1996 FACTS 1997 FORECAST Market Size: $1,105 million Market Size: $815 million Shipments: 370 million Shipments: 330 million ASP: $2.99 ASP: $2.

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1 4 THE EPROM MARKET FACTS FORECAST Market Size: $, million Market Size: $8 million Shipments: 3 million Shipments: 33 million ASP: $2.99 ASP: $2.4 OVERVIEW EPROMs (electrically programmable read only memory) have long been the cornerstone of the non-volatile memory market. Created in the 9 s with Intel s invention of the UV-erasable PROM, these devices have since been produced in an assortment of part types with varying speeds and densities. Since about the early 99 s, EPROMs stronghold in the non-volatile market has been tested due to the emergence of flash memory. Many forecasts called for the quick demise of the EPROM market due to the greater presence and influence of flash devices. Yet demand from high-volume applications such as cellular phones, modems, BIOS storage, and numerous embedded systems, allowed the EPROM market to remain healthy for a longer time that most anticipated. Additionally, EPROM advantages over flash memory include smaller die size, cheaper technology, and the absence of peripheral circuitry and external components. These elements have kept the EPROM market rather strong. THE EPROM MARKET Beginning in, ICE believes that the flash memory market put more pressure on the EPROM market. As a result, the EPROM market, though still about one billion dollars in size, declined 2 percent to $. billion. Figure 4- shows ICE s complete EPROM market forecast for the -22 time period. Displayed are the market size, unit shipments, average selling prices, and price per megabit for several densities. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-

2 28Kbit Units (M) 26Kbit Units (M) 2Kbit Units (M) Mbit Units (M) 2Mbit Units (M) 4Mbit Units (M) 8Mbit Units (M) 6Mbit Units (M) Total Total Units (M) , , , ,43, ,38, , , , , C Figure 4-. EPROM Market Forecast A closer look at these figures (Figure 4-2) notes the definite downward trend of the EPROM market, units, and ASPs on a quarter-by-quarter basis. Further, Figure 4-3 shows that ICE forecasts the EPROM market to decline at an annual rate of -4 percent through the year 22. In fact, ICE forecasts that will be the first year (since its initial market days) that the EPROM market does not reach the one billion-dollar level. 4-2 INTEGRATED CIRCUIT ENGINEERING CORPORATION

3 4 4 Units (M) Millions of Units, Dollars Q94 2Q94 3Q94 4Q94 Q9 2Q9 3Q9 4Q9 Q96 2Q96 3Q96 4Q96 Q9 Quarter/ Units (M) K Figure 4-2. Quarterly EPROM Market Figure 4-4 displays the dollar volume of select EPROM densities. Here, ICE shows that although the 4Mbit EPROM density was the largest dollar segment, the bulk of EPROM sales can be attributed to devices with densities smaller than 4Mbit. In the smaller density domain, EPROM devices still hold a price/performance advantage over flash memory products. For instance, EPROMs have grown in the peripheral market, driven largely by the explosive growth of CD-ROM drives. Each CD-ROM drive uses a 26Kbit or 2Kbit EPROM. Furthermore, sales of modems have escalated with the increased use of the Internet. Emerging 6Kbit-per-second modems will likely opt for EPROM over flash once a standard has been adopted by the telecom community. Mid-density EPROMs currently serve in many arenas including PC peripheral devices, which require Mbit or less of EPROM serving as code storage. Applications for EPROM code storage include hard disk drives, scanners, graphics and multimedia cards, and fax/modems. In applications where volume is high and cost is crucial, EPROMs remain an attractive, low-cost solution. Another potential application is the set-top box market. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-3

