Contents. Semiconductor DQ Monday Report Issue 20

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1 Semiconductor DQ Monday Report Issue 20 Introduction to Semiconductor DQ Monday Report Semiconductor DQ Monday Report allows Gartner Dataquest analysts to share opinions and analysis of key events as they unfold. To learn more about Gartner's industry-leading products and services, we encourage you to contact us at: or contact your local account executive. You can also visit us at About Gartner Gartner Dataquest is the recognized leader in providing the high-technology and business communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, e-business, and professional services sectors of the global IT industry. Contents DRAM Spot Market Pricing... 2 Memory Market Pricing, May Press.gartner.com... 6 In the News... 6 New Reports... 7 Upcoming Gartner Conferences... 8 Gartner provides unrivaled thought leadership for more than 10,500 organizations, helping clients achieve their business objectives through the intelligent and efficient use of technology. Additionally, Gartner helps technology companies identify and maximize technology market opportunities. Gartner's technology content and strong brand reach IT professionals globally through Gartner Research, its research and advisory unit; Gartner Services, its custom consulting unit; Gartner Events, including Gartner's renowned Symposia; and at Gartner, founded in 1979 and headquartered in Stamford, Connecticut, achieved fiscal 2001 revenue of $963 million. Gartner's 4,000 associates, including 1,200 research analysts and consultants, are in more than 90 locations worldwide Gartner, Inc. and/or its Affiliates. All Rights Reserved. 1

2 2 Semiconductor DQ Monday Report, Issue 20 DRAM Spot Market Pricing Table 1 shows the average spot market pricing for DRAM as tracked by Gartner Dataquest for the weeks ending 16 May and 23 May. Table 1 DRAM Spot Market Pricing (U.S. Dollars) 16-May May-03 Weekly Change (%) Low High Low High Low Gartner Dataquest Analysis Last week spot pricing was mixed, with pricing changes ranging from a 3.2 percent decrease to a 3.0 percent increase. Figure 1 shows a 52-week history of average DRAM spot pricing for the six key devices tracked. High 64Mb (8Mbx8 PC133) Mb (16Mbx8 PC133) Mb (16Mbx8 DDR266) Mb (32Mbx8 PC133) Mb (32Mbx8 DDR266) Mb (8Mbx16 RDRAM 400MHz) Source: Gartner Dataquest (May 2003) Figure 1 DRAM Spot Pricing, 52-Week History U.S. Dollars Mb PC Mb PC Mb PC Mb DDR Mb 266DDR May 21-Jun 12-Jul 2-Aug 23-Aug 13-Sep 4-Oct 25-Oct 15-Nov 6-Dec 27-Dec 17-Jan 7-Feb 28-Feb 21-Mar 11-Apr 2-May 23-May 128Mb RDRAM Source: Gartner Dataquest (May 2003)

