Drive Capital Equipment Growth
Areal density roadmap increases (50%) per year toward CPP (perpendicular recording) capable of 1 Terabit/in² (2006)…will
require new manufacturing technology
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VEECO: IN EVERY STEP OF YOUR TFMH PROCESS
WAFER PROCESSES ROWBAR/SLIDER PROCESSES HGS, FINAL ASSY AND TEST
NEW MTI
Slicing
NEW MTI
Dicing
SEMICONDUCTORSEMICONDUCTOR
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IN SEMICONDUCTOR …Q2 orders $19M, up 32% sequentially, include (1) Ion Beam deposition system for advanced masks
• Despite our initial 2005 expectations of an industry-wide Semi Capexsoftening…we see continued world wide acceptance of our Auto AFMin Wafer Fabs for 90nm and 70nm, 300M applications
• Q2 Auto AFM orders remain steady. Received order for IBD-LDD advanced photomask deposition tool
• In general, our AFM sales will be paced by leading edge 90/70 nmdeployment in 2005
• KLA, a key competitor, has withdrawn their AFM product (10 beta site units have been returned)
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VEECO’S SEMICONDUCTOR OPPORTUNITY:SHRINKING DIMENSIONS REQUIRE 3D METROLOGY• Veeco has the broadest line of 3D
AFM non-destructive Metrology solutions
• Our goal is to be a step ahead of industry roadmap…90…65…45nm
• Top 10 semi device manufacturers have at least one AFM in line wafer fab – 300 systems installed…TAM 10 per fab
• We have launched new systems for specific applications in Etch, CMP, CD control, Photolithography
Veeco Dimension X3D and 65nm scan
26nm lines in R&D sample
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LEADING ATOMIC FORCE MICROSCOPE TIP TECHNOLOGYLEADING ATOMIC FORCE MICROSCOPE TIP TECHNOLOGY
Veeco tip development roadmap addresses leading edge 45nm and
25nm applications
• Recent JDP with Leti and Team NanoTech for advanced tip development
• Next-gen tips required to meet industry roadmap and improve customers’ CoO
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VEECO HAS PENETRATED KEY SEMICONDUCTOR CUSTOMER BASE
• Tech. Dev. CentersIBMTSMCUMCAMDInfineonSematechLetiSeleteTICNT
• IDMsIntelSamsungMicronIBMHynixToshibaST MicroAMDInfineonTI
• FoundriesTSMCUMCUMCiSMICPromosInotera
9 out of 10 Top Semi Customers use Veeco’s AFM solutions
Veeco expanded applications support identifiying new “AFM applications”
LED/WIRELESSLED/WIRELESS
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LED/WIRELESS…Q2 orders $13.3M, down 5% sequentially, signal “market bottom”
• As we expected, Veeco LED 2005 revenue will decline 25% as mobile cell phone growth slows, Taiwan/China have excess capacity…and supplier consolidation proceeds
• Industry LED device growth was 37% in ’04 to $3.5B; ’05 to be marked by ASP declines and slower unit growth
• Next LED growth wave…large area flat panel LCD TVs, automotive lighting and specialty architectural lighting expected in 2006
• The LED market is forecasted to double from $3.5B to $7.0B in the next 5 years driven by Blue/Green/White LED penetration evolving from keypad and color display backlighting
• To large area LCD TV (Sony/Samsung/Philips announcing 20”/40” TV’s)• To automotive tail light/turn signals/interior light, eventually headlights • To specialty lighting for buildings/bridges/museums/airports high resolution signs
and eventually to general illumination in homes and offices penetrating the $12B/year world-wide lighting business (2008 to 2010 timeframe)
• Veeco to use 2005 to improve product reliability, reduce warranty cost, introduce GaNzilla II plus…prepare for 2006 growth and improved gross margins
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Color LCD DisplayCamera Phone—Flash LED (camera phones will show rapid growth ‘04-’07)Mid-end using 11 LED, High-End using 24 LED
Sideview Whitefor color displays 1.0/0.8/0.6t600mcd ~1cdWhite Multi LEDs
for Camera flash3 White or RGB whitemore than 2cd
Multi chip indicators
Slim SMD Blue or Whitefor keypads0.35t
4 or 1 chip
3 chips
Main : 3 chip(sub-display :2)
8 ~ 12 chips
LEDS IN MOBILE PHONES…over 45 LED chips per phone~670M phones sold in 2004
Source: Samsung SEMCO, Blue 2004
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LED FORECAST…GaN HB LED market continues to grow (22% CAGR ’05 to ’09)
Source: Strategies Unlimited
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1960 1970 1980 1990 2000 2010 2020
Rel
ativ
e LE
D U
nit S
hipm
ents
EnterpriseRed Indicator Lights
Red HB-LEDs
Blue & Green
HB-LED (GaN)
White
Backlighting
Gener
alIllu
min
atio
n
Red LED
Blue & Green HB-LEDRed HB-LEDTail Light
HB-LED Headlights
Small LCD Backlighting
Cell Phone PDA
Large LCD Backlighting
$12BHB-LEDMarket
Size
SOLID STATE LIGHTING GROWTH OPPORTUNITYRed, Green, Blue HB-LEDs >20% CAGR
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EPITAXY ROADMAP…DEFINES NEXT GENERATION VEECO MOCVDGaN HB-LEDS
Color Binning (wavelength in nanometers)
Brig
htne
ss(m
Wpe
r std
LE
D a
rea)
8mW
7mW
6mW
5mW
4mW
3mW
2mW
1mW 2001
2002
2003
2005
+ 5nm + 4nm + 3nm < + 2.5nm <+ 2nm
Headlights
OutdoorSignage
MobilePhones
Large LCDBacklighting
Blue Keypads
20062007
TrafficLights
2004
20 lumens/watt
40 lumens/watt
60 lumens/watt
General Illum.
