Semiconductor Supply Chain Management: Trends and Strategies

1. Introduction to Semicon SCM Allan Chen June 16, 2001

2. Supply Chain Management (SCM) in Semicon Semicon SCM Components Why Supply Chain Management Implementation Trend and Strategy Agenda

3. Supply Chain Management Blueprint Site Factory Planning Semicon Industry Wafer Testing Assembly Final Testing • Supply Chain Planning • Global capacity allocation • Demand fulfillment Customers Suppliers • Demand management • Fulfillment management • Allocation/Capacity management • ATP/CTP • Design Collaboration • E-Commerce • Demand management • E-Procurement

4. Product Design Product Design Flow Material Flow Product Flow Manufacturing Process Raw Material Finished Goods Transportation Inspection Distribution Receiving Order Flow Customer Purchase Order Flow Production Planning Order Promising Sales Purchasing Supplier Forecast Management Marketing Integrated Manufacturing System Supplier Customer

5. What Is A Supply Chain in Semicon? • A supply chain is a network of facilities that performs the • functions of • procurement of material, • transformation of material to intermediate and finished goods, • and distribution of finished products to customers. Sub ASSY Sub F/T 60 ~ 70 days 9 - 14 days 15 - 20 days FAB I 1 - 2 days C/P F/T wafer bank die bank FAB 2 F/G Fabrication Probing Assembly Testing

6. FT Process FAB Process CP Process Supply Demand Supply Supply Supply Uncertainty Plagues the Supply Chain • The Real Challenge in A Supply Chain - Uncertainty* • Different Sources of Uncertainties Exist along A Supply Chain • Demand: forecasting mismatch, demand volume, product mix, unexpected changes • Process: yield, machine downtimes, WIP, process hold • Supply: quality, reliabilities of FAB wafer supply and back-end capacity supply ASSY Process *Tom Davis, “Effective Supply Chain Management”, Sloan Management Review, 1993.

7. The Semiconductor Supply Chain Multi-level Supply Chain

8. Operation Steps: Semiconductor vs. Assembly bop1 bop2 Wafer process routing Split Route Main Route op1 op2 op3 op4 op5 op6 op7 op8 op9 op10 cop1 cop2 cop3 aop1 aop2 Split Route Rework route Assembly steps Route_1 op1 op2 op3 op4 op5 op6 bop1 bop3 op9 op10 op5 op2 op3 Route_2 op1 op4 op6 op7 op8 op9 op10 op5 Route_3 op1 op2 op3 op4 cop1 cop2 cop3 op9 op10

9. Planning over thousands of Decision Trees 0.22 Lot#1 0.22 Lot#2 0.22 Lot#3000 0.15 Lot## 0.18 Lot## 0.35 Lot## OP1 EQP#1 EQP#1x EQP EQP EQP EQP EQP EQP OP2 EQ#2A EQ#2B EQ#2C EQ#2D EQ#2E OP3 EQ#3A EQ#3B EQ#3C EQ#3D • Capacity & Constraint • Material Constraint • Resources OP412 EQ#2B EQ#2C EQ#2D OP413 EQ#3B EQ#3C OP414 EQ#50 EQP EQP EQP EQP EQP EQP Planning complexity for IC manufacturing

10. Semiconductor SCM Components

11. SCM Enterprise Application Decision Support Supply Chain Event Management Supply Chain Execution Order Management Supply Chain Planning Operational Planning Warehouse Management Transportation Management International Trade Logistics Inventory Management Production Scheduling Tactical Planning Manufacturing Planning Distribution Planning Supply Planning Supply Chain Collaboration Strategic Planning Demand Planning and Forecasting Supply Chain Network Design Seconds/ Minutes Hours/ Days Weeks/ Months Quarters Years

