Contents. Semiconductor DQ Monday Report Issue 47

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1 Semiconductor DQ Monday Report Issue 47 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 Spotlight on Semiconductors... 3 Recent Spotlight Articles... 3 Press.gartner.com... 3 In the News... 3 Upcoming Reports... 4 New Reports... 4 Upcoming Gartner Conferences... 5 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 47 DRAM Spot Market Pricing Table 1 shows the average spot market pricing for the eight DRAM devices tracked by GartnerDataquestfortheweeksending21Novemberand28November. Table 1 DRAM Spot Market Pricing (U.S. Dollars) 21-Nov Nov-03 Weekly Change (%) Low High Low High Low Gartner Dataquest Analysis Last week, spot pricing was mixed, with pricing changes ranging from a 3.1 percent decrease to a 1.1 percent increase. Figure 1 shows a 52-week history of average DRAM spotpricingforthefivekeydevicestracked. High 64Mb (8Mbx8 PC133) Mb (16Mbx8 PC133) Mb (16Mbx8 DDR266) Mb (32Mbx8 PC133) Mb (32Mbx8 DDR266) Mb (32Mbx8 DDR333) Mb (32Mbx8 DDR400) Mb (8Mbx16 RDRAM 400MHz) Source: Gartner Dataquest (December 2003) Figure 1 Average DRAM Spot Pricing, 52-Week History U.S. Dollars Mb PC Mb DDR Mb DDR Mb DDR Mb RDRAM Dec 27-Dec 17-Jan 7-Feb 28-Feb 21-Mar 11-Apr 2-May 23-May 13-Jun 4-Jul 25-Jul 15-Aug 5-Sep 26-Sep 17-Oct 7-Nov 28-Nov Source: Gartner Dataquest (December 2003)

3 Semiconductor DQ Monday Report, Issue 47 3 With the end of the month in sight, spot market pricing for mainstream devices is sustaining the trend of the last few weeks, with pricing for 256Mb DDR parts continuing to slip. But the older legacy devices have run out of steam, as far as price increases are concerned. Market activity was generally quiet with the United States on holiday at the end of the week. The average weighted pricing across all densities and technologies fell by 1.6 percent compared with the previous week. In other news, rumours continued to surface that Hynix Semiconductor is close to signing a draft agreement on the sale of its non-memory division possibly to Citigroup of the United States. Estimates on the value of the deal range from $400 million to $600 million. Whatever the final number, the cash will be a welcome boost to Hynix, and is likely to be used on extra capacity. By Andrew Norwood (andrew.norwood@gartner.com) Spotlight on Semiconductors Spotlight on Semiconductors provides an overview for a suite of Research Briefs specially commissioned to address a specific topic area. The overview and accompanying Research Briefs can be found on the Semiconductors Focus Area. Recent Spotlight Articles Client Issues for Semiconductors gartner.com/research/spotlight/asset_52724.jsp 22 October 2003 Forecast Scenarios, 3Q03: Cautious Optimism gartner.com/pages/story.php.id.9417.s.8.jsp 12 September 2003 Semiconductor Industry Seeks the Next Big Thing gartner.com/pages/story.php.id.9407.s.8.jsp 5 September 2003 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 Motorola Transfers Wafer Fabrication Facility The trend toward a "fabless" business model, where semiconductor vendors focus on chip design and marketing rather than production, can help reduce costs of new semiconductor devices by reducing overheads. In support of this trend, Motorola recently agreed to transfer ownership of a $1 billion fabrication facility in China to Semiconductor Manufacturing International Corporation (SMIC) based in Shanghai. This will allow the facility to be used for foundry purposes, that is, producing chips based on designs provided by customers.

