August 2011 Issue

Your monthly digest which aims to provide you a round up of the semiconductor headlines with a special focus to the Asian arena - direct to your inbox. Simply click on the relevant links provided to get the details.

Key Take-Away

Local Asia-Pacific News

Industry Headlines

Financial Watch

Mergers, Acquisition, Joint Ventures,

Spin-offs and People

Market Outlook

Views and Opinions

Stock Watch

Hi, Make yourself comfortable – for July was packed with news and this edition may be a longer read than “usual” (or “di solito” as my Italian amici say!) First to the local playground … Toshiba upped the hard disk drive game by announcing the opening of 2 more R&D centres with TDK and Showa Denko K.K to collaborate with it in the new centres - unlike competitors Seagate and Western Digital that are vertically integrated, Toshiba works with third parties for its key components. Sources cite that Hitachi may join Toshiba-Sony merger in small LCDs - a move that would create the world's largest maker of small panels. Moving to South Korea, the country is expected to rank third worldwide this year in terms of polysilicon production as local companies are expanding their production lines. The Korean technology giant, Samsung has created a new business division comprising its chip and flat screen operations. The move comes as it struggles with losses from its flat-screen operation due to weak demand from TV manufacturers and low productivity after it converted its LCD production process. In Asian silicon valley, aka Taiwan….. HTC’s announcement of its purchase of S3 Graphics plunged its stock despite a strong second-quarter earnings report. The company has increasingly turned to acquisitions to expand its software capabilities. Early this year, it announced its plans to acquire London-based mobile-platform company Saffron Digital as well as a stake in U.S.-based on-demand games company Onlive. With both Mstar and Mediatek vying for Nokia’s 2G biz, Spreadtrum buying Telegent and Mediatek licensing wireless charging from WiTricity, the local (am including China too here) fabless competition in mobile handset biz is beefing up. The Telegent acquisition, though, makes one wonder whether Spreadtrum too will do a SiRF.

On the global front - European semiconductor giant, STMicroelectronics saw the biggest drop (since September 2001) in its share price this month – courtesy Nokia. Now, why did I not sell off my STM shares whilst the charismatic Pistorio was at helm?? However the company did see a bright spot in MEMS. Thanks to HP inkjet wafers, STM topped the 2010 MEMS foundry revenue rankings. It also debuted into the touchscreen displays with its FingerTip technology. Applied Materials added to the semiconductor sector concerns with its warning on tough economic conditions. Similar such outlooks have come from Novellus, TSMC, Microchip Technology… to name a few. Many investors believe chip companies have spent too quickly on manufacturing expansion and could find themselves slashing capital expenditures next year.

If you have any thoughts on the above & would like to share them with me and your industry colleagues through this e-newsletter, please email me at meenu@asic-vlsi.com. Have a great month ahead! Best Regards Meenu Ps: If you see a need for

Training for your engineers Detailed research and an in-depth analysis for your specific market intelligence requirements, Do let me know; we can value-add. Visit www.asic-vlsi.com for details or simply drop me an email

LOCAL ASIA-PACIFIC NEWS

TSMC to ramp 14nm FinFETs in Q4 2013 Source: David Manners, Electronics Weekly – 29th July 2011

TSMC expects to begin its ramp of its first FinFET based process in Q4 2013, says CEO Morris Chang. The process geometry will be 14nm. Currently TSMC is ramping 28nm.

