COVID-19

With the emergence of consolidation as a potent engine of semiconductor industry growth, global mergers and acquisitions are sweeping the industry as companies look to accelerate advances across segments including data centers, AI, IoT and automotive chips.

Founded in 2004, S2C’s worldwide customer base uses its desktop and enterprise field programmable gate array (FPGA) prototyping tools to verify system on chip (SoC) and application-specific integrated circuit (ASIC) designs will work as intended.

Luc Van den hove, president and CEO at imec, spoke on semiconductor sustainability, healthcare trends and deep tech, and their implications for the semiconductor industry, sharing his views ahead of his keynote presentation at SEMI ISS Europe on May 30, 2022, in Brussels, Belgium.

Kate Wilson, president of the semiconductor division at Edwards Vacuum, has already made progress in tackling critical issues like reducing Edwards’ carbon footprint, building an inclusive workplace, and contributing to overcoming the global chip shortage.

Considering the history of computing and the low expectations for women that were once widespread in academia and the workplace, little wonder that women continue to face significant hurdles in the microelectronics industry. Today, women make up less than 25% of the computing workforce.

AEM Holdings Ltd, a Singapore-based multinational corporation, is listed in Forbes Asia’s 200 Best Under A Billion 2019 and 2020 spotlighting small and midsized companies in the Asia-Pacific region with sales under $1 billion. AEM clinched the Singapore Business Review Technology Excellence Award 2020 for Analytics-Semiconductor and the Singapore Business Awards Enterprise Award 2019/2020. These achievements are testament to AEM’s vision and innovation and the company’s contributions to the increasingly complex testing of chips in a rapidly evolving technological world. I spoke with AEM CEO Chandran Nair, a new Regional Advisory Board (RAB) member of SEMI Southeast Asia, about the company’s intelligent test and handling solutions, its role in digital transformation, the company’s key role in the smart manufacturing movement and the growth prospects for Singapore’s electronics sector. SEMI: AEM’s application-specific, intelligent system test and handling solutions for semiconductor and electronics companies serve the advanced computing, 5G and AI markets. How do you differentiate your solutions from those offered by competitors? Nair: A key differentiation for AEM is that we work closely with our customers to develop application-specific integrated test and handling solutions that meet their needs in a scalable manner from lab to production. We offer our customers customized, full-stack test and handling solutions that give them the agility to accelerate their delivery cycles and enhance product quality. Over the years, AEM has developed and acquired world-class technologies in instrumentation, test, automation, robotics, optical inspection, high-end thermal control, and software. These technology pillars, along with our deep know-how to customize test and handling solutions using the technology pillars as a platform, enable AEM to meet the fast-changing needs of our customers faced with the challenges of testing heterogeneous and complex devices. In addition to investing in technology, AEM has also invested in delivering application-specific solutions to meet customer demand. Our recently announced acquisition of CEI with its manufacturing capabilities in Vietnam and its specialization in low-volume, high-mix manufacturing increases our geographical reach and our ability to quickly turn application-specific test and handling solutions to be deployed. We have a unique and differentiated approach that enables our customers to test high-performance computing devices, automotive devices, and mobility devices with maximum test coverage, cost-effectively, in a manufacturing environment. Our experience in serving the high-performance computing market that traditionally drives advancements in thermal control also puts us at the forefront of delivering comprehensive thermal management, vision, and deep automation and test solutions for the computing, automotive, and mobility markets. AEM also has a strong instrumentation portfolio, including high-density digital instruments and mixed-signal and protocol-aware instrumentation that is well-suited for ATE solutions for SoC, high-power devices, and CMOS image sensors. Over the last few years, we have also established leadership positions in developing and deploying application-specific test solutions for MEMS devices and offering wafer and frame probing stations suitable for R D, wafer sort, and final test. We form strong partnerships with our customers, provide them with end-to-end support in product development, and take them through the entire life cycle process from concept to mass production. Chandran Nair and Goh Meng Klang, vice president of operations, at the AEM manufacturing site in Singapore. (Photo credit: AEM) SEMI: Digital transformation is powering strong growth of advanced computing, 5G and AI. Will AEM be expanding its AEM manufacturing plants in China, Malaysia and Singapore to meet rising demand for these technologies in the coming years? Nair: In regards to manufacturing, AEM currently has manufacturing facilities in Singapore, Malaysia, the U.S., Finland, and China. With our recently announced acquisition of CEI, we will add manufacturing capability in Vietnam and Indonesia. AEM will continue to expand manufacturing appropriately to give our customers cost-effective solutions while maintaining our proven track record of delivering on time and scaling rapidly in times of crises like the pandemic or geopolitical disruptions. As for advanced technologies, the three key factors that will bring the full potential of 5G to fruition are 1) cost-effective, high-powered processing devices at the edge, 2) easy access to high-bandwidth communications, and 