>2012
>100
lumens/W
GaNzilla I MOCVD
GaNzilla II MOCVD
NexGenMOCVD
New Applications Enabled By Advanced Epitaxy Films
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GANZILLA II MOCVD VALUE PROPOSITION
Value Proposition:
Superior Productivity from Higher Throughput and Narrower Device Binning
FEATURE BENEFIT1. New Flow Flange Narrower Binning =
Higher Yields
2. Heater Filament Improved Reliability
3. Advanced controls Improved Reliability
4. PyroControl & Temp Stability = RealtempTemp Higher Yields.
5. Automation Increased t'put
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COMPOUND SEMICONDUCTOR: HIGH BRIGHTNESS LIGHT EMITTING DIODES (HB-LEDS)
Primary Growth Demand
Timeframe Application
2015-2020 General Illumination
2010-2015 Automobile Headlights
2005-2010 Large LCD Backlights
2000-2005 Mobile Phone Backlights2002 2003 2004 2005 2006 2007
$5B
$4B
$3B
$2B
$1B
$5B
$4B
$3B
$2B
$1B
30% CAGR2002-2007
2002 2003 2004 2005 2006 2007
$5B
$4B
$3B
$2B
$1B
$5B
$4B
$3B
$2B
$1B
30% CAGR2002-2007
GaN-based HB-LEDs
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KEY LED APPLICATIONS
AutomotiveLighting
GeneralIllumination
OutdoorSignage
Mobile Appliances
HeadlampsDashboard
Heads up displays
60 million light vehicles produced per year; only 40% use LEDs
Headlamps and DRL will be introduced as
brightness continues to increase
Interior lightingIndustrial
Event lighting
5% of LED market in 2004, growing fast
Flexibility of light quality and color drives
novel applications
5-10 years before major adoption into
general lighting
Large displaysTraffic signals
Storefront lighting
Signage displays continue to become
larger and more dynamic
Beijing 2008 Olympics driving adoption in
China
Cell phonesPDAs
Flashlights
57% growth in LEDs for backlighting in
2004
Expected growth for white “flash” LED and other small displays
LCDBacklighting
Flat Panel TVsLaptops
Retail Display
Color rendering significantly higher than CCFL (100%
NTSC)
Adopted for high-end TV units; will increase penetration as price
falls
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SOLID STATE LIGHTING TO PENETRATE $12B GENERAL ILLUMINATION MARKET
•20% of Global Electricity Demand is for Lighting•Solid State Lighting (HB-LED) will Cut Consumption in Half
Satellite Composite Photo at Night
2015
Solid State Lighting
2005
Incandescent
SCIENTIFIC RESEARCHSCIENTIFIC RESEARCH
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IN SCIENTIFIC RESEARCH… Q2 orders $26M, up 3% sequentially
• We see continued strength of our profitable optical and AFM Metrology products in Material Science/Life Science and Nanotech material applications
• We will introduce new metrology products for extended applications in the second half of 2005 to grow this profitable Veeco segment
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WHY THE FOCUS ON “NANO-BIO”?
