Applied Materials Supply Chain Opportunities

1
Applied MaterialsSupply Chain Opportunities

• Larry Peruffo
• Managing Director, Central Materials

2
Business Mission
To be the leading supplier of semiconductor
fabrication solutions worldwide through
innovation and enhancement of customer
productivity with systems, process modules and
service solutions
3
Corporate Overview

• Past Four Quarters New Orders
• Past Four Quarters Revenue
• Worldwide Employees
• Worldwide Locations
• Gross RDE Investment (5 years)

• 6,097 Million
• 7,343 Million
• 17,000
• 13 Countries
• gt90 Sales and/or Service Locations
• Manufacturing in North America,Europe and Israel
• Development in North America, Asia, Europe and
  Israel

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Communications and Consumer ProductsDrive
Semiconductor Pervasiveness
Cellular Phones
45
Digital Camera
40
Set-TopBox
DVDPlayer
35
Internet Game Consoles
Smart Cards/Kiosks
30
SmartAppliance-Phone
Application MarketGrowth
Advanced DesktopPC and Workstation
25
MultimediaPC
CAGR (1997-2002)
AutomotiveApplications/GPS
20
PortableComputing
Switching LAN
1st Generation
15
2nd Generation
Video Camera
HDTV
3rd Generation
10
CarRadio
ColorTV
5
SemiconductorIndustry
0
0
5
10
15
20
25
30
35
40
45
50
55
SC Content (As of Equipment Cost)
Source Applied Materials Corporate Marketing
est., Dataquest
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The Worldwide Semiconductor Industry Food Chain
Electronics Revenue 1,326 Billion 3.5 of
Worldwide GDP
Electronics Revenue 1,040 Billion 3.2 of
Worldwide GDP
1.3X
Semiconductor Revenue 265.4 Billion 20.0 of
Electronics
Semiconductor Revenue 144.0 Billion 13.8 of
Electronics
1.8X
Capital Spending 68.0 Billion 25.6 of
Semiconductor
Capital Spending 39.7 Billion 27.6 of
Semiconductor
1.7X
WFE 22.3 Billion
WFE 39.0 Billion
1.7X
IncreasesOver 2001E
2006F
2001E
Source Dataquest, Applied Materials Corporate
Marketing estimates, WSTS, SEMI
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Global Presence
Taiwan 1,109 Million
SE Asia China 693 Million
E
F
F
9
A
E
15
29
Korea 449 Million
D
A
6
D
15
26
B
B
Europe 1,085 Million
Japan 1,876 Million
C
C
Q1 FY 01 Q4 FY 01 Revenue 7,343 Million
7
Wafer Fab Equipment Company Revenue
Applied Materials
TEL
Nikon
ASML
KLA
Lam
Canon
Novellus
SVG
Source Company Reports, VLSI Research 2/12/2001
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CustomersVirtually every semiconductor
manufactured in the world passes through Applied
Materials Equipment

• North America
• Intel
• Texas Instruments
• Motorola
• Japan
• Toshiba
• NEC
• Taiwan
• TSMC
• UMC

• Europe
• ST Microelectronics
• Infineon
• SE Asia and China
• Chartered Semiconductor
• Grace Semiconductor
• Korea
• Samsung
• Hynix

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Semiconductor Wafer Processing
Assembly, Test
ManufactureWafer
Epitaxy
Deposition
CMP
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Product Examples

• Product Size from a car to a large truck
• Selling Price from 2 million to 5 million
• Thousands of parts, many options, typically
  unique for each customer

Rapid Thermal Processing
Physical Vapor Deposition
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Supply Chain Design

• Assemble to order business, with some
  customization of individual tools
• Assembly and test done in-house, all other
  production sourced from suppliers
• Moving most assembly operations to contract
  manufacturers, increasing supply chain complexity

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Major Supply Chain Challenges

• Managing the Business cycles
• Increasing product mix
• Constant change of products
• Development of supplier capabilities