3) cost-effective sensor technology. Semiconductors are the primary drivers of these three key success factors. As devices become more complex and our reliance on semiconductor-powered devices in all aspects of our lives deepens exponentially to include mission-critical applications, AEM’s role is to ensure that our customers' electronic and semiconductor devices are shipped thoroughly tested, safe to use, and highly reliable. It is imperative that, as a testing company, we find innovative ways to help our customers test their products with maximum coverage and minimum cost. To do this, we are focusing our R D efforts and investments to continue building on our key technology pillars to ensure that we stay ahead of the curve when it comes to test and handling solutions. We prepare our customers to test increasingly complex devices manufactured on the latest process node. SEMI: During your career you’ve driven projects in test and automation and more recently robotics solutions for ports, logistics warehouses and transport. With robotics and automation a key part of Industry 4.0, what role do AEM solutions play in powering the smart manufacturing movement? Nair: The smart manufacturing movement is powered by semiconductors, software and increasingly by artificial intelligence (AI). Test is at the heart of the process of ensuring that semiconductor and electronics devices reach the consumer well-tested for reliability. With our vision of enabling A Zero Failure World, AEM addresses the necessity for safe, highly reliable devices. The semiconductor companies themselves are adopting smart manufacturing methods. AEM’s tools are Industry 4.0-ready, and we continue to invest in machine learning and data analytics, which are integral to the future of test. Our tools are automated and feature embedded sensors to provide our customers with data about tool usage, the state of a machine’s health, and more. Our tools are connected to our customers’ manufacturing automation platforms. Additionally, we continue to invest in our ability to better slice and dice test data to understand trends and patterns to help our customers analyze data and make decisions faster. SEMI: You also have experience heading autonomous vehicle projects. With the COVID-19 pandemic hastening digital transformation, do you see an acceleration in the development of fully autonomous vehicles and smart manufacturing? Research and development efforts for autonomous vehicles (AV) continue at a fast pace worldwide. With shutdowns and restricted movement rules globally, the pandemic has hastened digital transformation in many ways. The delivery of goods and services is transforming, and AV will surely play a part, especially in secure environments for autonomous transport. The pandemic has accelerated the development of autonomous vehicles and smart manufacturing technology in automation-friendly environments like factories and ports. SEMI: At the recent Global Technology Summit hosted by SEMI, you spoke about testing innovations to meet the demands of highly complex devices. Please elaborate on innovative testing solutions versus traditional testing? Nair: AEM offers a disruptive and differentiated solution, one that is driving a paradigm shift to asynchronous, modular, highly parallel, smart testing solutions. ​ The traditional approach of ATEs to test increasingly complex devices on advanced nodes has reached a point of diminishing returns as it gets exponentially more expensive to increase test coverage to acceptable levels. Additionally, as devices get more complex and companies are rapidly adopting heterogeneous packaging technologies, the realization that System Level Test (SLT) is necessary is forcing a rethink of the entire test process. AEM’s provides asynchronous, modular, highly parallel test cell solutions that enable each test cell to run SLT, final test, or burn-in all in one system and its ability to handle hundreds of test cells independently with each test cell testing multiple devices. Our solutions suddenly make comprehensive testing of every complex device cost-effective. Freeing us from legacy ATE allows AEM to provide these innovative solutions to our customers. AEM engineering and manufacturing teams in Singapore at work on semiconductor test and handling systems for global deployment at world-class semiconductor facilities. (Photo credit: AEM) SEMI: Singapore seems to be in the sweet spot of digital transformation. Singapore’s industrial production grew 8.6% year-over-year in January 2021, an expansion driven mainly by a surge in sectors including electronics, and more growth is seen in the year ahead. Digital technologies such as 5G technology and cloud computing together with continued demand for work-from-home equipment is behind this growth. What are the growth prospects for the region’s electronics sector? Nair: Singapore is well-poised to benefit from the current digital transformation accelerated by the adoption of these technologies during the pandemic. Being a safe, well-governed country with strong IP protection, excellent infrastructure, and the rule of law, Singapore is in a great position to play a central role in cloud-based services, 5G, and the semiconductor industry. Singapore’s semiconductor sector output is at a record high, and the prospects for renewed growth in the region are very good. SEMI: As a new Regional Advisory Board member of SEMI Southeast Asia, how is your industry experience relevant to the scope of this role? What opportunities lie ahead for the region? Nair: I am honored to represent AEM in the SEMI’s Southeast Asia RAB. The SEMI RAB can influence policymakers with ideas and information on the current and future needs of the industry. I also believe that SEMI Southeast Asia can cultivate a strong innovative semiconductor ecosystem that helps regional and global growth. I look forward to working with other very experienced and accomplished board members. Bee Bee Ng is president of SEMI Southeast Asia.