12. Semicon SCM Enterprise Application Decision Support Supply Chain Event Management Supply Chain Execution Order Promising Supply Chain Planning Operational Planning & Control Operations Sequencing Shop Floor Control Inventory Management Production Scheduling Tactical Planning Material & Capacity Planning ATP/CTP Resource Rationalization Supply Chain Collaboration Strategic Planning Demand Planning and Forecasting Sales and Operations Planning Seconds/ Minutes Hours/ Days Weeks/ Months Quarters Years

13. Multi-Level Supply Chain Management Sales and Operations Planning Supply Chain Collaboration Supply Chain Event Management Demand Planning and Forecasting Order Promising ATP/CTP/PTP Resource Rationalization Multi-Site Production Planning Multi-Site Production Tracking Multi-Site Capacity Management Production Scheduling Material & Capacity Planning Operations Sequencing Shop Floor Control

14. Why Supply Chain Management?

15. Fact Planning Issues Faced Needs • Weak integration between planning and execution • Enterprise visibility of planning process and multi-user access enable better process and and convincing results • Lack of due date projection capability in foundry environment • Quickly generate ATP & CTP to customer • Limited visibility into capacity constraints • Concurrent planning & optimizations of all constraints. Problem windows and real-time simulation capabilities to react in a timely manner

16. Fact Current Manufacturing planning issues Needs • Islands of data, multiple excel spreadsheets consuming vast amounts of planner time • Single entry of forecasting information, company-wide visibility • Automatic tools with both planning and execution data inputs • Manual Work with limited dimensional view (e.g. Total volume by Product) • Lack of rapid re-plan capability • Reduce planning cycle time allows daily planning and rapid re-planning • Lack of what-if analysis in variety product mix situation • Provide what-if analysis capability • Lack of detailed execution schedule • With proper modeling, provides detailed execution priority/schedule

17. Future Business Process Changes • Reduce planning cycle from a weekly to daily • Integrate all fab areas as one team and quick response for capacity allocation. • Need a flexible system for start planners for dynamic capacity situations. • Solve problems from planning system instead of execution system. • Should integrate from customer to turnkey for Virtual Fab requirement.

18. Scenario: Good individual site delivery performance but BAD overall delivery performance, due to lack of integrated manufacturing targets. Issues FABs’ MPS don’t meet CP/ATS’s delivery needs Invisibility of FABs’ planning/execution changes to CP/ATS Lack of Push/Pull mechanism for Fab lots under defined target Current Status MPS just cover Fabs only, CP/ATS MPS were generated based on current WIP Replace projected out date with scheduled out date when lots were delayed Managed manually System Solution Manage overall capacity for FABs, CPs, ATS, EBO, PC & IE Generate integrated target for Fab, CP, ATS and EBO by backward planning Update lot schedule out date for back-end stages by daily Raise demand/supply changes to drive back-end re-planning Coordinate FABs/CP/ATS/EBO planning modules for Push/Pull decision Re-plan for execution violation by weekly Example: Business analysis and solution Customer order fulfillment performance

19. Planning Logic Backward planning for plan lots Wafer Start Commit due Wafer Fabrication Circuit Probing Assembly Packaging Final Test Current WIP Wafer Out Date Forward planning for WIP

20. Implementation

21. Supply Chain Management Blueprint Overall Supply Chain Planning Demand Planning Allocation Capacity Planning Planning Global Optimization Order Management Fulfillment Output Planning Customer Execution Fab Optimization ..... Fab1 Final Test Factory Planning Fab2 Testing Assembly Fab6 MES Dispatching

22. Supply Chain Level Planning Factory Level Optimization &Planning Step 2 Factory Level Optimization &Planning Factory Level Optimization &Planning Global Collaboration Increasing velocity within company supply chain using global planner Increasing velocity within each manufacturing site using factory planning system Increasing velocity with partners through collaboration Step 1 Step 3 Implementation Strategy – Bottom-Up • Getting start from Manufacturing Planning • the basis of supply chain management • manageable risks • fast growth requirements for Fabs