4 4 Semiconductor DQ Monday Report, Issue 47 Intel Steps Down to 65 Nanometers Intel demonstrated a 65-nanometer chip test design on Monday 24 November. The transistors on the Static Random Access Memory (SRAM) test chips are so small that 10 million of them would fit in one square millimeter roughly the size of the top of a ballpoint pen according to Intel reports. Intel does not make stand-alone SRAM chips, but chose them as a demonstration device. SRAM is an important component for deeply embedded devices including processors and chips used for mobile phones. Upcoming Reports China/Hong Kong Semiconductor Market Logistics and Distribution Trends Abstract: The semiconductor market's logistics in China and Hong Kong are becoming complicated. This report attempts to illustrate different trends seen in the semiconductor distribution market in China and Hong Kong. Strategic Market Statements As China's electronics market continues to expand, semiconductor vendors have to constantly re-evaluate their distribution strategies. In addition to setting up revenue targets, semiconductor vendors should make sure a good evaluation process is in place to gain distributor "mind share." Semiconductor vendors should consider adding a few technically experienced distributors in their distribution portfolios. New Reports Worldwide Semiconductor Packaging and Assembly Facilities, 4Q03 Semiconductor packaging and assembly continues its growth in 2003, with expansion into China increasing substantially, as most major packaging companies now have projects under way. (Gartner Dataquest Market Statistics, SCEM-WW-MS-0179, 24 November 2003, US$9,995) Semiconductor Forecast: 4Q03 Update Semiconductor market revenue for 2003 is forecast at $174 billion, an 11.7 percent gain over annual sales of $156 billion in In 2004, sales are expected grow by 20 percent to $209 billion. (Gartner Dataquest Alert, SEMC-WW-DA-0112, 14 November 2003, US$95) Worldwide IC Package Forecast, Updates (Executive Summary) Worldwide integrated circuit package unit shipments will increase by 12.5 percent in 2003 compared with 2002, based on the semiconductor forecast in the third quarter of (Gartner Dataquest Executive Summary, SEMC-WW-EX-0301, 20 November 2003, US$195) Update: SPA Facilities Focus Manufacturing Plans in China Semiconductor packaging and assembly continues to grow, expanding into China, as major integrated device and original equipment manufacturers and semiconductor assembly and test service companies have projects under way. (Gartner Dataquest Alert, SEMC-WW-DA-0113, 19 November 2003, US$95) 4Q03 Update: Semiconductor Capital and Equipment Spending Industry fundamentals have strengthened, but a lack of business confidence is impacting capitalequipmentspending.severalscenariosarepossiblefortheindustry'srecovery. (Gartner Dataquest Perspective, SEMC-WW-DP-0350, 19 November 2003, US$795)

5 Semiconductor DQ Monday Report, Issue 47 5 Platform ASICs Jump-Start Market Platform application-specific integrated circuits are a new breed of products aimed to reduce the time to market and lower design costs. Platform ASICs have a bright future, as can be seen by the increase in new designs. (Gartner Dataquest Perspective, SEMC-WW-DP-0349, 18 November 2003, US$795) China/Hong Kong Semiconductor Distribution Channel Directory There are 124 distributors serving the semiconductor industry in China/Hong Kong. While all distributors have offices in Hong Kong, many have expanded their local coverage in mainland China in the past few years. (Gartner Dataquest Focus Report, SCSI-AP-FR-0130, 17 November 2003, US$1,295) China/Hong Kong Electronic Equipment and Semiconductor Market Forecast, 3Q03 (Executive Summary) China/Hong Kong electronic equipment production will grow 14.5 percent in China/Hong Kong semiconductor consumption revenue will grow 23.6 percent during the same period. (Gartner Dataquest Executive Summary, SEMC-WW-EX-0303, 17 November 2003, US$95) Photomask Market Forecast, 4Q03 Estimates for the photomask market show a decline for the third year in a row, despite first improvements in units sales. Forecasts note photomask revenue and unit demand through (Gartner Dataquest Market Statistics, SCEM-WW-MS-0178, 17 November 2003, US$1,495) DRAM Forecast Shows Industry Is on Track for a Good 2004 Revenue from dynamic random-access memory rose 30 percent in 3Q03 over the previous quarter. At $4.9 billion, it was the highest for 11 quarters, and most vendors returned to profit. This isn't just a seasonal upturn. (Gartner Dataquest Alert, MPDA-SE-DA-0005, 17 November 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. Gartner Dataquest Semiconductor Industry Conferences Gartner Dataquest has rescheduled its semiconductor conference to the first quarter of 2004 to meet its clients' needs.

6 6 Semiconductor DQ Monday Report, Issue 47 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