As monolithic scaling slows down, the semiconductor industry is increasingly relying on advanced packaging technologies to extend Moore’s law through heterogeneous integration. Higher on-package bandwidth, improved yield resiliency and the need to integrate diverse IP from multiple foundries are driving demand for advanced packaging technologies that address these issues but introduce challenges of their own such as efficient power delivery to all the different domains in a heterogeneous system. SEMI spoke with Kaladhar Radhakrishnan, Intel Fellow at Intel, about heterogeneous system integration trends and new developments in the semiconductor industry. Radhakrishnan shared his views ahead of his keynote at the SEMI Connecting Heterogeneous Systems Summit, 1-3 September 2021, an online event. Join the summit to meet experts from Intel and other key industry influencers. Registration is open. SEMI: What is driving the adoption of electronics and semiconductor devices nowadays and why is the development of new and innovative technologies important? Radhakrishnan: We are living in an increasingly data-driven world where devices have become an integral part of our lives. A recent study estimated that in the United States alone, 13.6 connected devices per capita consume an average of 300 gigabytes worth of data every month. In the workplace, COVID-19 has driven fundamental business changes that has sped up the adoption of digital technologies such as virtual conferencing, remote work, and e-commerce. Organizations are realizing that a high-quality video conference can be an adequate substitute for many in-person meetings. As a result, businesses are accelerating the digital transformation in order to adapt and thrive in this new environment. Five decades of sustained exponential growth in semiconductor performance has conditioned the average digital consumer to expect more from their devices. However, there are some headwinds ahead as traditional scaling slows down and power density rises. Because consumers and businesses are now generating data at a faster rate than they can consume it, technologists need to scale compute, storage, and bandwidth even faster to keep pace. Without investments in research and development of new and innovative technologies to address these challenges, the full potential of this data will go unrealized. SEMI: What forces are heightening the importance of heterogeneous system integration? What are the implications for increased on-package bandwidth, improved yield resiliency and the need to integrate diverse IP from multiple foundries? Radhakrishnan: The semiconductor industry increased transistor density and scaled performance through classical Dennard scaling until the turn of the century. By then, the gate oxide thickness had scaled down to atomic dimensions and the exponential increase in sub-threshold leakage signaled the end of scaling through traditional methods. Since that time, the chip industry has been relying on innovations in transistor materials and structures such as high-k metal gate, strained silicon, and FinFETs to keep pace with Moore’s law. However, this alone will not be sufficient to continue scaling and the industry needs to explore other vectors to augment improvements in transistor technology. Heterogeneous integration through advanced packaging is one key technology that can help drive these gains. Technologies like Foveros can enable device density scaling by creating a 3D stack of multiple die using high-density interconnects. Heterogeneous integration enables chipmakers to move from a monolithic system designed on a single large chip to a heterogeneous system comprised of a number of smaller chiplets. The main benefit of using smaller chiplets is that they improve yield and enable application based customization of the foundry processes. However, if the disaggregation to smaller chiplets is not accompanied by an increase in on-package bandwidth, the power and performance penalties associated with chiplet-to-chiplet communication will hobble system performance. This is why advanced packaging technologies that improve die-to-die communication are key enablers for heterogeneous integration. SEMI: What are some of the key technology challenges in developing heterogeneous systems? Radhakrishnan: The obvious challenge that most people focus on is the need for improved