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U.S. Semiconductor Industry

U.S. Semiconductor Industry. Sebastian Budijanto Siantoro Chandra Emily Chiang Ambrosio Lina. Industry & Market Analysis. Definition. Materials that has electrical conductivity between a conductor and an insulator The most common semiconductor materials are silicon and germanium.

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U.S. Semiconductor Industry

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  1. U.S. Semiconductor Industry Sebastian Budijanto Siantoro Chandra Emily Chiang Ambrosio Lina

  2. Industry & Market Analysis

  3. Definition • Materials that has electrical conductivity between a conductor and an insulator • The most common semiconductor materials are silicon and germanium. • Example: Computer chips, both for CPU and memory

  4. Product Categories • Integrated Circuits (IC) • 85% of market • CPU and PC memory (DRAM, SRAM, Flash Memory) • Discrete Devices • Transistors, diodes, resistors • Optoelectrics • LED, Optical coupler, laser diode

  5. Business Models • Fabless • Focus on marketing and product development • Foundries • Manufacture and sell to other companies • Integrated Device Manufacturer (IDM) • 60% of market • Develop, produce and market products • Intel and AMD

  6. Industry Characteristics • Short product lifecycle • Moore’s Law • The number of transistors in IC doubles every 18 months • Increasing R&D expenditure • Development of nanotechnology • Increasing foreign consumption • In 3rd Quarter 2004, Asia Pacific has nearly 40% market share

  7. Industry Characteristics • Large IDMs start shift to fabless • E.g. Broadcom & Xilinx • Outsourcing production to foundries • E.g. TSM and IBM • More concentrated customer bases • Growth direction parallel to PC and telecommunication industry

  8. Annual Sales

  9. Industry Statistics • Market Capitalization = $ 556 B • Revenue (est.) = $ 180 B • Financial Ratios • Profitability and management effectiveness

  10. Financial Ratios • Price /Earnings 27.263 • Price/Book 3.645 • Current Ratio 4.007 • Debt/Equity 0.102

  11. Profitability and Management Effectiveness • Gross Margin 53.076% • Operating Margin 22.065% • Net Profit Margin 22.415% • ROA 13.678% • ROI 11.604% • ROE 15.022% • YoY Qtrly Rev Growth 32.7% • YoY Qtrly EPS Growth 42.8% • Dividend Yield 0.6%

  12. Cost Structure

  13. Leaders by Market Capitalization • Intel Corp $ 147.7 B • Texas Instrument Inc. $ 42.7 B • TSM Co. Ltd. $ 38.2 B • Applied Materials Inc. $ 27.7 B • STMicroelectronics NV $ 17.2 B 21. AMD $ 6.02 B

  14. Microprocessor Market share

  15. Flash memory market share Source: iSupply Market Analysis (September 2004)

  16. Leaders by Sales(2003 Annual Report) • Intel Corp. $ 30.1 B • Flextronics Int. Corp. $ 15.9 B • Texas Instruments Inc. $ 12.2 B 8. Applied Materials Inc. $ 4.5 B 10. AMD Inc. $ 3.5 B

  17. Market Composition

  18. Year 2003 Recap • US Sales = $80 Billion • U.S Market Share = 48% of $163 B • U.S. Jobs = 226,000 (estimate) • % of Sales Outside U.S. = 73% • R&D Investment = $22.82 Billion, 14% of Sales (estimate)

  19. Global Market Share

  20. Philadelphia Semiconductor Index (SOXX) – 5 year

  21. SOXX – 2 Year Range

  22. SOXX – 1 Year Range

  23. SOXX & DJI – 5 Year range

  24. SOXX & GSPC – 5 Year Range

  25. Environment • R&D Developments • Tariffs and export regulations • Broadband internet • Emergence of China

  26. R&D Developments • Increase in R&D funding by Congress • $5.6 billion for NSF (increase of 5%) • 20% projected increase in 2005 for nanotechnology • $12.6 billion for Department of defense (increase of 12%) • R&D tax credit and Equipment depreciation tax reforms

  27. Tariffs & Export Regulations • Elimination of semiconductor tariffs in 2002 • SIA is lobbying for PTA (President Trade promotion Authority) • Negotiating free trade agreement in Latin America and Asia Pacific

  28. Broadband Internet • Availability of broadband benefits US economy by hundreds of billions dollars • High Tech Broadband Coalition won over FCC in deregulation of broadband.

  29. Emergence of China • 3rd largest market share for semiconductor products • Predicted to be 2nd highest in 2010 the U.S. • Subject to WTO regulations • Anti-dumping law • Patent, standard, and quality enforcement • Trading and investing regulations

  30. Industry Forecast

  31. Development for industry sectors • PC industry • Projected 14% growth • Technological advancement • Telecommunication • Projected 14 % growth • Increase use of wireless telecom products • Consumer products • Projected 30% growth • Increase use of digital technology

  32. Consumer Products

  33. Advanced Micro Devices Inc. (AMD)

  34. Company Overview • Founded in 1969, based in Sunnyvale, California • Global supplier of integrated circuits (IC) • Personal, network computer, and communications • Facilities in US, Europe, and Asia

  35. Mission Statement • Purpose • “We empower people everywhere to lead more productive lives.”

  36. Executives

  37. Products Overview • Microprocessors • Desktop PC • AMD Athlon 64 FX, AMD Athlon 64, AMD Athlon XP, AMD DuronTM • Mobile: • AMD Athlon 64, AMD Athlon XP-M • Servers & Workstation: • AMD Opteron, AMD Athlon MP • Flash Memory • Spansion memory, Multi-chip packages • Personal Connectivity Solutions • AMD Geode, AMD AlchemyTM

  38. Competition • Microprocessor • Intel • Flash memory • Intel, Samsung, Toshiba, ST Microelectronics N.V., Sharp Electronics Corporation, Renesas Technology, Silicon Storage Technology, and Macronix International • Personal Connectivity Solutions • Hitachi, Intel, Motorola, Inc., NEC Corporation, Toshiba, Transmeta, and Via Technologies

  39. Strategic Partners • Formed FASL LLC (now Spansion LLC) with Fujitsu Limited • Design, produce, and market flash memory products • Agreement with IBM • Jointly develop new logic process technology • Formed AMTC and BAC with Infineon Technologies AG and Dupont Photomasks, Inc. • Constructing and operating advanced photomask facility

  40. Sales and Marketing • Distribution: • Direct sales force • Third party distributors • Avnet Inc. accounted for 13% of 2003 consolidated net sales • Fujitsu Limited accounted for 13% of 2003 consolidated net sales • Independent representatives • International sales • 80% of net sales in 2003 • 73% of net sales in 2002 • 67% of net sales in 2001

  41. Sales and Marketing (cont) • Expanding to China • Regional headquarter • Established relationship with OEM in China • Pricing • AMD sells to distributors under terms allowing the distributors certain rights of return and price protection on any inventory of our products held by them.

  42. Miscellaneous • Intellectual properties • 5,900 patents and 2,000 pending patents • Employees • 7,400 non-unionized employees (AMD) • 6,900 partially unionized employees (FASL LLC) • Restructured in 2001 and 2002

  43. AMD’s Demand Expectations • Worldwide demand for PC microprocessors will increase in 2004 • Replacement cycle for older PC system • Lower-priced PC system • Enhanced product features • Improved economic condition

  44. Goal • Microprocessor • Increase market acceptance • Flash memory • Increase market acceptance • Personal Connectivity Solutions • Continue provide cost-effective product

  45. Financial

  46. Financial cont’d

  47. Financial cont’d

  48. Financial cont’d

  49. Financial cont’d

  50. Company Snapshot

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