• Life Science Instrumentation is fastest growing portion of analytical instrumentation business
• Forecasted to grow 29% CAGR from 2003-2008 (versus 6% overall for the analytical instrumentation market)
• Nanomaterials: $35B market by 2020 ($200M in 2002)
• Industry lacks nanoscale metrology standards: a key bottleneck in development and manufacturing of commercial nano and bio-materials
• Veeco believes that the “nano-bio” instrumentation market is a large growth opportunity – should surpass GNP, electronic industry and information technology growth rates – and we are aligning our new product development programs to this area
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NANOTECHNOLOGY “All The World’s Industry Is In Its Path”
AFMs Image, Measure and Manipulate Nanoscale Structures
Life Science Information TechnologyNano Ruler
Magnetic Bits (HDD)160nmx40nm (100Gb/in2).
MEMS10um – 1mm
Transistor0.5um – 90nm
Quantum Dots20nm wide ea.
Silicon Atom0.2nm dia
Human Hair70um wide
Red Blood Cells3um dia
DNA Strand2nm wide
1,000,000nm
100,000nm
10,000nm
1,000nm
100nm
10nm
1nm
0.1nm
Magnetic Bits (HDD)160nmx40nm (100Gb/in2).
MEMS10um – 1mm
MEMS10um – 1mm
Transistor0.5um – 90nm
Quantum Dots20nm wide ea.
Silicon Atom0.2nm dia
Human Hair70um wide
Red Blood Cells3um dia
DNA Strand2nm wide
Silicon Atom0.2nm dia
Human Hair70um wide
Red Blood Cells3um dia
DNA Strand2nm wide
1,000,000nm
100,000nm
10,000nm
1,000nm
100nm
10nm
1nm
0.1nm
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AFM APPLICATIONS ‘LAB-TO-FAB’
CMP Etch Litho Resist Litho Masks
DNA
Nano-manipulation& PicoForce
Topography Magnetics Life Science Nano ‘Pull / Position”
Non-destructive(SARS virus)
Polarization Meas.(BiFeO3 spheres)
Atomic Scale Meas.(Copper seed layer)
RESEARCH & SCIENTIFIC (installed base >7000 systems)
PRODUCTION FAB (installed base >300 systems)
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• Nano Metrology
• Nano Manipulation
• Nano Material
Carbon Nanotube Transistor
VEECO’S SCIENTIFIC RESEARCH BUSINESS INCLUDES:
Nanotechnology
Materials Research
Life Sciences
• Semiconductor• Future Data Storage• Polymers
• Living Cells• DNA• Proteomics
Polymers Cu Films Magnetic Storage Media
DNA Lipids Protein Crystal Detection
$116
$961
$-
$200
$400
$600
$800
1997 2004
NANOTECHNOLOGY ($M)
Government Nanotech Funding Source: NNI
$116
$961
$-
$200
$400
$600
$800
1997 2004
NANOTECHNOLOGY ($M)
Government Nanotech Funding Source: NNI
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NANOMATERIALS
• Nanomaterials: $35B market by 2020 ($200M in 2002)
• Industry lacks nanoscale metrology standards: a key bottleneck in development and manufacturing of commercial nanomaterials
Veeco and Dow receive a $6M NIST/ ATP to Develop New Nanotechnology tools
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PICOFORCE AND NANOMAN FOR SINGLE MOLECULE MEASUREMENTAND NANOMANIPULATION
Pulls or stretches molecules and produces force spectroscopy
readings at Pico-Newton levels
MANIPULATION OF DNA USING VEECO’S NANOMAN SCANNING PROBE
100+ Units Sold Since Introduction
THE 2005 MODELTHE 2005 MODEL
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THE 2005 REVENUE MODEL by Business Segment
$390M TO $400M
$168M TO $171M
$68M TO $71M
$154M TO $158M
2005 RANGE
+3% TO +5%
-24% TO -27%
+15% TO +18%
2005 CHANGE
$390M
$163M
$93M
$134M
2004
Total
Metrology(Auto AFM/Research AFM
and Optical)
Epitaxial Equipment(MOCVD/MBE)
Ion Beam and Mechanical Equipment(IBE/IBD/Slider)
PROJECTED REVENUE/PRODUCT MIX CHANGE FOR 2005
Revenue mix change favors higher Vecco gross margin
Data Storage Growth
LED Decline
Scientific Research/Industrial Metrology Growth
Flat to modest growth
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THE GROSS MARGIN MODEL 2005
50%
55%
44%
46%
2006TARGET GROSS MARGIN
39.5%
52%
24%
35%
’04 YEAR
43%-44%40% 46%Total
53%52% 55%Metrology(Auto AFM/Research
AFM and Optical)
30%25% 33%Epitaxial Equipment(MOCVD/MBE)
42%36% 44%Ion Beam and Mechanical Equipment(IBE/IBD/Slider)
‘05 YEAR’05 QUARTERLY
INCREASE
IMPROVED GROSS MARGINS IN EACH BUSINESS SEGMENT
Q2 Disappointing…GaNzilla II helps GM 30-35%
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“THE 2005 INCOME MODEL”
16%
34%
50%
100%
Q206
13%
35%
48%
100%
Q106
8%
36%
44%
100%