3 Semiconductor DQ Monday Report, Issue 20 3 Pricing on DDR SDRAM 128Mb devices was flat during the past week. Pricing was in the range of US$1.60 to US$1.80. Pricing on the 256Mb 32Mbx8 DDR266 was in the range of US$3.05 to US$3.45 low-end pricing was up 1.7 percent while high-end pricing was up 3.0 percent on the week. Pricing on the 128Mb 16Mbx8 PC133 device was down 3.2 percent for low-end pricing for the week, while high-end pricing was down 2.9 percent. Pricing ended the week in the range of US$3.00 to US$3.30. Pricing on the higher-density 256Mb 32Mbx8 PC133 device was up 1.6 percent for low-end pricing for the week, while high-end pricing was up 1.4 percent. Pricing ended the week in the range of US$3.25 to US$3.65. RDRAM pricing was flat last week. Pricing ended the week in the range of US$4.75 to US$5.05. The big news this week has been the launch by Intel of the 865 chipset, better known by its code name, Springdale. The 865 chipset opens the door for the use of DDR SDRAM 400 in the mainstream PC market. Most of the DRAM vendors hope the introduction of DDR-400 to the PC market will see a repeat of last year's introduction of the DDR-266, in which the device attracted a significant premium over the SDRAM part. The problem is that most DRAM vendors are working off the same strategy a quick ramp of DDR-400 to take advantage of the price premium. But, already, this price premium for DDR-400 has fallen to 20 percent. Compare this with the 200 percent price premium the DDR-266 device enjoyed over the SDRAM PC133 device in November It is true that earlier in 2002, before demand had started to ramp from the PC market, that pricing difference between the two parts were marginal. However DDR-266 pricing soon rocketed as demand increased and supply could not keep up. But the massive pricing premium enjoyed by DDR-266 parts during much of the second half of 2002 occurred becauseoftheproblemsthatmanufacturerswerehavingwithyields. This time around most of the vendors have been working on an early introduction of DDR-400 in an effort to make sure that the bin yields for DDR-400 are acceptable before the ramp-up in demand. The vendors are tweaking the process and, in doing so, reducing supply. But these issues should soon be resolved and the market adequately supplied with DDR-400. Therefore it is unlikely that DDR-400 will see the massive price premium experienced with the DDR-266, and DRAM vendors will be disappointed. Memory Market Pricing, May 2003 By Andrew Norwood (andrew.norwood@gartner.com) Memory Pricing Still Under Gentle Downward Pressure Memory device pricing in May remained stable, with only gentle downward pressure to report. The second quarter is traditionally the weakest quarter of the year, so that the market is quiet is not surprising. How this year does differ from normal, of course, is in the lack of order visibility and the continued uncertainty about the level of demand going into the third quarter. Table 2 shows regional and worldwide average memory device contract pricing for May.

4 4 Semiconductor DQ Monday Report, Issue 20 Table 2 Contract Pricing for Selected Memory Devices (U.S. Dollars) South Korea Japan Taiwan China/Hong Kong Europe Americas Worldwide Device Low High Low High Low High Low High Low High Low High Low High NOR Flash 32Mb 2Mbx16-TSOP Mb 4Mbx16-TSOP Mb 2Mbx16-TSOP NAND Flash 128Mb 16Mbx8-TSOP Mb 32Mbx8-TSOP Mb 64Mbx8-TSOP N/A N/A N/A N/A Gb 128Mbx8-TSOP N/A N/A N/A N/A Gb 256Mbx8-TSOP N/A N/A N/A N/A N/A N/A N/A N/A SRAM Asynchronous 1Mb 128Kx8-70-ns 5V Mb 512Kx8-70-ns 1.8V/3V (CSP) Mb 512Kx8-70-ns 5V Mb 512Kx16-70-ns 1.8V/3V (CSP) Mb 1024x16-70-ns 1.8V/3V (CSP) SRAM Synchronous 4Mb N/A N/A Mb N/A N/A Mb N/A N/A N/A N/A Pseudo (1T) SRAM 16Mb (1Mx16) 3V N/A N/A N/A N/A N/A N/A N/A N/A Mb (2Mx16) 3V N/A N/A N/A N/A N/A N/A N/A N/A Mb (4Mx16) 3V N/A N/A N/A N/A N/A N/A N/A N/A

5 Semiconductor DQ Monday Report, Issue 20 5 Table 2 (Continued) Contract Pricing for Selected Memory Devices (U.S. Dollars) South Korea Japan Taiwan China/Hong Kong Europe Americas Worldwide Device Low High Low High Low High Low High Low High Low High Low High DRAM 128Mb (16Mbx8-133MHz) Mb (16Mbx8-266MHz DDR) Mb (8x16Mb RDRAM 800MHz) N/A N/A Mb (8x32Mb RDRAM 800MHz) N/A N/A Mb (32Mbx8-133MHz) Mb (32Mbx8-266MHz DDR) N/A = Not available Source: Gartner Dataquest (May 2003)