on-package bandwidth. However, as we rely on 3D stacking to continue device scaling at the package level, it is important to comprehend power delivery and thermal challenges as well. Power to the top die has to be delivered through TSVs on the bottom die, which not only adds resistance but also reduces the useful area available on the bottom die. This problem is further exacerbated when we stack more than two die. Excessive noise on the power delivery network can cause timing issues that limit the maximum operating frequency of the transistor. Similarly, when we stack multiple die, we must take into account associated thermal challenges. For example, each interface of the multi-die stack adds thermal resistance, which makes it harder to cool the chips at the bottom. SEMI: What are some of the key global market trends that driving demand for heterogeneous and system-level integration? Radhakrishnan: The number of artificial intelligence (AI) and machine learning applications have grown dramatically due to their ability to solve highly complex problems across a wide range of segments. AI and machine learning models require more memory bandwidth and compute capabilities that are difficult to achieve without some form of heterogeneous integration. Another market trend driving demand for heterogeneous integration is the increasing reliance on custom hardware accelerators. To combat the slowdown in frequency scaling and single-core performance, we have moved to multi-core architectures by tackling the inherent parallelism in our workloads. However, Amdahl’s law tells us that such an approach will hit a bottleneck when we reach the limits of the serial portion of the workload. As these constraints slow the performance of general-purpose processors, the reliance on custom hardware accelerators to boost performance for specific workloads is growing. Heterogeneous integration at the system level with a combination of CPUs, GPUs, FPGAs and other accelerators can optimize system power and performance. SEMI: What solutions is Intel developing to address these market needs? Radhakrishnan: Intel is actively involved in the development of the industry ecosystem for heterogeneous integration. We have developed a number of innovative advanced packaging solutions such as the EMIB and Foveros that are used in products today. Intel is also developing the next generation of advanced packaging technologies, Foveros Omni and Foveros Direct, which will dramatically scale the IO density by using direct Cu-Cu bonding technology. Foveros Omni is a crucial building block technology to enable high-voltage power conversion on the package for efficient power delivery. Intel is uniquely positioned to predict the design needs for future systems and deploy its resources to develop the technology building blocks needed to continue performance scaling. Our IDM 2.0 strategy enables us to leverage our leadership in packaging technologies to design the best products and use the best IP to deliver leading products across a broad range of categories. SEMI: What do you expect from your participation at SEMI Connecting Heterogeneous Systems Summit? Radhakrishnan: I’m hoping to shed some light on some of the new technologies we have been developing at Intel to enable heterogeneous system integration. I also want to bring awareness to the power-related challenges we are facing with heterogeneous systems. I also look forward to listening to what other industry leaders have to say on the topic. Kaladhar Radhakrishnan is an Intel Fellow and a Power Delivery Architect with the Technology Development group at Intel. He plays a significant role in shaping and driving power delivery technologies for Intel microprocessors. His areas of expertise include integrated voltage regulators, advanced packaging and passives technologies. Kaladhar is a two-time recipient of the Intel Achievement Award, the highest Intel honor an individual or small team can receive. He has authored four book chapters, over 40 technical papers in peer-reviewed journals, and has been awarded 35 U.S. patents. He has also served as an adjunct professor at Arizona State University. Kaladhar joined Intel in 2000 soon after receiving his Ph.D. in Electrical Engineering from the University of Illinois at Urbana-Champaign. Serena Brischetto is senior manager of marketing and communications at SEMI Europe.

