The

Yield

Management

Company

Service Business

Rich Ruiz Director, Global Provisioning GSS Service Supply Chain Mgmt

Agenda

Overview Change

of KLA-Tencor Results

Roadmap

Preliminary

GSS Service Supply Chain Management

K
3

Who is KLA-Tencor?

The industry leader in yield management and process control solutions for semiconductor manufacturing and related industries. Products and services for in-line wafer defect monitoring, reticle and photomask inspection, electron beam metrology, wafer overlay, film and surface measurement, as well as overall yield and fab-wide data analysis. This technology is used by every major semiconductor manufacturer around the world.

Semiconductor World Market

Consumer Electronics: 12% Govt/Ot her: 9% Data Processing: 41%

Communicat ion Technology: 16%

Auto and Industrial: 22%

Semiconductor Sales
300 250 200 150 100 50 0

274 204

$B

2000

2005

ce: VLSI Research, 2-03

GSS Service Supply Chain Management

Whats unique about this business?

Leading

edge technology

Latest generation Materials, Process, and Equipment Technology provide the the capability to build integrated circuits with 90 nanometer critical dimensions.
Capital

intensive industry

A state of the art 300mm wafer fabrication facility can cost $1B - $2B and an hour of machine down time can cost >>$1M in revenue.
Epic

boom and bust cycles narrow customer base

5

Early signs of the next downturn are appearing

Extremely

10 customers make up 80% of total revenue

GSS Service Supply Chain Management

Problem Statement

The Problem May 2001*

Poor

parts availability was a major customer complaint and threatens to impact future business.
<65% of orders filled to service commitments.

Past

investments in inventory and supply chain improvements had failed to achieve sustained results. of poor operational performance was creating significant drain on service profitability.

Cost

* Joined KLA-Tencor GSS Service Supply Chain Management

Data Analysis

Deteriorating Inventory Performance

Inventory growth outpaced installed base growth.
125

and inventory was more than 3 times higher than best in class* performance
Inventory as % installed base (normalized)
3.50 3.00

% Growth from Jan 2002 Baseline

120

115 Installed Base Inventory 110

2.50 2.00 1.50

* PRTM/PMG 2003 Service Supply Chain Benchmark Study for electronics equipment makers

105

1.00 0.50
Q102 Q202 Q302 Q402
80 70

100 Q103 Q203 Q303

KLA Tencor Best In Class

Field Inventory Targets were growing uncontrollably.

60 50 40 30 20 10 0

GSS Service Supply Chain Management

Root Cause

10

Root Cause Summary

Forecasting

capability of existing execution system (DRP) was not designed to be effective in an extreme low usage environment (Linear Model assumptions are not met). stocking model did not achieve optimum balance between fill rate performance and inventory investment. interface between systems created data integrity and timing issues. systematic capability to manage improvement efforts.
11

Field

Poor No

GSS Service Supply Chain Management

Challenge of Low Failure Rate Planning

100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Number of Parts % of Total

Percent of Total Parts

Large Portion of the Decisions the system needed to Make was deciding whether to stock 1 or Zero.

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 >=50

12,000 11,400 10,800 10,200 9,600 9,000 8,400 7,800 7,200 6,600 6,000 5,400 4,800 4,200 3,600 3,000 2,400 1,800 1,200 600 0

Total Pieces Requested During Past 12 Months

Number of Parts Planned

12

GSS Service Supply Chain Management

Solution

13

Service Supply Chain Strategy

Implement

a scientific solution to resolve the Stock Planning process. Drive data integrity and integration through the entire process.
All usage, demand, installed base and inventory to be accurately captured.
Increased data reporting frequency. Weekly Inventory Flash, Daily Usage Review

Integrating

the stock planning and execution capability systems to ensure theyre being driven by the same data.
Leverage improved forecasting data to drive optimized distribution.
14

GSS Service Supply Chain Management

Preliminary Effects

15

Improvement in Key Service Metrics

% Im prove m e nt from Bas e line

18%

16%

14%

12%

10%

8%

6%

4%

2%

0% Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03

Local Fill Rate

Regional Fill Rate

Global Fill Rate

Supply Chain Cost (% of Rev)

16

GSS Service Supply Chain Management

Au

10

20

30

40

50

60

70

80

0 Normalized

Field Target Trend

O ct

g98

Historical Thresholds

GSS Service Supply Chain Management

-9 De 8 c98 Fe b99 Ap r-9 9 Ju n99 Au g99 O ct -9 9 D ec -9 9 Fe b00 Ap r-0 0 Ju n00 Au g00 Oc t -0 0 De c00 Fe b01 Ap r-0 1 Ju n01 Au g01 O ct -0 1 D ec -0 1 Fe b02 Ap r-0 2 Ju n02 Au g02 O ct -0 De 2 c02 Fe b03 Ap r-0 3 Ju n03

17