4 ,4,2 Dollars (Millions), Total,2,3,39,38, E Figure 4-3. EPROM Market Decline EPROM UNIT SHIPMENTS Listed in Figure 4- are quarterly EPROM unit shipments by density during the past three years. As noted, the majority of EPROM shipments were devices with densities equal to or less than Mbit. During the ten-year (-22, Figure 4-6) time period, EPROM shipments peaked at 498 million units in. This surge was largely due to widespread use of EPROMs in various applications (CD-ROMs, modems, etc.) and some OEMs returning to EPROMs after being disappointed with initial flash memory availability and cost. Through the next five years, ICE forecasts that smaller-density devices ( Mbit) will still be responsible for at least half of all EPROM shipments. It is rather clear, however, that ICE s total EPROM shipment forecast is not very rosy. EPROM shipments, after having peaked in, decreased 26 percent in. ICE forecasts EPROM unit shipments will continue to decrease through the year 22. In fact, beginning in, ICE believes unit shipments will decline an average of - percent per year through INTEGRATED CIRCUIT ENGINEERING CORPORATION

5 Dollars (Millions),4,2, 28Kbit 26Kbit 2Kbit Mbit 2Mbit 4Mbit 8Mbit 6Mbit Total ,,,,,,,,,,,,,,,, , , , , , Figure 4-4. Dollar Volume of Select EPROM Densities Certain densities may be slower to decline than others. For example, ICE shows that smaller density (26Kbit) devices will remain the mainstay of the market through 22 (Figure 4-). Additionally, reasonably steady growth is forecast for the Mbit EPROMspecifically those with access times faster than 3ns. Target applications for these devices include code storage for digital signal processors and microcontrollers. Also, many other low-cost applications require embedded software solutions. In this case, EPROMs fill the need very nicely. EPROMs at the 4Mbit density (and greater) created some interest in the market. Yet, this segment remains quite slim. Nevertheless, high-density EPROMs with their comparatively lower cost, higher speed, and lower voltage offer advantages that may provide the optimum solutions in different designs. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-

6 4 2 Units (Millions) 8 6,,,,,,,,,, 4,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 2,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Q94 2Q94 3Q94 4Q94 Q9 2Q9 3Q9 4Q9 Q96 2Q96 3Q96 4Q96 Q9 Quarter/, 26Kbit 2Kbit Mbit Mbit Total Units (M) A Figure 4-. Quarterly EPROM Shipments By Density Units (Millions) Total Units (M) Figure 4-6. EPROM Unit Shipments 4-6 INTEGRATED CIRCUIT ENGINEERING CORPORATION

7 Units (Millions), 28Kbit, 26Kbit 2Kbit Mbit, 2Mbit, 4Mbit 8Mbit 6Mbit Total Units (M), 4,, 4, 3,, 3,, 2, 2, A Figure 4-. EPROM Unit Shipments by Density EPROM AVERAGE SELLING PRICES EPROM average selling prices (ASPs) for the -22 time period are shown in Figure 4-8. From -, EPROM ASPs fluctuated in response to normal supply and demand variations in the EPROM market place. Adding to the rise and fall of prices was the fact that several EPROM suppliers exited the market in and. Some returned in. In, ICE anticipates further ASP erosion in the EPROM market. Pressure on ASPs could come partly through a trickle-down effect from DRAM capacity shifting to flash memory. Several vendors indicated that their excess DRAM capacity would be switched over to build flash memory products in. The added capacity for flash could force ASPs downward on flash devices, which, in turn may result in EPROM suppliers reducing their ASPs to maintain their market position. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-

8 Total Figure 4-8. EPROM Average Selling Price Following, and through the year 22, ICE believes that EPROM ASPs will decrease more gradually. This will likely be the result of decreased demand and a higher percentage of sales coming from low-density parts. Figure 4-9 plots the ASPs of several EPROM densities through the year 22. EPROM vendors have worked to keep their products priced at a more competitive fare than flash memory products. Concurrently, leading EPROM vendors reduced the die size of their EPROM devices and in many cases now offer low-voltage, high-speed versions of their most popular configurations. EPROM BIT VOLUME EPROM bit volume data for the complete market and for specific densities is provided in Figures 4- and 4-, respectively. Due to the decrease in overall unit shipments, EPROM bit volume growth slowed greatly in. Lower overall EPROM unit shipments will offset any bit volume gains made as a result of higher density devices permeating the market though the year INTEGRATED CIRCUIT ENGINEERING CORPORATION