2005 YR
3%
37%
40%
100%
Q1
10%8%5%EBITA
36%
46%
100%
Q4
36%37%Operating Expenses
44%42%Gross Margin
100%100%Sales
Q3Q2
IMPROVE GROSS MARGINS 2% PER QUARTER
APPROXIMATE TIME FRAME
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2005 PROFIT GROWTH PLAN ON FLAT REVENUE
54
60
98
114109
117
90
124 15540
40
73
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2003 2004A 2005E
+4%
+35%
+37%
+151%$279M
$390M +40% $405M +4%
-26%
+11%
+25%
+2%
Favorable product mix change (higher Data Storage, less Epitaxial revenue, stable Scientific Research/Metrology)… improves Veeco profitability
CS
Semi
DS
SciRes
▲ ▲
EBITA $13.0M $13.8M $~30M*
* Based on projected cost reductions, material savings, new products, warranty cost reductions and mix change
Q3 2005 GUIDANCEQ3 2005 GUIDANCE
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Q3 2005 GUIDANCE (as of 7/25/05)
• Q3 revenues and orders in the range of $95-105 million
• Q3 2005 GAAP earnings in the range of $(0.02) to $0.05 per share
• Q3 2005 non-GAAP (excluding amortization) earnings per diluted share are expected to be between $0.08 and $0.13 using a 35% taxrate
FINANCIALSFINANCIALS
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ORDERS, REVENUE AND EBITA UP…Exceed guidance and prior quarter
• Q2 revenue $103M, up 10% sequentially, above $90-$95M guidance, up 4% from prior year.
• Sequentially Data Storage up 85% $47.4M Semiconductor down 3% 16.9LED/Wireless down 38% 13.9Scientific Research down 12% 25.2 Total up 10% $103.4M
• Strong Data Storage Ion Beam, Slider and Metrology revenue as hard drive growth continues
Semiconductor
Scientific Research
LED/Wireless
13%13%25%25%
16%16%46%46%
Data Storage
(Record level)
Benefit of Diverse Market Mix and Data Storage Growth
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VEECO 6 MONTHS REVENUE
• 6 months revenue $197M, up 4% Y/Y; Semiconductor and Data Storage increase
6 months revenue Data Storage up 9% $73.0MSemiconductor up 19% 34.3LED/Wireless down 5% 36.2Scientific Research down 5% 53.8 Total up 4% $197.3M
Semiconductor
Scientific Research LED/Wireless
18%18%28%28%
17%17%
37%37%Data Storage
Benefit of Diverse Market Mix
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VEECO 2ND QUARTER… Orders up 20%...strength in Data Storage and Semiconductor
• Q2 orders $119M, up 20% sequentially, above $90-95M guidance, down 5% from prior year
Sequentially Data Storage up 33% $60.4M (record level) 1.30Semiconductor up 32% 19.0 (AFM and IBD mask) 1.10LED/Wireless down 5% 13.3 0.96Scientific Res. up 3% 25.9 1.03Total up 20% $118.6M 1.15
• Positive Book/Bill 1.15 to 1 (above sector performance)
• Ending Backlog > $155M• Record Data Storage Orders
(consumer electronic growth, continuedData Storage capacity ramp, technology investment in perpendicular
head investment)
Semiconductor
Scientific Research
LED/Wireless
11%11%
22%22%
16%16%51%51%
Data Storage
Diverse market mix allows Veeco greater growth than Silicon/Semi market
B/B
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Q2 ORDERS BY GEOGRAPHIC REGION
• Good penetration of International Markets
• 31% growth in APAC region as it becomes our largest region
• Data Storage, LED and Semiconductor customers shift additional decision making to APAC
APAC
N. America
Japan16%16%
27%27%
38%38%
19%19%
Europe
Q2 Orders $119M
$31.4M
$22.7M
$45.4M
$19.1M
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Q2 HIGHLIGHTS…Gross Margins and EBITA improve
• EBITA $6.1M up130% sequentially, up 21% y/y• EPS excluding amortization $.09
• above $.04 to $.07 guidance• Gross Margin 42%, 2% above Q1…in line with guidance, above prior
year 41.2%• Margins on track with 40, 42, 44, 46% Gross Margin quarterly
improvement plan (Ion Beam out- performs, Epitaxial under-performs)• Operating Expenses $37.4M or 36% in line with forecast…Q3/Q4 to
be 35%, 33%... • Inventory decreased $5.7M• Accounts receivable DSO reduced to 54 days• Cash flow was a positive $8.7M• Balance Sheet cash increased to $109M
• Pre-tax Veeco was breakeven on a GAAP basis
57
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STRONG VEECO BALANCE SHEET
($ IN MILLIONS)
Cash and Investments $ 109.4 $100.3
Working Capital 217.9 216.8
Fixed Assets 70.8 73.5
Total Assets 553.7 576.9
Long-Term Debt 229.4 229.6
