3Q03 Semiconductor and Electronics Manufacturing ForecastSan Jose, California • 8 July 2003

Presenters: Klaus-Dieter Rinnen

Mary Olsson

Jim Hines

Jim WalkerEmerging Technologies and Semiconductors

Gartner Dataquest

Semiconductor Manufacturing Market Semiconductor Manufacturing Market Outlook: Fundamentals Point to GrowthOutlook: Fundamentals Point to Growth

2

Forecast Growth Scorecard

Revenue Growth (%) 2002 2003 Base Up Base Down

World GDP +2.0 +2.2U.S. GDP +2.5 +2.4

Electronic Equipment* -1.4 +4 Semiconductor +1.9 +12 +8 +1

Capital Spending -38 +15 +8 +1

Equipment Spending -30 +18 +11 +3 WFE Equipment -32 +15 +9 +1 P&A Equipment -22 +35 +26 +17

Silicon Shipment (MSI) +19 +10

*Production revenue

3

+2.

2

+3.

4

+2.

0

+1.

2

+4.

0

0

1

2

3

4

5

2000 2001 2002 2003 2004

Source: Global Insight (June 2003)

Real GDP Growth (Percent) •U.S. tax cuts stimulate strong U.S. consumer spending•Eurozone adopts looser

economic policies•Capital spending revives•Dollar depreciates slowly

•Wild cards limited

2H03 revival still possible, but full recovery may be

pushed out to 1H04

•U.S. tax cuts fail to stimulate U.S. consumer spending

•Eurozone maintains tight economic policies

•Capital spending falters•Dollar crashes

•Wild cards wreak havoc

Global GDP Growth, 2000-2004

4

Overall IT Trend — Weighted/Monthly:2003 Cautious Underspending; 2004 Increase

Key Trends: Current spending remains below

budgeted levels Stalled recovery in current spending

Contributing factors:– War with Iraq– SARS outbreak– Slow economy

Technology manufacturing and communications vertical market lags current spending

Projected demand in 2004 slightly higher, but still below prewar level

5

Gartner Dataquest’s Index of Semiconductor Market Leading Indicators, July 2003

-45%

-30%

-15%

0%

15%

30%

45%

60%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Semiconductor Growth

Indicator

Actual ForecastForecast

Semiconductor Revenue Growth

6

Monitoring Phased Recovery Through 2004

1H03 2H03 1H04 2H04

Cell Phones

PCs

•Recovery under way:•Equipment markets slowly

improving•Cell phones transition to higher

generations, especially in Japan•PC market improving

•Continued recovery depends on:•Growth in cell phone demand •PC replacement cycle starts in 2H03•Stronger electronic

equipment production in 2004

SpendingConsumer Corporate

?

Communications

7

Semiconductor Demand by Application

0% 5% 10% 15%

41%

24%

17%

2003 Semiconductor “Pie”CAGR (%) 2002-2007

8%

7%

3%

Automotive

Communications

Industrial

Data Processing

Military/Civil/Aerospace

Consumer

8

0

50

100

150

200

250

300

1996 1998 2000 2002 2004 2006

Billions of Dollars

Semiconductor Revenue Forecast:Recovery Gains Momentum in 2003

8%2%

23%

22%-5%

6%Upside Potential

9

Quarterly Semiconductor Revenue: Market Expands on 2H03 Improvement

Optimistic PessimisticMost Likely

30

35

40

45

50

55

60

65

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

Billions of Dollars

2002

1.9%

Scenarios

OptimisticMost LikelyPessimistic

2003

+12.3% +8.3% +1.3%

10

Conclusions

Inventory days peaked in 1Q01

Healthy drop in 1Q03

Good “bill of health” for inventories

Supply Outlook: Semiconductor Inventory

Dataquest Semiconductor Inventory Index

0.8

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1Q99 1Q00 1Q01 1Q02 1Q03

11

Wafer Fab:Overall Industry Utilization

Ratio of Silicon Consumed to Fab Capacity

40%

50%

60%

70%

80%

90%

100%

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

Leading Edge

12

Wafer Fab: Foundry ServicesFoundry Fab Utilization

Ratio of Silicon Consumed to Fab Capacity

40%

50%

60%

70%

80%

90%

100%

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

Leading Edge

13

Wafer Fab: Foundry Services Quarterly Revenue Forecast Scenarios

Optimistic PessimisticMost Likely

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

Billions of Dollars

2002

+16%

Scenarios

OptimisticMost Likely

Pessimistic

2003

+27% (0.25)+23% (0.60)+21% (0.15)

14

Conclusions

2003: Demand growth and price pressure

2004: Tightening capacity

2005: Strong demand growth and pricing support

Wafer Fab: Foundry Services Market Revenue Forecast

Revenue (Billions of Dollars)

0.0

10.0

20.0

30.0

2000 2003 2006

15

Wafer Fab: Equipment Quarterly Revenue Forecast Scenarios

Optimistic PessimisticMost Likely

3

4

5

6

7

8

9

10

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

Billions of Dollars

2002

-32%

Scenarios

OptimisticMost LikelyPessimistic

2003

+16% (0.25) +9% (0.60) +1% (0.15)

16

Wafer Fab: EquipmentWhat Is Hot and What Is Not in 2003?