9 , 6Mbit 8Mbit 4Mbit 2Mbit Mbit 2Kbit 26Kbit 28Kbit. 28Kbit 26Kbit 2Kbit Mbit 2Mbit 4Mbit 8Mbit 6Mbit Total A Figure 4-9. EPROM ASPs By Density EPROM PRICE PER MEGABIT EPROM price per megabit values for several densities are plotted in Figure 4-2 for the years -22. Besides technology, one of the key elements that leads a designer to choose an EPROM over flash memory (or any other memory technology) is price. At lower densities, EPROMs continue to show remarkable resilience on a price-per-megabit basis compared to flash memory options. At higher densities, however, flash memories are more attractive from a priceper-megabit standpoint. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-9

10 4 4 Bit Volume Bits x Annual Bit Volume ( 2 ) A Figure 4-. EPROM Bit Volume Figures 4-3, 4-4, and 4- compare the price per megabit values for several EPROM and flash memory densities through the year 22. At the Mbit density (and smaller), EPROMs provide a cost advantage. However, at densities beginning at the 4Mbit level, flash memory devices are forecast to be more cost-competitive than EPROMs. Still, there remain many who believe that as EPROMs move to higher densities, they will maintain their cost advantage over flash memory devices. Despite early predictions to the contrary, price parity between EPROMs and flash memory chips is years away they believe, and in fact, may never occur. EPROM CONSUMPTION AND PRODUCTION Through the years, EPROM consumption has been much more evenly balanced by region than other memory segments (Figure 4-6). Japan is still forecast to be the EPROM market leader in. However, its share, and that of North America and Europe may begin to dwindle. The reason for this is that North America, Japan, and Europe will be quicker to accept and implement flash memory in different systems, thus leaving more of the EPROM market to the ROW region. 4- INTEGRATED CIRCUIT ENGINEERING CORPORATION

11 Bits x 2 28Kbit 26Kbit 2Kbit Mbit 2Mbit 4Mbit 8Mbit 6Mbit Total Bit Volume ( 2 ) 4, 4 3, 3, 2,,, 2,,,,,,,,, Figure 4-. EPROM Bit Volume By Density A Meanwhile, EPROM production (Figure 4-) remains firmly in control of North American companies. Several key Japanese EPROM suppliers exited this market during the past few years. The same holds true of many North American suppliers. However, as will be shown, some of them returned. EPROM SALES LEADERS Figure 4-8 briefly summarizes the recent EPROM activities of several suppliers. During the past few years, many vendors had difficulty determining just how aggressively they would participate in the EPROM market. An exodus of EPROM suppliers started in when formidable manufacturers such as AMD, TI, National, and many Japanese suppliers, including NEC, Fujitsu, and Mitsubishi announced they would curtail their support of this market in order to focus on other products. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-

12 Mbit 8Mbit 4Mbit 2Mbit Mbit 2Kbit 26Kbit 28Kbit Kbit 26Kbit 2Kbit Mbit 2Mbit 4Mbit 8Mbit 6Mbit A Figure 4-2. EPROM Price Per Mbit By Density Not every company distanced themselves from the EPROM market, however. SGS-Thomson, though shown with only a small EPROM sales increase in (Figure 4-9), remained committed to being the number one EPROM supplier through the end of the decade. ST continued to invest in EPROM technology. It currently uses.µm and.6µm process technology to build all its EPROM products. Atmel and Cypress increased their presence in the market during. Cypress anticipates greater opportunities in the commodity EPROM business. It started making slow versions (access times slower than ns) of its fast EPROM products. In doing so, Cypress believes it will better cover the complete range of speed requirements for many applications. Meanwhile, EPROM sales at AMD, TI, and Fairchild (formerly National) were indicative of their strategic (albeit short lived) decisions to withdraw from the EPROM market. A review of some of the key EPROM suppliers and their activities is provided below. 4-2 INTEGRATED CIRCUIT ENGINEERING CORPORATION