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Worldwide Wafer Fab EquipmentHistory and Forecast
Forecast
Actual
Sources Applied Materials Corporate Marketing
estimates, SEMI
14
Business Cycle ChallengeAustin Manufacturing
Builds
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Product Mix Complexity

• Customers moving from 200mm wafers to 300mm
• Completely new set of products for 300mm
  production
• Number of products increasing

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Constant Change

• Production plans change weekly
• Customer orders change several times during their
  manufacturing cycle
• Regular engineering changes to improve products
• These changes require constant re-planning of
  material

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Supplier Development

• Constant management of supplier capacity based on
  business cycles
• Supplier and internal business process
  development for contract manufacturing
• Improved quality at lower cost
• Broaden supply base to find lowest cost producers
  worldwide

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Major Supply Chain Initiatives

• RECENT PROGRAMS
• Oracle Implementation
• 18 month project that replaced Applieds MRP
  system with a corporate wide ERP system
• Outsourcing
• Transfer internal assembly operations to the
  supply base
• CURRENT PROGRAMS
• International Sourcing
• Develop suppliers in Low cost Regions to reduce
  material costs
• Supplier Collaboration
• Leveraging B-to-B technology for increased data
  availability and communication with the supply
  base

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Inventory Control
Production Control
Demand Management
Purchasing
Volume Manufacturing
Supplier Development
SMT - Modules
Logistics
Supply Chain Mgt
Materials Program Mgr
Buyer or Planner
Production Control
Global Materials
International Materials
Pilot Manufacturing
Purchasing
Strategic Materials (process support)
Global Capital Indirect
Manufacturing/ Operations
Customer Productivity Support
Field Support
Inventory Analysis
Work Center
Contracting
Project Management
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New College Graduate Placements
MSU - Spring 00 Contract Specialist - Awards
parts to contract after evaluating and sending
quotes. Focus is in managing/developing the
supplier this includes audits of supplier sites,
contract negotiation, and an emphasis on cost
reductions. Master Scheduler - Forecasts items
for different system technologies based on past
usage and future marketing trends. Executes and
reports demand activities for non-system orders.
Schedules the marketing forecast of non-system
orders by quarter into the MRP environment. BGSU
- Spring 00 Build to Print Contract Specialist -
Supports Machining, Ceramics, and Plastics
commodities by tracking and maintaining Cost
Models. Provides assistance to Supplier Account
Team Leads through working with suppliers and
contracting activities. MSU - Fall 00 Project
Coordinator - Acts as an interface between one
product business group and the supply chain
management organization. Focus is to reduce
costs for 200mm systems. BGSU - Fall
00 Production Control Planner - Supports
different product business groups by analyzing
material usage data and responding to MRP
suggestions, schedules manufacturing operations
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SCM Career Paths
SC - 8 years (Bowling Green) Buyer,PC
Planner,Master Scheduler,Purchasing
Mgr.,Materials Mgr., Master Scheduling Mgr. MB -
8 years (Michigan State) Buyer,Buyer/Planner,Contr
acts Specialist,SAT Lead,SAT Lead/Manager AC - 8
years (Michigan State) IC Planner,Buyer,Contracts
Specialist,Master Scheduling,Project
Manager,PM Supervisor WW - 8 years (Arizona
State) IC/PC Planner,Master Scheduling,Product
Marketing Engineering/Global Product Marketing MK
- 14 years (Arizona State) IC/PC
Planner,Buyer,Project Manager,IC
Manager,Materials Manager,Director
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Purpose of the Intern/Co-op Program
A strategic program designed to provide students
with hands-on experience to enhance their
professional and educational goals through real-
life projects.
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General Parameters of the Program

• Internship 3 months in duration
• full-time during the summer between May and
  August
• part-time during the Fall or Spring semesters
• Co-op Full-time work experience 6-8 months in
  duration
• January-August or May-December
• Present project results at conclusion of intern
  or co-op assignment