6 6 Semiconductor DQ Monday Report, Issue 20 Gartner Dataquest Analysis DRAM Little movement in DRAM pricing during the past month reflects strength on the demand side. In an uncertain business environment, system and component channel inventory is being built up in anticipation of a healthier market in the second half of the year so, in the short term at least, the downward pressure on DRAM pricing has abated. Flash NOR-Based Flash NOR-based flash pricing is relatively stable across the board, with any downward price movements restricted to the higher-density (32Mb and above) devices. We are hearing of tight supply affecting the lower-density (4Mb and below) devices, but so far buyers do not appear to have anything to worry about: Lead times are not lengthening, and prices are not rising. NAND-Based Flash NAND flash pricing has stabilized recently, with reports of tight supply here and there. The most likely explanation is that strong bit growth during recent months has resulted in demand catching up with supply. Whether this tightness in the market is a temporary mismatch between production levels and demand or whether it is a sign of a more fundamental period of undersupply to come remains to be seen. Certainly it is a bit too early to suggest that widespread shortages of NAND flash will be a feature of the second half of the year. SRAM High-density SRAM pricing remains under downward price pressure with no sign yet of a significant improvement in demand. By Richard Gordon (richard.gordon@gartner.com), Andrew Norwood (andrew.norwood@gartner.com), Hee-chan Lee (hee-chan.lee@gartner.com), Dorothy Lai (dorothy.lai@gartner.com), Jamie Wang (jamie.wang@gartner.com), Hiroyuki Shimizu (hiroyuki.shimizu@gartner.com) and Joseph Unsworth (joseph.unsworth@gartner.com) Press.gartner.com Press.gartner.com is designed to guide you through the correct procedure of obtaining a Gartner Dataquest analyst's quote. If your company would like to issue a press release quoting one of our analysts, you must submit your request to quote.requests@gartner.com. Standard requests will be approved within 48 hours. In the News ST Buys Smart Card Provider in Italy STMicroelectronics announced the acquisition from the IPM Group of the assets of smart card supplier Incard SpA of Italy. The move expands ST's efforts in the smart card business. Incard was the world's sixth-largest card maker in 2002, according to Gartner. With a manufacturing facility located in Marcianise, close to Naples, Incard has 290 employees. It complements ST's smart card chip technology, and its recent acquisition of Proton World International (PWI). In that acquisition, ST gained additional smart card system software know-how, particularly in the banking and finance fields.

7 Semiconductor DQ Monday Report, Issue 20 7 Marvell Posts Fiscal 1Q04 Profit Amid 12 Percent Sales Jump Marvell Technology Group reported sales of US$168.3 million for the first quarter of fiscal 2004, a 70 percent year-over-year jump from US$98.8 million, and a 12 percent quarterover-quarter increase from US$150.8 million. Net income was US$4.4 million, or US$0.03 per share, for the first quarter of fiscal 2004, compared with a net loss of US$30.9 million, or US$0.26 per share, for the first quarter of fiscal Agere Rolls Out Six Communications Chips Based on Common Platforms Agere Systems rolled out six chips for communications equipment, underscoring the company's desire to target different applications using common hardware and software platforms. Two devices act as traffic managers for edge boxes that carry frame services over an ATM backbone running up to 5 Gbps. The other four are designed to provide higher integration and boost channel capacity of 3G wireless base stations and DSL access multiplexers. The devices are based on 0.13-micron design rules from Taiwan Semiconductor Manufacturing Co. (TSMC). New Reports Final 2002 Asia/Pacific Semiconductor Market Share by Geographical Area (Executive Summary) Gartner Dataquest's final market share analysis shows that the Asia/Pacific semiconductor market grew 26.2 percent to achieve revenue of $55.2 billion in (Gartner Dataquest Executive Summary, SEMC-WW-EX-0236, 22 May 2003, US$195) DRAM Supply and Demand Outlook, 2Q03: New Alliances New alliances between leading dynamic random-access memory vendors will not solve the oversupply problems expected throughout most of 2003 and Users may find these changing relationships adversely affect supply. (Gartner Dataquest Perspective, SEMC-WW-DP-0279, 23 May 2003, US$495) DRAM Supply and Demand Quarterly Statistics: Worldwide, (2Q03 Update) This forecast gives details of the dynamic random-access memory market and its top 18 suppliers, covering applications, device density and technology. Oversupply will be 3.7 percent in (Gartner Dataquest Market Statistics, SCSI-WW-MS-0181, 23 May 2003, US$9,995) Asia/Pacific Foundry Industry Production Revenue, 2002 Asia/Pacific foundry production revenue, which accounts for about 78 percent of the global foundry market, hit $8.2 billion in (Gartner Dataquest Market Statistics, SCSI-AP-MS-0135, 22 May 2003, US$6,995) Semiconductor Foundry Market Share Estimates, 2002 (Executive Summary) The market for semiconductor foundry services rose 16 percent to $10.4 billion in revenue during Foundries contributed 19.6 percent to worldwide semiconductor revenue. (Gartner Dataquest Executive Summary, SEMC-WW-EX-0240, 21 May 2003 US$195) Silicon Wafer Market Grows 5 Percent in 2002 According to Gartner Dataquest's 2002 silicon wafer market survey, the market grew 5 percent over 2001 to reach $5.7 billion. (Gartner Dataquest Alert, SEMC-WW-DA-0088, 20 May 2003, US$95)