COVID-19 has likely had a greater impact on healthcare than on any other industry sector, said Glenn Snyder, Principal and Lead Analyst for MedTech at Deloitte, and a featured speaker at a recent SEMI webinar that offered a glimpse into the Future of MedTech in the run-up up to the SEMI Global Smart MedTech Symposium, kicking off tomorrow and running through August 5th. Snyder said medtech growth may appear muted in its early years but is poised to begin a steep climb as innovation continues, harkening back to the super-charged growth of circuitry on a wafer (aka Moore’s Law), which also saw a seemingly slow, flat start. Medtech enjoy its own exponential growth powered by 5G implementations, consumer demand, and the development of a robust ecosystem of bio-sensors, data standards, and regulatory improvements. Consumer-Driven Future and COVID-19 Impact Snyder noted that the future of medtech will be consumer-driven – enabled by open, highly interoperable data and secure platforms geared toward end users. A case in point: Detecting disease early through sensor systems will rely on not only on-body and environmental sensors, marking a fundamental shift from the today’s today’s hospital-centric system to improve health outcomes. Telemedicine growth during the pandemic is a notable example. In one case study of a health system, Snyder noted that telehealth usage skyrocketed from 1% to 60% of all patient visits over the early months of the pandemic but has since dropped to 10% due to the lack of charting, billing and other support systems needed to sustain the high rate of telehealth visits. Even so, hospitals expect to see a steady rise in consumers’ use of telehealth in the coming years. One driver are pilot programs for healthcare-at-home services for post-surgical patients. The programs have delivered better health outcomes and are more personalized and family-friendly than medical clinic or hospital visits. They also cost less. Digital monitoring using remote biometrics sensors are one key to driving the long-term success of these programs. Health Systems Changing Their Business Model In the medtech sector, changes in health system business models lag consumer adoption. What’s more, policy changes aren’t keeping pace with new models for medtech products. For medtech products to thrive, a solid foundation of data gathering, transmission and management capabilities that tie into traditional healthcare systems must be formed. Companies considering a vertically integrated approach to the medtech market can steer clear of healthcare providers – but only at the risk of having less access to patients and their historical healthcare data. Snyder said companies that control vertically integrated healthcare products and patient data can make support systems more efficient and robust but may struggle to deepen their market penetration. Companies such as Intuitive Surgical have found success with this model by offering highly differentiated products. Supply Chain Alarmingly Thin for Medtech Devices In a recent Deloitte survey of medtech companies, 60% reported that at least half of their products are powered by semiconductors, yet 70% noted pointed to high supply chain risks with most of their products because they have only a single source. Risk management and creating a resilient supply chain will remain key for medtech providers to adapt on a global scale. Partnerships and Collaborations During the event roundtable, Snyder mentioned that bio and pharma companies have partnered successfully to grow their businesses. Doug Kiehl of Eli Lilly, the moderator of the discussion, added that traditional healthcare providers should look outside of their usual business circles for medtech innovation. COVID-19 highlighted how new multi-disciplinary healthcare partnerships risk assessment processes have opened several paths to innovation previously unexplored. Both Snyder and Kiehl expect to see more collaboration between health systems and medtech innovators as they uncover synergistic business models. SEMI Global Smart MedTech Symposium Kicks Off Today Explore the gaps in the supply chain at the Global Smart MedTech Symposium and join the conversation with medtech device companies and health systems providers. Sessions include: Realtime Continuous Diagnostics and Monitoring Decentralized DNA Sequencing and Molecular Diagnostics Data Science and Infrastructure – AI/Data Fusion Applications in Rural and Decentralized Healthcare in the Digital Age The four-day symposium features three sessions at different times each day to cater to participants in Taiwan/Asia, Europe and North America. Register today! Heidi Hoffman is senior director of Technology Communities marketing at SEMI.