13 2 Mbit EPROM Mbit Flash Mbit EPROM ($) Mbit Flash ($) A Figure 4-3. EPROM Versus Flash Price Per Mbit Comparison (Mbit Density) 4Mbit EPROM 4Mbit Flash Mbit EPROM ($) Mbit Flash ($) A Figure 4-4. EPROM Versus Flash Price Per Mbit Comparison (4Mbit Density) INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-3

14 Mbit EPROM 6Mbit Flash Mbit EPROM ($) Mbit Flash ($) A Figure 4-. EPROM Versus Flash Price Per Mbit Comparison (6Mbit Density) Consumption (Percent) North America Europe Japan ROW A Figure 4-6. Regional EPROM Consumption (Percent) 4-4 INTEGRATED CIRCUIT ENGINEERING CORPORATION

15 6 Production (Percent) North America Europe Japan ROW A Figure 4-. Regional EPROM Production (Percent) SGS-Thomson SGS-Thomson (ST) reassured its existing customers and new clients that it would continue to provide a secure source of EPROM product, even as others exited the EPROM market. Low voltage is one of ST s strengths when it comes to EPROM offerings. With approximately onethird of the total market, the company offers a broad range of products starting at the 6Kbit level and scaling all the way to the 6Mbit density. The company also offers 4ns and ns EPROMs for DSP-oriented applications. Advanced Micro Devices Advanced Micro Devices (AMD s) EPROM business has gone from that of a leading supplier to that of an alternate-source supplier. AMD lost two of its primary EPROM foundry partners in. They abandoned AMD s EPROM production in favor of devices with higher ASPs. As a result, AMD had to closely re-evaluate its production commitments. Following the re-evaluation, AMD decided it was now more focused on the growth potential of its flash memory business. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-

16 AMD Still committed to EPROM production, but... Evaluating in-house capacity allocation. Lost two EPROM foundry suppliers. More wafer starts at Flash facility (FASL) in Japan. Atmel $3 million capital equipment investment to bring up.µm EPROM manufacturing process. Roadmap takes the process to.8µm. Cypress Primarily a high-speed EPROM player but now also attacking slow, low-cost segment left behind by others. Fairchild (formerly National) Aggressively pursuing EPROM market. Trying to win back customers it led to competitors two years ago when it (as National Semiconductor) decided to exit the market. Integrating EPROM and Flash capabilities with MCU and MPU technology to create application-specific products. Fujitsu Announced it would halt its EPROM production by the end of Q9 and concentrate on DRAM and flash memory production. Integrated Silicon Solution Inc. High-performance EPROMs for code storage applications. SGS-Thomson Upgrading EPROM process to.µm. Densities to 6Mbit; many low-voltage versions. Texas Instruments After reducing its EPROM production percent two years ago, TI recommitted to the market. The company rebalanced its capacity to bring EPROM production back to previous levels. 242B Figure 4-8. EPROM Suppliers - How Committed to Market? Others % Fairchild (National) % Company Sales ($M) Sales ($M) / Cypress % Macronix 9% TI % AMD 2% SGS-Thomson 33% $,M Atmel 2% SGS-Thomson Atmel AMD Macronix Cypress TI Fairchild (National) Others Total , ,38 4% 36% 2% 29% 23% 44% 8% 4% 2% 224A Figure 4-9. EPROM Sales Leaders 4-6 INTEGRATED CIRCUIT ENGINEERING CORPORATION

