MEMS Opportunities and Challenges Tom Willey October 6 th 2010

1. MEMS Opportunities and Challenges Tom Willey October 6th 2010

2. Agenda • Introduction TW-Partners • Discera – MEMS • Market dynamics • What was involved in building MEMS product • What happened • Investment – MEMS • Today • What’s needed

3. TW - Partners • Founded in 2008 by Tom Willey & Mark Konopacky • Business Development Services • HQ in Silicon Valley • Locations in Tokyo, Cambridge & Seoul • Broad Management & Partner Core Competence • Strategy, Sales, Marketing, Finance, Funding • Broad Market Segment Expertise. • Extensive Global Client Business Development.

4. Electronic Heartbeat - Quartz • Every electronic device contains an oscillator • Electronic heartbeat • Quartz crystal is dominant • $3.5B – 10B units • 15% growth • 100 year old technology • Very mature life cycle • Difficult to innovate • Low margin

5. Tomorrow’s Electronic Heartbeat - Si • Large existing market • No market risk • Extremely attractive to venture backed start-ups • Silicon knocking on the door • Lots of players stepping up with Si solutions • Definite exits • M&A • IPO possible • Discera – Core Value • MEMS-based oscillator • 60% GM, with ASP less than Quartz manufacturing cost

6. Building a MEMS Oscillator – Easy? 1) Resonator 2) Packaged Resonator 3) Resonator + ASIC 4) Packaged Oscillator 5mm x 3.2mm

7. Resonator • First Silicon ≈ 1996 • Univ Michigan internal Fab • Discera Funded – 2001 • Technology spin-out • Resonator “ready for productization” • Productization - 2008 • Multiple major revisions • 2 MEMS fabs • Many Issues • Multiple experimental split lots to solve • Difficult to predict cause and effect • Lots of “black magic” Resonator

8. ASIC, Package & System • ASIC • Design process well understood • Fab – design kits • Good design tools • Packaging design • Simple plastic – low cost • Main Issues – Stress • Multiple experimental split lots to solve • System • Difficult to predict cause and effect • Lots of “black magic”

9. Today • 2010 - Discera is now shipping in volume and gaining market penetration • Future looks promising for Discera MEMS solutions in the clock timing market • But • 9 years - $60M++ to get there • Allowed competition to gain foothold • SiTime entered the market 2005 using Bosch technology • Large venture investment • Used Bosch MEMS technology • Now possibly ahead of Discera

10. Why did it take so long & cost so much? RESONATOR & PACKAGE ASIC Multiple Chip Designs Worked as expected On Time On Spec On Budget Used two different fabs Designs were transportable and reusable Relatively few issues Design rules Good tools • Design & simulation “Designing is an art” • Lots of experiments • Virtually no re-use • Almost no design tools • Device, system, package • Fabs look like a sandbox to the artist • No design kits • Similar to the Industry in the 70’s

11. Venture Investment in Semiconductor • ROI • Most Si companies need ≈ $60M - $80M in to get an exit • Very few exits see $60M-$80M • Almost no exits > $100M • For VC’s - not likely to even get their money back • RESULT: Almost impossible to get new investment in Silicon • Acquirers – Major Si Companies • Fewer companies getting funded means less innovation • Bad for industry outlook • Need to get Venture ROI back on track • Risk minimization • Capital efficiency - < $10M-$20M total investment

12. MEMS Innovation • No shortage of MEMS opportunities/ideas • To become real • Companies have to be funded • Investors want higher capital efficiency and % of success • Devices have to work 1st time • MEMS design/development ecosystem requires drastic improvement • Designers • Semi Fabs • EDA tools companies