23. Factory Level Optimization &Planning Factory Level Optimization &Planning Factory Level Optimization &Planning Implementation Strategy – Top-Down Global Collaboration Step 1 Supply Chain Level Planning Step 2 Step 3 • Getting start from Business Process Definition • business goal driven • clear process flow and target • higher level driving force

24. Provide a predictable customer capacity commitment Improve visibility of capacity efficiency Improve quality of decision process about allocation Improve investment and resource utilization Quick response to demand/supply variance Improve accuracy of total projected out date Enhance customer order tracking visibility Improve global SC operation efficiency Improve delivery deadline performance Objectives

25. Software Package !! • Efficiency - Solutions are ready now (6 months for a site) • Quality - Professional IT skills with domain knowledge • Expansion - More feasible functions were implemented • Maintenance - Easier to make upgrade by vendor • Market trend - • Solution was verified by market • System development and maintenance outsourcing Solution development In-house design Enhance Legacy system!? ? Software Package ?!

26. Resources Resources consuming Need more and more involvement and commitment from users for: Data Collection and Validation Model Design Input & Feedback Functionality validation Planning Scenario Development and checking Legacy system adapting and interfacing Tradeoff between a variety of objectives Ex. Max Utilization vs. Customer Satisfaction Requires management support to synchronize overall and each individual area’s KPIs or measures. Business Process Reengineering (BPR) PM and team capability Challenges

27. Implementation Milestone 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th Beta test BSD DSA & Prototyping Fab, Subcon, Mask,CP Implementation Conv. Testing Fine tune & Enhancement 3 Fabs 7 Months Rollout 2 Fabs Rollout JV Fabs Rollout Planning Collaboration Change management

28. Trend and Strategy

29. From ERP to SCM to Supply Chain Collaboration Supply Chain Collaboration • help companies interact • better with their customers, • suppliers, and employees. • Offered as hubs to support • joint intra-enterprise and • inter-enterprise planning and • scheduling SCM • support the planning, • scheduling, and fulfillment • Allow cross-functional • processes to coordinate • activities across company • departments ERP • Back-office functions alone • Automate functional • processes • Ensure data consistency • & integrity • provide a transactional • backbone

30. Business Application Evolution Collaborative Commerce Source: Gartner

31. Customer Go to Market Initiation Design Implementation Evaluation Pilot Run Risk Production Production Design Collab. Engineering Collab. Logistics Collab. Document Sharing Technical Support, etc. Information Sharing Communication e.g. Discussion tsmc Design/Engineering/Logistics Collaboration

32. Total Supply Chain Management Supply Chain Collaboration Supply Chain Event Management Demand Planning and Forecasting ATP/CTP/PTP Order Management Multi-Site Demand & Capacity Allocation Multi-Site Production Tracking Multi-Site Production Planning Material & Capacity Planning Production Scheduling Inventory Management Shop Floor Control Operations Sequencing

33. e Foundry Hub Is Emerging • On-line ordering, auction • Consolidated buying • Liquid market for surplus • ( inv, spare parts, equipment) • Lab simulation • Design for fabrication • IP library • Knowledge management • Design rules • PDM • Product Life Cycle • Management • Supply chain management • Logistics management • B2B integration • ERP, CRM

34. A Global Collaborative Commerce Web

35. Web-Based B2B Transactions Should Skyrocket ($ in billions) Source: Forrester Research.

36. Global B2B Transaction Potential ($ in billions) 109% CAGR Source: Forrester Research.

37. Put customers at the center of IT systems Provide rapid access to fab information remotely Cluster fab Manufacturing Execution Systems Internet is the standard communication channel with customers Integrate with upstream and downstream supply chain Successful IT Strategies for Foundry Source: Quincy Lin, Senior Vice President, TSMC

38. New Tech Introduction Better User Interface Smoother Information Flow Quicker Document Download Expanded Technical Support Enhanced Service eFoundryTM Suite Better Operation Environment Enhanced Design Environment Enhanced Security Control Yield Data Analysis Accelerating Time-to-volume Time-to-market eFoundryTM Brings the Virtual Fab to Life

39. Q & A