SMIC’s management woes add fuel to fire amid sector slowdown Source: Reuters – 18th July 2011 Shares of the world's No. 4 global contract chip maker, lost a tenth of their value today amid worries over its management shakeup, a foundry sector slowdown and delays in technology upgrades. Apple tests new chip with TSMC Source: Claire Jim and Argin Chang, Reuters – 15th July 2011 Taiwan's TSMC has begun trial manufacturing of next generation chips for Apple’s mobile devices, a source with knowledge of the matter said, in a sign that the iPad maker is shifting from its traditional chip supplier, Samsung Electronics Mediatek signs technology transfer and license agreement with WiTricity Source: Wireless Power Planet – 14th July 2011 The two companies jointly announced that they have entered into a technology

KEY TAKE-AWAY

Quarterly results and financial health Intel, Broadcom, ARM, Western Digital and Cadence posted strong results. TSMC, Applied Materials, Novellus gave grim outlooks. Woes at ST-Ericsson and Cisco continue. Acquisitions Tektronix bought Optametra and Veridae, Intel (Fulcrum), Spreadtrum (Telegent), Maxim (SensorDynamics), Cadence (Azuro), HTC (S3 Graphics), Microsemi (ASIC Advantage). Rankings STMicroelectronics topped the list in MEMS foundry revenue for 2010 - the only company to top 100 million dollars. Toshiba was a

transfer and license agreement. MediaTek will collaborate on the development and marketing of semiconductor solutions optimized for WiTricity’s patented technology for wireless charging over distance. Taiwan chipmaker is tops in Asia corporate governance Source: Reuters – 12th July 2011 No company in Asia does a better job of meeting the needs of analysts and investors than Taiwan Semiconductor Manufacturing Co., according to participants in Institutional Investor's first All-Asia Executive Team survey. 3M increases investment in Taiwan Source: Ken Liu, Taiwan Economic News – 12th July 2011 The company recently added several new equipment in a semiconductor application laboratory it is operating in Yangmei City, about an hour`s drive from Taipei, to better service its customers on the island. Toshiba starts volume production at Fab 5 Source: David Manners, Electronics Weekly – 12th July 2011 Toshiba and SanDisk have announced the start of volume production at Fab 5, the third 300mm wafer NAND fabrication facility at Toshiba’s Yokkaichi Operations in Mie Prefecture, Japan. Samsung produces first 20nm ARM based test chip Source: Anton Shiloy, Xbit Labs – 12th July 2011 Samsung's 20nm process technology will use second-generation gate last high-K metal gate (HKMG) process technology as well as fifth-generation strained silicon wafers. UMC calls for Taiwanese DRAM alliance Source: Techeye.net – 11th July 2011 Amid falling prices and growing concerns of a DRAM crisis in Taiwan, UMC has called for the integration of the island’s memory industry. It was announced last week that one of the nation’s leading DRAM manufacturers, ProMOS, would be cutting its capital by 85 per cent and calling in financial advisors to steer clear of disaster. Canon enters back-end packaging market with lithography tool debut Source: Electroiq – 8th July 2011 Canon made its first foray into the semiconductor back-end packaging equipment market with the new FPA-5510iV for through silicon via (TSV) and bump lithography Aixtron plans China training centre, introduces new MOCVD reactor Source: LEDs Magazine – 8th July 2011

close runner up to Samsung in the NAND flash market Training “VLSI Designs Essentials” – a 4 days public training course organized under IC-PLUS series organized in collaboration with VIRTUS and NTU-CCE. Course fees are 50% subsidized by WDA. 1st run : 12th – 15th September 2011

Germany-based equipment manufacturer Aixtron and the Suzhou Institute of Nano-tech and Nano-bionics (SINANO) have signed a cooperative agreement to establish a new MOCVD training and demonstration facility in the Suzhou Industrial Park (SIP) in the Yangtze River delta area of China. Toshiba opens two hard drive R&D centres Source: Rick Merritt, EE Times – 7th July 2011 Toshiba said it will open both its HDD Advanced Technology Centre as well as HDD Manufacturing Technology Centre on 16th July. TDK Corp, which manufactures magnetic heads, and Showa Denko K.K., which makes disks, will collaborate with Toshiba in the new centres. Many Taiwanese workers tempted by careers in green power sector Source: Focus Taiwan News Channel – 4th July 2011 Nearly two-thirds of Taiwan's office workers have expressed an interest in working for companies involved with energy saving products as prospects improve for solar power and LED lighting, according to a survey released Monday by 1111 Job Bank Samsung Electronics creates component division, chip head Kwon in charge Source: Reuters – 1st July 2011 The Korean technology giant has created a new business division encompassing its chip and flat screen operations, and named the head of its semiconductor unit to lead it. Back to top

