Making Chips, Solar Panels and Public Policy ITC Briefing – February 15, 2011 Maggie Hershey, SEMI and William Morin, A

1. Making Chips, Solar Panels and Public Policy ITC Briefing – February 15, 2011 Maggie Hershey, SEMI and William Morin, Applied Materials

2. About SEMI • Global industry association • ~1900 members • Established in 1970 to serve the semiconductor supply chain • Today serves members interests in the following market segments: • Semiconductor • Photovoltaic/Tech-Energy • Emerging or Adjacent Markets • HB-LED • Flat Panel Display • Nanotechnology • MEMS

3. The Electronics Ecosystem Estimate 2010 Electronic End Equipment $1,237B Semiconductors $300B { Semiconductor Equipment $38B SEMI® membership Materials $43B Source: SIA, SEMI, and IC Insights

4. Semiconductor Industry Outlook:2010 is a Record Year Annual Growth % (line graph) Global Semiconductor Revenue US $B (bar graph) Source: SIA/WSTS historical year end reports, SIA November 2010 Forecast

5. Demand Drivers • Shift from personal computers toward consumer and wireless applications; small proportion of demand from government • End Market Drivers for Semiconductor Demand • Wireless applications (cellular, Wi-Fi networks) • Entertainment (DVD, home FPDs, games) • Personal Computers • Automotive Electronics

6. Worldwide IC Revenues by Region of Sale Source: WSTS

7. Capital Equipment Cycles Annual Growth % (line graph) Global Capital Equipment Revenue US $B (bar graph) Source: SEMI and SEMI/SEAJ year end historical reports, SEMI Mid-Year 2010 Forecast

8. SEMI® 2010 Year-end Equipment Forecast By Market Region $42.77 $40.52 $38.95 $37.54 $29.52 $15.92 US$ Billions Totals may not add due to rounding. Source: SEMI Year-end 2010 Semiconductor Consensus Forecast, November 2010

9. Semiconductor Materials Cycles Global Materials Revenue US $B (bar graph) Annual Growth % (line graph) Source: Rose Associates historical reports 1987 through 1999, SEMI 1999 through 2011, January 2011

10. SEMI® 2011 Materials Forecast By Market Region $46.93 $45.53 $42.67 $43.55 $42.52 $37.25 $34.83 $30.94 $28.82 US$ Billions Source: SEMI Materials Market Data Subscription January 2011 Totals may not add due to rounding.

11. Some Industry Characteristics • R&D intensive: 10-15% of revenues reinvested into R&D • Export dependent: over 80% over U.S. companies’ sales are overseas • Global: no U.S. monopoly on this technology

12. Making the Same Chip Etch CVD PVD Implant Lithography Track Mask Making CMP Process Control Option 1 Option 2 Option 3, etc. Lam, AMAT Novellus Applied Varian ASML TEL Nuflare AMAT KLA-Tencor TEL, Hitachi HT Jusung Ulvac SEN Nikon Sokudo Micronic Ebara Vistec TEL, HHT, AMEC ASM Unaxis Nissin Canon Suss MicroTec Hitachi Tokyo Seimitsu Nova Measuring Substantial Foreign Availability of Technology February 2011

13. SEMI PV Group PV Group Focus - Manufacturing • Close to 500 SEMI member companies form PV Group, many of them with history and expertise in semiconductor manufacturing • 85+ PV “pure players” have joined since January 2009 • Advisory Committees, Technology Roadmap and Industry Collaboration, Standards, Expositions and Conferences, Policy and Advocacy, Industry Research and Statistics

14. Worldwide PV Production • In 2009, China and Taiwan built 49% of PV modules • U.S. ranked 5th in worldwide production

15. Worldwide PV Installations • Worldwide installed PV capacity has grown 16-fold over the past decade • Most of new capacity has been in Germany • US poised to overtake Germany in next two years

16. Policy Issues

17. Export Control Reform • Administration’s export modernization initiative seeks to create a: • Single list • Single license processing agency • Single IT system • Single enforcement agency • SEMI believes the system needs updating, particularly the Commerce Control List. • Semiconductor equipment controls not updated in 20 years. • Industry is highly controlled, products are widely available. • Emerging domestic industry within China. • U.S. companies need equal access to China market now to establish themselves, build their long term business, and to fund R&D and remain leaders.

18. U.S.-Korea Free Trade Agreement • SEMI urges Congress to pass this agreement as soon as possible. Working with the High Tech Trade Coalition (HTTC), a group of 15 industry associations. • Key benefits include: • Tariff elimination • Intellectual property rights protection • Trade facilitation • Need for U.S. to regain momentum on trade liberalization • SEMI also supports market expansion efforts through the Colombia and Panama Free Trade Agreements and the Trans-Pacific Partnership.

19. ITA Product Expansion • WTO’s Information Technology Agreement negotiated in 1996. Originally 29 participants, now 70. • Eliminated tariffs on wide range of IT products, including many types of semiconductor devices and equipment. Estimated cost savings in the billions. • Preliminary stage of considering expansion of product list: • New products and major changes in industry since 1996 • Clarify coverage, avoid classification disputes • Several associations recently sent a letter to USTR Kirk encouraging this initiative and work is beginning to build support with key trading partners.

20. Intellectual Property • Mounting challenges in IP protection can undermine the incentives and rewards of innovation. • Developing and protecting intellectual property has become a costly global management concern: • Rising costs of R&D increase pressure for return on these investments • Escalating legal costs of IP management and litigation • The globalization of the semiconductor business requires a global approach to IP management • Increasing IP violations are driven by: • Weak IP protection laws, enforcement and penalties in many regions • Outsourcing and off-shoring from the US and Europe to Asia • Major pressures for cost reduction in a consumer driven market

21. Intellectual Property Industry Impact: • Equipment – many companies focus on a limited number of product areas, making it difficult to absorb IP losses since there is not a lot of room to spread out these losses • Materials – many companies often serve multiple industries and could focus their resources in other areas if semiconductor-related investments are no longer advantageous Government: • Promote strong IP protection and enforcement provisions in free trade agreements • Ensure compliance by trading partners • Assist individual companies as possible Industry: • SEMI promotes best practices by requiring all member companies to commit to an IP Statement of Principles, Board-level discussions, educational activities, etc. • IP White Paper: www.semi.org/ip

22. Other Policy Issues • PV/Solar Energy: • Extension of the grant-in-lieu-of investment tax credit • Expansion of the advanced energy manufacturing tax credit • Renewable energy standard or clean energy standard with solar provisions • R&D Tax Credit • Extension before December 2011 expiration, goal of permanency • Government Investment in Basic Research: • NSF, NIST, DOE Office of Science, Focus Center Research Program • High Skills Immigration: • H-1B visas are critical for highly skilled workers and shortages continue • Supply Chain Issues: • “Rare earth” minerals: restrictions from China • Conflict minerals: SEC reporting/disclosure

23. For More Information Maggie Hershey Senior Director, Industry Advocacy mhershey@semi.org 202-289-0440 www.semi.org William Morin Director, Government Affairs Applied Materials William_Morin@amat.com 202-638-4434 www.appliedmaterials.com