8 8 Semiconductor DQ Monday Report, Issue 20 Semiconductor Foundry Market Share Estimates, 2002 The market for semiconductor foundry services rose 16 percent to $10.4 billion in revenue during (Gartner Dataquest Market Statistics, SCEM-WW-MS-0161, 20 May 2003, US$6,995) TCAD Bridging Electronic Design and Manufacturing The importance of the technical computer-aided design tool will rise with greater demand in higher wafer yield as electronic design moves to the 90- or even 65-nanometer realm. (Gartner Dataquest Perspective, SEMC-WW-DP-0277, 20 May 2003, US$495) ASIC Design Starts Survey: EMEA, 2002 Update The industry slowdown hurt vendors of application-specific integrated circuits in Europe, the Middle East and Africa. The number of new designs fell by 12 percent and demand shifted toward cheaper, less complex devices. (Gartner Dataquest Focus Report, SCSI-WW-FR-0124, 19 May 2003, US$1,295) Stepper Sales: Digesting 2002 and Looking Ahead 2002 was the second year of decline for the semiconductor equipment market in general and steppers in particular. (Gartner Dataquest Alert, SEMC-WW-DA-0087, 19 May 2003, US$95) Upcoming Gartner Conferences Gartner Dataquest hosts the IT industry's most respected conferences and strategic forums in locations around the world. For more information, please contact Gartner Worldwide Events from within the United States at or visit the Gartner Web site at gartner.com. Semiconductor Industry and Market Update, Q2'2003 Breakfast Briefing Thursday, 12 June at 8 a.m. Eastern Millenium Hilton, New York City Gartner Dataquest invites you to attend the Semiconductor Industry and Market Update Q2'2003 Breakfast Briefing at the Millenium Hilton, 55 Church Street, New York City. Registration will begin at 8 a.m. We are excited to have the following analysts present: Jeremey Donovan, Research VP Jim Hines, Principal Analyst Bryan Lewis, Research VP Tom Starnes, Research VP Joe Byrne, Principal Analyst Please take advantage of this rare opportunity to meet Gartner Dataquest semiconductor analysts and register now! You may register by ing Becky Tonnesen at becky.tonnesen@gartner.com or faxing at The cost of the briefing is US$149.

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10 10 Semiconductor DQ Monday Report, Issue 20 For More Information... In the United States: In Europe, the Middle East and Africa: In Asia/Pacific: In Japan: Gartner Interactive: The content herein is often based on late-breaking events whose sources are believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The conclusions, projections and recommendations represent Gartner's initial analysis. As a result, our positions are subject to refinements or major changes as Gartner analysts gather more information and perform further analysis. Entire contents 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden Gartner, Inc. and/or its Affiliates. All Rights Reserved