INDUSTRY HEADLINES

ST-Ericsson to close Basingstoke site Source: David Manners, Electronics Weekly – 29th June 2011 According to the Basingstoke Gazette, ST-Ericsson is to close its R&D centre on the Chineham industrial estate, outside Basingstoke with the loss of 139 jobs. This is the fourth cost-cutting plan since the company was put together in 2008 by combining the wireless businesses of Ericsson, STMicroelectronics and NXP. GlobalFoundries fabs in New York and Dresden achieve “Ready for equipment” milestone Source: BusinessWire – 12th July 2011 Achieving "Ready for Equipment" (RFE) status marks the transition from the construction phase to the operations phase--a significant milestone on the path to volume manufacturing in these new facilities. Verigy debuts scalable semiconductor testers, digital channel cards

Source: Marketwire – 8th July 2011 The Advantest Group company launched scalable, cost-efficient testers for advanced semiconductors, such as 3D device architectures and 28nm and below technology nodes: V93000 Smart Scale Generation. Amantys wins $7m from ARM and Moonray for Cambridge power play Source: Business Weekly – 7th July 2011 Power electronics company Amantys, driven by ex-ARM Holdings executives and exploiting Cambridge University IP, has clinched the Series A round just a year after earning seed funding and only 16 months after launch. Applied Materials introduces innovation for building faster DRAM chips Source: Press Release – 6th July 2011 Applied Materials announced a trio of new systems designed to boost performance in the next generations of DRAM chips. These include Applied Centura® DPN HDTM Applied Endura® HAR Cobalt PVD and the Applied Endura® VersaTM XLR W PVD systems Back to top

FINANCIAL WATCH

Cadence lifts sales target after strong Q2 Source: EE Times - 28th July 2011 The EDA company reported second quarter revenue of $283 million, up 8 per cent from the previous quarter and up 25 per cent compared with the second quarter of 2010. Juniper networks reports preliminary 2nd quarter 2011 financial results Source: Marketwire - 26th July 2011 Net revenues for the second quarter of 2011 increased 15% on a year-over-year basis, and increased 2% sequentially, to $1,120.5 million. The company estimates revenue for the third quarter ending September 30, 2011, to be in the range of $1.070 billion to $1.120 billion. STMicroelectronics slumps by most in decade on forecast of drop in sales to Nokia Source: Chiara Remondini, Bloomberg - 26th July 2011 STMicroelectronics shares declined 11 per cent, their biggest drop since September 2001, to 5.67 euros, in Paris. The chipmaker has a market value of 5.17 billion euros ($7.49 billion). RF Micro Devices Q1 profit down Source: RTTNews - 26th July 2011

