T h e Y i e l d M a n a g e m e n t C o m p a n y Service Business Rich Ruiz Director, Global Provisioning GSS Service Supply Chain Mgmt

2 GSS Service Supply Chain Management Agenda Overview of KLA-Tencor Change Roadmap Preliminary Results

3 · K

4 GSS Service Supply Chain Management 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. Source: VLSI Research, $B Semiconductor Sales Communication Technology: 16% Auto and Industrial: 22% Consumer Electronics: 12% Data Processing: 41% Gov’t/Other: 9% Semiconductor World Market

5 GSS Service Supply Chain Management What’s 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  Early signs of the next downturn are appearing Extremely narrow customer base  10 customers make up 80% of total revenue

6 · Problem Statement

7 GSS Service Supply Chain Management 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. Cost of poor operational performance was creating significant drain on service profitability. * Joined KLA-Tencor

8 · Data Analysis

9 GSS Service Supply Chain Management Deteriorating Inventory Performance Inventory growth outpaced installed base growth…. … and inventory was more than 3 times higher than best in class* performance * PRTM/PMG 2003 Service Supply Chain Benchmark Study for electronics equipment makers % Growth from Jan 2002 Baseline Field Inventory Targets were growing uncontrollably.

10 · Root Cause

11 GSS Service Supply Chain Management 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). Field stocking model did not achieve optimum balance between fill rate performance and inventory investment. Poor interface between systems created data integrity and timing issues. No systematic capability to manage improvement efforts.

12 GSS Service Supply Chain Management Challenge of Low Failure Rate Planning Large Portion of the Decisions the system needed to Make was deciding whether to stock 1 or Zero.

13 · Solution

14 GSS Service Supply Chain Management 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 they’re being driven by the same data.  Leverage improved forecasting data to drive optimized distribution.

15 · Preliminary Effects

16 GSS Service Supply Chain Management Improvement in Key Service Metrics

17 GSS Service Supply Chain Management Field Target Trend