Note: Some segments include OEM sales

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

ECD

Steppers

2003 Growth

2003 Revenue (Millions of Dollars)

Market Growth

TrackDry Etch

CMP Nontube CVD

PVD

RTP

ImplantProcess Control

Wet Clean

Factory Automation

193-nm Steppers

0%

20%

40%

50%

30%

10%

17

Packaging and Assembly: Overall Industry Utilization

Factory Utilization

30%

40%

50%

60%

70%

80%

90%

100%

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

Leading Edge

18

Packaging and Assembly: SAT Services Quarterly Utilization

Factory Utilization

30%

40%

50%

60%

70%

80%

90%

100%

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

Leading Edge

19

Packaging and Assembly: SATS Market Quarterly Revenue Forecast Scenarios

Optimistic PessimisticMost Likely

0.0

1.0

2.0

3.0

4.0

5.0

1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

2002

+18%

Scenarios

OptimisticMost Likely

Pessimistic

2003

+29% (0.30)+22% (0.55)+16% (0.15)

Billions of Dollars

20

Conclusions

2003: Packaging production exceeds 2000; strong QFN

2004: Flip chip and SIP become strong drivers

2005: WLP moves into mainstream

Packaging and Assembly: SAT ServicesAnnual Revenue Forecast

Revenue (Billions of Dollars)

0

10

20

30

2000 2004

21

Packaging and Assembly: Equipment Quarterly Revenue Forecast Scenarios

Optimistic PessimisticMost Likely

0.0

0.5

1.0

1.5

2.0

1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04

2002

-22%

Scenarios

OptimisticMost Likely

Pessimistic

2003

+35% (0.25)+26% (0.55)+17% (0.20)

Billions of Dollars

22

Packaging and Assembly: Equipment What Is Hot and What Is Not in 2003?

Molding/Encapsulation

AP Lithography

2003 Growth

2003 Revenue (Millions of Dollars)

Die Bonders

Market Growth

Package Singulation

Flip-Chip Bonders

Dicing Saws

Contact Prober

Vision Inspection

Solder Ball Attach

Test Handlers

Wire Bonders

15%

25%

35%

0 150 300 450 600

23

Long-Term View: Cycles ContinueCapital Spending and Equipment Forecasts

Billions of Dollars

0

10

20

30

40

50

60

70

1999 2001 2003 2005 2007

Capital Spending

Billions of Dollars

0

5

10

15

20

25

30

35

40

45

1999 2001 2003 2005 2007

Semiconductor Equipment (Excluding Test)

24

Conclusions Economy

Expect improvement in 2003, albeit back-end-loaded Weakness in Europe and Japan sharpens need for U.S. improvements

Electronic equipment Expect gradually improving macro conditions to spur phased recovery Start of Y2K PC replacement cycle expected; strength is questionable Corporate spending returns in 2003; strength depends on economy

Semiconductors Expect revenue growth of 8 percent in 2003 Expect tightening capacity utilization and better demand to drive 2004

Supply-side and capital equipment Healthy inventories and rising demand lead to improving fab utilization Supply-side fundamentals encourage more optimistic outlook on CAPEX with 7.9

percent growth in 2003 Holding to WFE growth of 8.7 percent Upgrade packaging equipment segment to 26 percent growth for 2003 Next fab build cycle slips into 2004; next downcycle in late 2005/early 2006

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Gartner Dataquest Events at Upcoming SEMICON/West 2003

SEMICON/West 2003 Forum

– Semiconductors: Fishing in Tide Pools or Open Seas

– 16 July 2003 San Francisco, CA

– For more information or to register, please visit www4.gartner.com/2_events/local_briefings/asset_8216.jsp

Breakfast Briefing

– The Back End Leads the Recovery

– 18 July 2003 San Jose, CA

– For more information, please visit the Featured Events section on the Gartner Semiconductor Focus Page: www4.gartner.com/pages/section.php.id.2014.s.8.jsp

– For registration, please contact Becky Tonnesen at becky.tonnesen@gartner.com