The company reported net income for the first quarter of $8.9 million or $0.03 per share, dropping substantially from net income of $28.3 million or $0.10 per share in the year-ago quarter. Broadcom results beat Street, stock leaps Source: Noel Randewich, Reuters - 26th July 2011 The fabless vendor gave a rosier-than-expected outlook for its revenues, dispelling worries about a tepid economy and high inventories and giving a hefty boost to its shares. ARM has cracking Q2 Source: David Manners, Electronics Weekly - 25th July 2011 Revenue grew 27% on Q1 to $190, margin grew from Q1’s 42.7% to 44.5% in Q2, profit grew 25% to $54m from $43.5m and cash generated was $45.7m up from Q1’s cash generation of $30.4m ZTE targets innovation with VC fund Source: Fiona Chau, Telecoms Europe – 22nd July 2011 The Chinese vendor’s fund of 100 million yuan will be used to back projects evaluating new concepts on technology systems, business models and management processes, and is part of the firm’s efforts to stay ahead of the technology curve by seeking out future investment ideas. Western Digital beats expectations, tops rival Source: Chris Casacchia, Orange County Business Journal – 21st July 2011 The disk drive maker reported revenue in the June quarter of $2.4 billion, up less than 1% from a year earlier. Adjusted profits topped $158 million, down 40% from a year ago as the company saw increased spending on research and development and slimmer margins. Intel reports (mostly) solid revenue growth Source: Rik Myslewski, The Register – 20h July 2011 Intel's second quarter of 2011 was a good one, beating Wall Street estimates and showing double-digit revenue growth across all major business segments. But weakness at the low end of the market shows that the world's largest microprocessor maker has its vulnerabilities. Cisco cuts 6500 workers, record $1.3b in costs Source: Zachary Tracer, Bloomberg – 19h July 2011 Cisco’s CEO, John Chambers has been eliminating jobs and abandoning less-profitable businesses amid slowing sales gains. The company has lost market share in its main switching and routing units to Juniper Networks and HP, and its forays into consumer products, such as the Flip video camera, faltered.

Polysilicon prices rebound, Si wafer faces challenges Source: EE Times – 14th July 2011 According to EnergyTrend, the spot price of polysilicon spot has recovered. Although the increase is modest, the price remained above $50/kg, which manufacturers indicate is the bottom line at the current stage. On the other hand, there is a slight change in silicon wafer prices. Applied Materials warns of tough economies Source: Reuters – 12th July 2011 The chip equipment manufacturing giant warned in May that it expected revenue in the current quarter to be down 3 per cent to 10 per cent from the previous quarter, implying revenue of $2.57 billion to $2.77 billion. WSTS: Chip market shrinking year-on-year Source: Peter Clarke, EE Times – 11th July 2011 Global chips sales in May were $23.49 billion, down by 1.7 per cent on the sales recorded for May 2010, according to figures from the World Semiconductor Trade Statistics organization. Novellus 2Q profit up but trims 3Q outlook Source: Yahoo Finance – 11th July 2011 Novellus’ second-quarter profit rose as sales grew 9 percent during the quarter, but softer sales are anticipated and the CEO lowered estimates for the third quarter. Microchip Technology announces preliminary net sales and EPS results Source: Businesswire – 11th July 2011 The provider of microcontroller, analog and Flash-IP solutions, announced today that it expects its net sales for its first quarter of fiscal 2012 ending June 30, 2011 to be down about 1.5% sequentially. TSMC has flat June, UMC drops Source: David Manners, Electronics Weekly – 11th July 2011

TSMC saw revenues drop 0.1% in June on May to US$3.8bn, while UMC saw revenues drop 2.3% on the month to US$315.5m.It is the third month in a row of successive declines for the two foundries.

Toshiba narrows gap with Samsung in NAND flash market Source: Yonhap News Agency - 10th July 2011

Samsung, which has been the world's leader in the NAND flash memory market for more than eight years, claimed 35.9 percent of the flash memory market during the first three months of this year, IHS iSuppli said in a report. Toshiba was a close runner-up with a 35.6 percent share in the three month period.

MEMS foundry rankings show STM’s dominance, pure-play foundry growth Source: Jeremie Bouchaud, IHS iSuppli – 5th July 2011 STM's 2010 MEMS foundry revenue totalled $228.6 million, the only company to top 100-million dollars. Inkjet wafers made for the Hewlett-Packard Co. represented the majority of STM’s MEMS revenue. ASE forecasts IC inventory adjustments, maintains capex budget Source: Electroiq – 30th June 2011 Despite higher-than-normal IC inventories, ASE will maintain its NT$23.2 billion (US$800 million) capital expenditure plan for future expansion by the end of 2011 Back to top

MERGERS, ACQUISITIONS, JOINT VENTURES, SPIN OFFS AND PEOPLE

Renesas to sell mobile power amp unit to Murata Source: Richard Wilson, Electronics Weekly – 29th July 2011 Murata has been looking at ways to strengthen its power amplifier technology in order to promote the integration of front-end modules including power amplifiers and to expand its business. Tektronix buys Optametra Source: Portland Business journal – 26th July 2011

Optametra makes analyzing equipment used to validate the performance of electronics equipment to help increase bandwidth on existing fiber networks. Tektronix President Amir Aghdaei said that combining Optametra’s equipment with Tektronix oscilloscopes will strengthen the company’s position in communications and optical markets.