The state of Penang, nestled along the northwest coast of Peninsular Malaysia, needs no introduction in the global electronics manufacturing sector. Despite its diminutive stature with just over 1,000 square kilometers of land area and a 1.8 million-strong population, Penang commanded an estimated 5% of global semiconductor exports in 2019, according to data compiled from the Department of Statistics Malaysia (DOSM) and UN Comtrade. The State’s transformation, from a traditional seaport economy into the Silicon Valley of the East, began in the 1970s, when the establishment of Malaysia’s first free trade zone in the State drew key investments from eight Multinational Corporations (MNCs). These pioneering investors – Intel Corporation, Hewlett Packard (now Keysight Technologies and Agilent Technologies), Robert Bosch, AMD, Litronix (now Osram Opto Semiconductors), Hitachi (now Renesas), Clarion and National Semiconductor[1] – sparked the development of a robust ecosystem of ancillary industries, which formed a foundation for the State’s rise as a prominent, offsite manufacturing hub. Today, Penang houses more than 350 MNCs that are supported by over 3,000 manufacturing-related SMEs. As Penang flourished as a vibrant, regional E E manufacturing hub, the local talent pool steadily accumulated a wealth of business intelligence and technical experience, enabling the robust supply chain to evolve in tandem with technology megatrends. This, in turn, enabled the State to focus on pursuing investments that have propelled the industry up the value chain, away from its beginnings as a low-cost manufacturing hub. Consequently, Penang has seen a proliferation of upstream technology-related investments in high value-added functions in recent years, ranging from research and development (R D), design and knowledge-based solutions, and downstream advanced manufacturing and testing to global business service (GBS) and Centre of Excellence (CoE) activities. Penang’s growing significance in the global E E value chain is demonstrated by its steady and resilient export performance in recent years. From 2014 to 2019, the State’s E E exports grew at a compounded annual rate (CAGR) of 12% to reach RM210 billion (US$51 billion). It has emerged as a hub for professional, scientific and controlling instruments (including medical technology), with exports of these products growing at a 5-year CAGR of 15% to reach RM23 billion (US$6 billion) in 2019. E E products, alongside professional, scientific and controlling instruments, collectively contributed between 77% and 82% of Penang’s total annual exports since 2014, and accounted for 50% of Malaysia’s exports in these two segments during the period. More impressively, despite the disruptions from the COVID-19 pandemic, Penang’s total exports continued to rise in 2020, growing 7% year-on-year to RM310 billion (US$75 billion), and a further 14% year-on-year in January and February 2021, driven by strong global demand for semiconductors. Shaping up as the destination of choice for advanced manufacturing investments As part of efforts to move Penang’s industry up the value chain, the State government has placed emphasis on attracting companies with strong commitments in implementing Industry 4.0 and sustainable investing. These efforts have yielded positive results, with the state having gained traction as a hub for advanced manufacturing investments. This is evidenced by the rising trend in investments per new job creation, which saw a six-fold jump from 2012 to 2020, as well as the number of global heavyweights announcing new investments as well as expansions of existing facilities in the State in 2019 and 2020. Penang attracted RM31 billion (US$7.5 billion) in approved direct manufacturing investment inflows in 2019 and 2020, 88% of which involved investments into the E E, equipment and medical technology industries. Prominent new investments included those from Lam Research, Bosch Group, Ultra Clean Holdings, Dexcom as well as Smith+Nephew. Together with planned expansions by a number of existing MNCs in Penang, these new investments, which are on track to commence operations between 2021 and 2023, are poised to bring Penang’s industry to greater heights and further integrate the State into the global value chain. Recent Notable Direct Manufacturing Investments in Penang Source: InvestPenang and respective companies Penang’s conducive business environment nurtures successful homegrown technology companies Penang’s conducive business environment has not only proven successful in attracting foreign direct investments (FDIs), but also successfully nurtured local E E success stories of locally employed engineers turned technopreneurs, who have founded and built companies that have successfully grown to become internationally renowned in their own right. These homegrown E E companies play crucial roles in the ecosystem, particularly in the areas of automated test equipment (ATE), automation, outsourced semiconductor assembly and testing (OSAT) services, electronics manufacturing services (EMS), precision engineering and tooling. The past five years have also seen the emergence of young, fast-growing Penang-based companies such as Experior, Oppstar Technology and Skyechip, which provide IC design and IC test design services to MNC clients globally. Public-private partnerships cultivate Penang’s talent development roadmap The state is cognisant that the development of a robust and skilled talent pool is imperative to support the growth of strategic industries in Penang. Strong public-private partnerships with concerted efforts in supporting talent development are key to Penang’s continued success. Toward this end, the State government has backed Penang