Shareholders’ Equity $ 244.7 $ 252.4
June 30, 2005
Dec. 31,2004
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VEECO MULTI-MARKET GROWTH OPPORTUNITY
Data Storage Microdrive growth to enable new wireless consumer products (iPod, MP3 players, camera/cell phones). Development of next generation 160/200 GB drives and advanced development of perpendicular heads for 2006/2007. Industry to add capacity to double HDD unit manufacturing in 3 years
Semiconductor Complete deployment of 90/65nm, 300mm (8-10 AFMs per fab)
LED/Wireless New application opportunity for Blue/White LED’s for backlighting of color displays, handheld camera/ cell phone, large area color displays, PDA, Wi Max, automotive, and solid state lighting
Scientific Research Continued strength of research AFMs/SPMs, characterization of new materials. Nanoscience emerges (life sciences, material sciences, genomics)
The content of Veeco’s enabling technologies increases in new consumer and nanotech applications
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VEECO IS WELL POSITIONED FOR OPPORTUNITIES IN GROWTH MARKETS
2004 2007
Wireless consumer Electronics
with embedded
Micro drives
White LED backlighting
LCD TV, automotive and general illumination
Use of In-Line 3D AFM
Metrology for 90, 65 and
45 nm
Extending Nanoscience
Applications to Life Sciences
and NanoMaterials
~$600MRevenue*
Technology Convergence
Enabling Consumer Electronics
$400M+Revenue*
2005 2006
+40% +6%
$390MRevenue*
+40%
3 YR 15% CG RATE
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SAFE HARBOR STATEMENT
• To the extent that this presentation discusses expectations about market condition, market acceptance and future sales of Veeco’s products, Veeco’s future financial performance, or otherwise makes statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include the challenges of continuing weakness in end market conditions and the cyclical nature of the telecommunications/wireless, data storage, semiconductor andresearch markets, risks associated with integrating acquired businesses and the acceptance of new products by individual customers and by the marketplace and other factors discussed in the Business Description and Management’s Discussion and Analysis sections of Veeco’s Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K .
VEECO INSTRUMENTS INC.VEECO INSTRUMENTS INC.INVESTOR PRESENTATIONINVESTOR PRESENTATION
JULY 28, 2005JULY 28, 2005
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2005 2004 High End Low End
Operating income $2,032 $420 $1,750 $4,000
Amortization expense 4,026 4,575 4,000 4,000
Earnings excluding certain charges before interest, income taxes and amortization ("EBITA") 6,058 4,995 5,750 8,000
Interest expense, net 1,959 2,239 2,000 2,000
Earnings excluding certain charges before income taxes 4,099 2,756 3,750 6,000
Income tax provision at 35% 1,435 (1) 965 (1) 1,313 (2) 2,100 (2)
Earnings excluding certain charges $2,664 $1,791 $2,438 $3,900
Earnings excluding certain charges per diluted share $0.09 $0.06 $0.08 $0.13
Diluted weighted average shares outstanding 30,003 30,177 30,300 30,300
(1) The actual income tax expense (benefit) for the three months end June 30, 2005 and June 30, 2004 was $0.5 million and ($0.2 million), respectively.
(2) The forecasted income tax expense for the three months end September 30, 2005 high end and low end guidance is $0.6 million and $0.3 million, respectively.
NOTE - The above reconciliation is intended to present Veeco's operating results, excluding certain charges and providing income taxes at a 35% statutory rate. This reconciliation is not in accordance with, or analternative method for, generally accepted accounting principles in the United States, and may be different from similar measures presented by other companies. Management of the Company evaluates performance of its business units based on EBITA, which is the primary indicator used by management to plan and forecast future periods. The presentation of this financial measure facilitates meaningful comparison with prior periods, as management of the Company believes EBITA reports baseline performance and thus provides useful information.
June 30, September 30, 2005Three months ended Guidance for three months ended