Qualcomm grabs motion sensing patents in Gesture Tek deal Source: Dean Takahashi, Venture Beat – 25th July 2011 Under the deal, Qualcomm will own intellectual properties related to gesture recognition that are similar to the motion-sensing technologies that Microsoft acquired and created to build its wildly popular Kinect motion-sensing system Microsemi makes hostile bid to buy Zarlink for $549m Source: Alex Sherman, Bloomberg – 21st July 2011 Microsemi is expanding its semiconductor business through acquisitions. The company has announced seven deals since March 30, 2010, including a takeover of Actel last year for more than $400 million. Buying Fulcrum could deepen Intel’s data-centre role

Source: Stephen Lawson, IDG News – 20th July 2011 Intel's acquisition of Ethernet chip vendor Fulcrum Microsystems is just the latest step in integrating the components within data centers to help them work smoothly as a single virtual system. Spreadtrum acquires Telegent Systems Source: PRNewswire – 19th July 2011 Spreadtrum Communications, a leading fabless semiconductor provider in China announced that it has signed a definitive agreement to purchase Telegent Systems, a provider of semiconductor and software solutions for the reception of live, broadcast television on mobile phones. Maxim buys MEMS firm in $160m deal Source: Richard Wilson, Electronics Weekly – 18th July 2011 Maxim Integrated Products has acquired SensorDynamics, the Austria-based developer of sensors and MEMS devices. The deal will allow SensorDynamics to use the US chip maker’s manufacturing, distribution and sales infrastructure. The target markets are in inertial sensors, wireless connectivity and sensor interfaces Cadence acquires Azuro Source: Marketwire – 12th July 2011 Azuro offers unique clock concurrent optimization technology, also known as ccopt, which delivers superior capabilities for designers faced with increasing performance, power and area challenges. Intermolecular and GlobalFoundries sign broad collaborative agreement Source: Enhanced Online News – 12th July 2011 Under a newly signed multiyear Collaborative Development Program and intellectual property licensing agreement, GlobalFoundries will leverage Intermolecular’s High Productivity Combinatorial (HPC) technology to accelerate the creation of process modules that will be integrated into GlobalFoundries manufacturing lines worldwide. TowerJazz sells stake in Chinese plant Source: Chris Casacchia, Orange County Business Journal – 6th July 2011 The chipmaker said it agreed to sell its holdings in Shanghai’s Hua Hong Semiconductor Ltd. for $32 million in cash. The company, which operates under the brand name TowerJazz, owns 10% of Hua Hong shares. Smartphone maker HTC buys S3 Graphics from VIA, WTI for $300m Source: Robin Wauters, TechCrunch – 6th July 2011 VIA will receive $147 million, while WTI will receive $153 million. VIA will recognize a capital gain of $37 million and paid-in-capital of $115 million in this transaction.