Skills Development Centre’s (PSDC) industry-led training and education efforts, which have helped train over 200,000 of workers to support the industry’s needs since 1989. The State has also coordinated collaboration for industries to provide input to local institutions of higher learning on the relevance of the institutions’ courses, and rallied the industry to support State-run scholarships (Penang Future Foundation) and STEM initiatives. Holistic initiatives to make Penang a world-class investment destination for global frontier companies The dynamics of the global value chain, especially for the technology sector, have evolved rapidly since 2018, particularly amid the complex confluence of trade protectionism, COVID-19 pandemic-driven issues and disruptive technologies. The State government believes that strong, geographically localised industry clusters could help companies mitigate the risks of supply chain disruptions, in addition to improving companies’ time-to-market at a lower cost. To further increase Penang’s attractiveness for high quality investments, the State is focusing on three key strategies: Extending its competitive edge in advanced manufacturing, further strengthening Penang’s industry clusters, which include expediting SMEs’ Industry 4.0 transformation journey, and nurturing more homegrown companies to penetrate the global supply chain Embarking on a continuous drive to develop and recruit talent to the State, as well as cultivate the younger generation’s interest in STEM Enhancing Penang’s liveability with a strong focus on making Penang a smart and green city The State government is committed to continue developing Penang in a holistic manner, with the aim of creating a vibrant business and investment destination with a robust and sustainable economy and high standard of living, creating a conducive environment to “work, live, learn, play and invest.” About InvestPenang InvestPenang is the Penang State Government’s principal agency for promotion of investment. Its objectives are to develop and sustain Penang’s economy by enhancing and continuously supporting business activities in the State through foreign and local investments, including spawning viable new growth centres. To realize its objectives, InvestPenang also runs initiatives like the SMART Penang Centre (providing assistance to SMEs), Penang CAT Centre (for talent attraction and retention) and i4.0 seed fund (a catalyst for the start-up ecosystem). For more information, contact [email protected]. InvestPenang also works closely with various industry associations, including SEMI, to promote Penang’s supply chain and E E ecosystem. InvestPenang is delighted to have collaborated with SEMI on numerous occasions since 2015 and endeavours to sustain the partnership in the years to come, including for the SEMICON SEA 2022 exposition to be held in Penang. [1] No longer present in Penang following a corporate M A exercise.

U.S. consumers are flush with cash, the American economy is hurtling back from the depths of the COVID-19 pandemic, and the semiconductor industry is flying high on skyrocketing chip demand, with chip equities soaring since the initial outbreak in early 2020 as virus outbreaks worldwide supercharged demand for the digitization of everything from factories to home offices. “Wow, what a difference a year makes,” said Jennie Raubacher, Global Head of Semiconductor Electronics Investment Banking at Wells Fargo, speaking at a recent SEMI webinar. The two rounds of government stimulus payments in 2020 and 2021 gave many U.S. households the safety net to withstand the heaviest blows dealt by the COVID-19 pandemic and stoked consumer spending that has helped lift a hobbled economy. Durable goods spending in the U.S. has also seen a sharp rebound, surging more than 60% from its April 2020 trough, Raubacher said. The twin forces have driven a blistering U.S. economic recovery after GDP shrunk about 10% by the second quarter of 2020 only to bounce back in the first quarter of this year to roughly $19 trillion, regaining the lost ground to match the GDP charted at the end of 2019. With the U.S. economy continuing to gain steam, inflation has, as expected, edged higher, with price increases particularly acute in used vehicle and lumber markets. Despite surging prices, Wells Fargo sees inflation moderating as durable goods demand slows, easing pressure on interest rates, Raubacher said. Equity Valuations at Record Highs Heady semiconductor stock prices are not new. Over the past 15 years, equity prices of chip companies in the S P 500 have grown more than 460%, outpacing the 230% jump in value of the S P 500 index overall, Raubacher said. And chip stocks continue to shine. Since early 2020, when the spread of COVID-19 hit its rapid clip, the recognition of the growing importance of chips to economies around the world has exploded. That dynamic joined secular technology trends including autonomous driving development, industrial and factory automation, 5G infrastructure buildouts, data center expansions, and smart city and smart home innovation fueled by the Internet of Things (IoT) as key drivers of semiconductor stock valuations. With its price/earnings (PE) ratio now at more than 21x, the S P 500 is well above its historical average of 15x PE. “The S P 500 valuation is at record high any way you look at it, and valuation multiples across the board, currently at 3x Next Twelve Months revenue, have increased dramatically from historical averages,” Raubacher said. Semiconductor stock valuations are on similar trajectory, with the SOXX index now at 15x Next Twelve Months EBITDA (earnings before interest, taxes, depreciation and amortization). “While semiconductor stocks may seem highly valued