17 Nevertheless, AMD continues to offer performance-related EPROMs. Its product offerings range from 64Kbit to 4Mbit and are available in higher-speed versions. The company, through production capacity adjustments, has also been able to shorten lead times for its EPROM devices in. Texas Instruments In, with sales of its very profitable digital signal processor (DSP) line growing at the rate of percent annually, Texas Instruments (TI) quickly freed additional capacity to meet demand for these devices. On the chopping block went its EPROM business. Customers and distributors were informed that TI would reduce its production of EPROMs by roughly percent to make more DSP capacity available. A large amount of fab space at TI s Lubbock, Texas, site was converted from the manufacture of EPROM devices to DSPs in that year. Additionally, TI cited a longterm plan to convert to flash memory. That was. The industry downturn, coupled with expansion of other fabs for DSP production, freed up more capacity for EPROMs. As a result, TI recommitted itself to the EPROM market. The company offers a range of devices from 26Kbit to 4Mbit and has no plans to develop higher-density products. TI s strength in the EPROM market is supplying devices to customers in the automotive, computer, and networking segments. Fairchild/National National reorganized its non-volatile memory business in. Its plan was to back out of the EPROM market and to pull out of commodity markets altogether focusing instead on applicationspecific-oriented solutions. It did not seek out new customers and led its existing EPROM customer base to new suppliers. Between and, the company s EPROM sales plummeted from $6 million to $2 million. But, things changed when National spun off Fairchild Semiconductor in. Despite it being a tough market, Fairchild claims it is re-energizing its EPROM business and wants to take a leadership position in it. It made a long-term commitment to this market and stated it will be, one of the last three players on the block. The company plans to extend its low-voltage EPROM family to Mbit, 2Mbit, and 4Mbit densities. Fairchild operates its own wafer fab facilities but is also working with two foundry partners and hopes to migrate to.3µm process technology in. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-

18 Atmel With AMD, TI, and National retreating from the EPROM business in, Atmel responded by supplying more EPROM orders. Although its logic business has received greater emphasis in recent years, EPROMs continue to be a significant contributor to the company s annual sales as shown below. 43% In-system programmable memories 42% 24% EPROMs 2% 2% Logic 22% 3% Microperipherals % Atmel offers high-speed and low-voltage EPROMs. It manufactures both V and 2.V EPROMs with capacities ranging from 26Kbit up to 8Mbits and access times as fast as 4ns. The company s EPROMs are currently manufactured using.µm technology. To drive costs down further, Atmel is preparing to move its EPROM manufacturing to.3µm technology. Cypress In a few short years, Cypress moved from a niche to a volume EPROM player. Cypress entered the EPROM business in with the introduction of a general purpose 26Kbit device. Soon after, it developed the fastest Mbit EPROM and focused its attention on the high-speed segment of the business. When many suppliers left the EPROM market, Cypress took advantage of greater opportunities in the commodity EPROM market. As a result, it began making its fast EPROM products (26Kbit, 2Kbit, and Mbit devices with access times to 2ns) run slower (access times ns to 2ns). In doing so, Cypress now provides a wide range of devices to handle the gamut of existing and future applications. Serving both high-speed and slow-speed market segments provides Cypress the opportunity of significantly increasing its EPROM sales. The company has plenty of EPROM production capacity available at its Round Rock, Texas, facility. Cypress hopes for more widespread use of EPROMs in traditional applications including BIOS, the automotive market, and in code storage applications. New applications it envisions include digital videodisks (DVDs) and set top boxes. In August, Cypress formed the Non-Volatile Memory group into which EPROM development was moved. For the year (), the company reported 4 design wins for its EPROM chips. The company set what it believes is a conservative projection of 2-2 million EPROM units shipments in. 4-8 INTEGRATED CIRCUIT ENGINEERING CORPORATION

19 Hualon Hualon Microelectronics Corporation (HMC) planned to develop EPROMs (and EEPROMs) by late with samples available early in. NEC NEC said it would continue to make EPROMs as long as there were users. However, the chip maker also announced it would terminate development of its next-generation EPROM devices. The purpose of the move was to concentrate its resources on the flash memory business Fujitsu The company s planned phase-out of the EPROM market coincided with the closing of an older, 2mm wafer line at its memory-production complex in Iwate, Japan. The company announced it halted production of EPROMs in March,, and now focuses its memory-manufacturing efforts on flash and DRAMs. INTEGRATED CIRCUIT ENGINEERING CORPORATION 4-9