Microsemi acquires ASIC Advantage Source: Globe Newswire – 6th July 2011 As ASIC Advantage's solutions are complementary to Microsemi's family of product offerings, the combined portfolio allows Microsemi to expand its reach into key markets and provide customers with a wider range of products from a single source. Tektronix acquires Veridae Systems Source: Marketwire – 5th July 2011 ”Veridae is solving an ever increasing challenge faced by our customers - debug and validation of their complex systems," said, Amir Aghdaei, President of Tektronix. "The combination of Veridae and Tektronix solutions will provide significant cost saving to our customers while accelerating their time to market." STATSChipPAC appoints Pasquale Pistorio as Director Source: Marketwire – 1st July 2011 Mr Pasquale Pistorio has been Honorary Chairman of STMicroelectronics group of companies since 2005. He served as the President and Chief Executive Officer of SGS Microelectronica from 1980 until 1987. Hitachi may join Toshiba-Sony merger in small LCDs: sources Source: Kentaro Hamada and Reiji Murai, Reuters – 30th June 2011 If the three-way alliance goes ahead, the mainly government-funded Innovation Network Corp of Japan will consider investing about 200 billion yen ($2.5 billion) in the merged unit Back to top

MARKET OUTLOOK

TSMC cuts capex and Q3 sales forecast Source: David Manners, Electronics Weekly – 28th July 2011 TSMC has cut its growth forecast for the foundry industry to 7% and reduced capex 5%, or $400m, to $7.4bn. Q3 sales are expected to fall 6-8% on Q2's $3.82bn (i.e. in between $3.54bn and $3.61bn). The company’s growth forecast for the overall semiconductor industry is 4%. SEMI shares capex forecasts at SEMICON West 2011 Source: Electroiq – 13th July 2011 Fab equipment spending will grow 19% to $35.1 billion, but assembly and packaging expenditures will drop: SEMI predicts -18% to $3.18 billion. Test equipment spending will also dip, down 5.5% (to $3.92 billion) from 2011.

ASML sees slowdown for semiconductor industry Source: Reuters – 13th July 2011 Dutch electronic chip manufacturing equipment maker ASML Holding says its customers are holding back on new orders as sales of computers and mobile phones slow, joining a list of technology firms warning over weak consumer demand. IC foundry sector facing uncertain times: analysts Source: Kevin Chen, Taipei Times – 12th July 2011 The Fitch Ratings report said aggressive capital expenditure and competition from integrated device manufacturing foundries would have a negative financial impact on “pure-play” foundries, while second-tier players such as China’s SMIC would be more vulnerable during a downturn Sticky times ahead for foundries, says China report Source: David Manners, Electronics Weekly – 12th July 2011 While high-end products like 28nm node and High Voltage/MEMS, do not suffer from over-capacity, other areas will see overcapacity till 2013 and, consequently, most foundries will suffer unavoidable losses, says the report. Timing IC market to hit $3b by 2016 Source: EE Times – 11th July 2011 The strong growth forecast for the market, currently valued at $1.7 billion, is attributed to the increasing demand from communications, computing and CE industry. Getting bearish: Analyst cut back 2011 SCE, but improve 2012 Source: Electroiq – 8th July 2011 A handful of industry watchers are lowering their 2011 outlooks for semiconductor capital spending, betting that there's more bad news ahead - but 2012 might not be as bad as feared. S.Korea to become world’s 3rd largest polysilicon maker Source: Yonhap News Agency – 5th July 2011 According to the report by Solar & Energy, a South Korean market survey and consulting firm, local companies are projected to produce a total of 37,595 tons of polysilicon this year, accounting for around 18 percent of global output. Back to top

VIEWS AND OPINIONS

Novellus sees “pause” on investment highway Source: David Lammers, Semiconductor Manufacturing & Design – 2nd June 2011 Novellus Systems CEO Rick Hill said several major semiconductor companies have postponed orders, characterizing the push outs as a “pause” in an otherwise robust semiconductor environment. Back to top

STOCK WATCH

Source: NASDAQ

1 month chart for Intel, TSMC, TI, Broadcom, STM, Xilinx, KLA-Tencor, Qualcomm, LSI, UMC, Applied Materials, Teradyne, Toshiba

and Infineon

INTEL

TSMC

TI

BROADCOM

STM

XILINX

KLA-TENCOR

QUALCOMM

LSI

UMC

APPLIED MATERIALS

TERADYNE

TOSHIBA INFINEON

Back to top

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