compared to historical levels, the chip industry has grown faster and expanded profitability by a wider margin than S P 500 companies,” Raubacher said. With that differential, “semiconductor equities are not as expensive as they may seem at first glance.” Earnings expansion and valuation multiple increases for the chip industry over the past 15 years have translated into a more than 500% jump in market capitalization, compared to a 300% increase for the S P 500 excluding chip companies, she said. Chip company revenue growth in the first quarter of 2021 was predictably low due to seasonality, dipping 2.4%, though dropped less than the historical average, Raubacher said. Second-quarter revenue growth for the industry is expected to hew to the historical average of 6%. Semiconductor growth forecasts by market analysts for 2021 range widely from 6% to 17% year-over-year, she added. Chip Companies Raise Capital at Record Pace In 2020 and 2021, semiconductor companies have raised an unprecedented $82 billion in capital to finance maturing debt and acquisitions, a wave that will “likely catalyze further consolidation in the sector,” Raubacher said. None of the financing has stemmed from liquidity crunches. Since Raubacher joined Wells Fargo 10 years ago to lead its semiconductor practice, the group has executed more than 175 transactions including $40 billion in mergers and acquisitions and $360 billion of financing for its semiconductor industry clients. “With a strong macroeconomic backdrop and demand environment, relatively low interest rates, semiconductor companies showing strong business fundamentals and robust valuations, we expect a pickup in M A activity,” she said. Growth Forecast Across Most Semiconductor Applications The next four years will see the chip industry grow across most applications including wireless communications, consumer electronics, transportation and medical. Automotive and industrial/aerospace will lead the way, expanding at an expected compounded annual growth rate of 14% and 10%, respectively, from 2020 to 2025 to “drive a significant portion of the TAM expansion during that period,” Raubacher said. Across all applications, the semiconductor industry is expected to grow at a 6.8% CAGR from 2020 through 2025, adding $183 billion in revenue by the end of the forecast period, she said. ESG Rises in Importance For their part, investors now focus on more than pure business performance when valuing individual companies. The ability of businesses to reduce their carbon footprint, promote workplace diversity and take other steps to serve the greater good as part of Environmental, Social and Governance (ESG) programs are carrying more weight in valuation models. “Investors are paying more and more attention to ESG initiatives and targets,” Raubacher said. “On the debt side, we’re seeing things like green bonds and interest rate reductions tied to ESG targets. Only a few semiconductor companies have incorporated ESG measures into their financing, so it’s still early days. It really comes down to the metrics you can track in your companies and the goals and targets you can commit to. It will be a very company-specific approach rather than an industry standard.” In the chip industry, Raubacher noted that ESG targets are geared not only to manufacturing equipment and processes in fabs and other semiconductor facilities throughout the supply chain, but increasingly also to chips themselves. As technology innovation continues to spur the development of chips to power more electronics for consumers and businesses, their proliferation comes at a cost: greater energy consumption. The upshot is that semiconductor makers are becoming more focused than ever on power-efficient designs to bolster their ESG initiatives, Raubacher said. Many semiconductor players across the supply chain are reducing their carbon footprint by switching to energy-saving equipment and reducing water waste, Raubacher said. At the same time, more semiconductor executives are recognizing the rising importance of highlighting corporate achievements across all aspects of ESG. More Governments See Vital Importance of Semiconductors As shelter-in-place orders took hold in countries worldwide after the initial COVID-19 outbreak, work-from-home offices, online shopping, virtual classes and remote doctor’s visits became the norm. The electronics at the heart of this connectivity – born of both necessity and convenience – and the chips that power them took on outsized importance around the world. Geopolitical skirmishes intensified and supply chains across the semiconductor industry were reimagined and redrawn. Governments jockeyed for advantage in the race to build new semiconductor manufacturing facilities and upped their chip investments. An acute chip shortage that started in the automotive industry and quickly spread to other sectors magnified just how pervasive and vital semiconductors had become in making the world go round. “There’s no question that the semiconductor industry is vitally important to global and national economies as governments around the world now recognize its strategic importance,” Raubacher said. That puts the industry in an even stronger position to help lay the regulatory groundwork for its own future. “There’s a unique opportunity for semiconductor industry executives to shape the public policies that could impact the direction of the industry for the next 30 years,” she said. More than 750 people attended the June 2nd webinar, Surging Chip Demand, Digital Transformation, and the Pandemic – What’s Next?, sponsored by SEMI members Brooks Automation, Hitachi, JECT, KLA and TEL. Sven Smit of McKinsey Company also delivered his talk Leading in COVID-19 Exit at the event.