Industry Overview

EXECUTIVE SUMMARY EXECUTIVE SUMMARY OVERVIEW OF THE ULTRA HIGH PURITY GAS/CHEMICAL DELIVERY SYSTEM Ultra High Purity (UHP) gas/chemical delivery systems are systems that deliver gas/chemicals to the specific point of use with as little impurities (high purity) or foreign materials (contaminants) as possible to ensure consistent and high quality yields. Requirements and specifications for gases/chemicals in the manufacturing process are very stringent wherein foreign materials or impurities in these systems need to be very minimal, typically on the scale of a few parts-per-billion (ppb) and expected to be on parts-per-trillion (ppt) as technologies evolve. Such tolerance levels for chemicals and gases highlight the need for experience and expertise in this specific and engineering oriented niche industry. UHP gas/chemical delivery system engineering is a very precise and specialized engineering centric industry, where measurements and part sizes are measured in nanometres and part-per-billion (ppb) counts. This industry has extremely low margins for error (bordering on none) as slight variances in manufacturing processes cause a disproportionate effect on process Cost of Poor Quality (COPQ) resulting in losses totalling millions of dollars. UHP gas/chemical delivery systems are typically used in semiconductor wafer fabrication processes and flat panel display (FPO) manufacturing. These are also used in other manufacturing industries like pharmaceuticals, bio-sciences, solar panel manufacturing and also nanotechnology processes where purity requirements are extremely critical to product quality. The importance of a well designed and well implemented UHP gas/chemical delivery system cannot be over-emphasised. This is one of the crucial elements in the overall manufacturing process that impact the final product quality. A semiconductor is a material which is neither a good conductor of electricity nor a good insulator; it is the basic raw material that an IC is made of. An Integrated Circuit (IC) is basically a semiconductor wafer on which millions of tiny resistors, transistors and capacitors are fabricated. An IC can function as a microprocessor, memory chip or amplifier. ICs have many applications and they can be found in every electrical application used. The process where the wafer is etched with the resistors, transistors and capacitors is called the semiconductor wafer fabrication process. An FPO is defined as a type of video display which is flat and thin, the common types of FPO are TFT-LCO and plasma display panels. The FPO fabrication process refers to the glass and polymer substrate manufacturing. This process converts raw materials to glass and polymer panels that can then be assembled into the FPOs. The cost to build a UHP system is relatively small compared to the cost of a semiconductor wafer or FPO fabrication plant (approximately 1.5% of the overall project costs), but as indicated above, this does not in any way diminish its importance to the construction and operations of the fabs. Therefore, semiconductor wafer or FPD manufacturers prefer UHP companies that have the necessary specialized skill set and experience and also a proven track record of safety and quality. Companies such as KE that have this kind of proven track record are sought after by the fab owners and/or the main project contractors. This is to ensure there is minimal disruption to the manufacturing process; there are no wastage/rejections and rework which all add onto costs and negatively impact their market reputation and credibility. One of the most important considerations in designing a gas or chemical delivery system is the level of purity of the gas/chemical required at the point of use. For both semiconductor wafer fabrication and FPD manUfacturing, it is critical that the gas/chemical delivered is without contaminants. The UHP gas/chemical delivery systems are critically important in these processes because: 1. They do not introduce any foreign particles/gas to the manUfacturing process. Contaminants are almost impossible to remove from contamination sensitive products and environments.
2. The downtime caused to factory processes to remove them is very expensive. Costs run into millions of dollars every day a fab is not in operation.
3. One of the main restraining factors to the miniaturisation of semiconductor wafer manufacturing processes is the purity of the gas and chemicals delivered. This increase in purity demands is manifested in the part-per-billion (ppb) contamination levels now routinely required of carrier gases instead of the previous part-per-mi/lion (ppm) requirements.
4. The UHP gas/chemical delivery system contains highly hazardous gases and chemicals. The leakage of such hazardous gas/chemicals as a result of improper material and installation methods may result in major disasters and serious injury to personnel.
5. Although the relative cost of a UHP gas/chemical delivery system to the cost of a fabrication plant is quite small; however, if it does not function properly it will cause a variety of major issues. Chief among them is Cost of Poor Quality (COPQ); this includes costs due to decreased yield, downtime to fabrication plant to clean the manufacturing environment, and also failure to meet customer ship dates which carries hefty financial penalties.

The basis of the UHP gas/chemical delivery system for the fabrication of semiconductor wafers and FPDs are the same. The gases and chemicals that reach the fabrication process have to be ideally as pure and free of contaminants as possible. Purity requirements for the semiconductor wafer and FPD fabrication processes are very similar. As such Frost & Sullivan has used the semiconductor wafer fabrication process to illustrate the layout of a UHP gas/chemical delivery system. Chart 1-1 gives a brief overview of the main components of a UHP gas/chemical network in a semiconductor wafer fab. The UHP gas/chemical delivery system’s main purpose is to ensure that the pipeline into the core wafer manufacturing fab will not introduce any foreign particles, moisture or oxygen  which  can  create  serious challenges  for  the  efficient operation  and  good yield  of  a  semiconductor and FPD wafer fabrication plant.  Chart  1-1:  Ultra  High  Purity  Gas/Chemical  Delivery  System  Layout  for  a  Typical  Semiconductor Wafer Fab
UHP GaslChemical Delivery System  Gas  -Monitoring and Analysing Systems ­ ..  • Manufactured on site • Piped through underground pipes • Gas cylinders from specialty gas manufacturers  Chemicals • Chemicals cylinders from specialty chemicals manufacturers • Point-of-use Chemical Generation (POUCG) • Large Containers (Note: Deionised Water is generated onsi/e)  “. -, “;’ .u~p~’~en\;<:al” … .• ~’elj;;;~~.¥is~!n ~. Piping ..•~ .P.urnpS ~Filtets • Particle .detectors !Maly~ers . .•.• Oth:ercompOilents  Core Wafer Manufacturing Fab
FabWalJ Source: Frost & Sullivan A typical UHP gas/chemical delivery system consists of bulk gas pads, gas bunkers, central chemical store, on-line gas analysis, bulk gas purifiers, chiller, abatement equipment, vacuum pumps, and also an integrated control system. These components are specially designed and constructed from specific materials in order to keep the particle generation and impurities to a minimum. This is important because particles generated through friction, abrasion, and deterioration of an object contaminates the gas/chemical stream. The integrity of the piping system is also critical, any micro leaks or leaks that occur will contaminate the entire UHP gas/chemical delivery system. Contaminations that occur in the UHP gas/chemical delivery system are hard to clean and lead to costly downtime of the production line. The UHP gas/chemical delivery system also includes monitoring and analysing systems such as Environmental Systems, Materials Management Systems, Toxic Gas Monitoring Operation and Solid and Liquid Waste Management System to ensure the purity of the gas/chemicals during tab operation. All these components are connected to each other by using precision welding techniques such as tube, orbital, and also laser. Through these specialty-welding techniques, no foreign particles, moisture or oxygen can enter the gas/chemical stream. Welding techniques such as orbital welding is an especially specialized skill as it involves connecting UHP gas/chemical pipes in such a way that there will be minimal introduction of foreign materials and also keeps particle generation and impurities to a minimum. The UHP gas/chemical delivery system is also important because the system contains highly hazardous gases and chemicals. The leakage of such hazardous gas/chemicals as a result of improper material and installation methods may result in major disasters and serious injury to personnel. Hazardous gases and chemicals can be classified as being flammable, combustive, corrosive or toxic. Toxic gases such as Arsene, Tungsten Hexafluoride, Boron Trichloride, Nitrogen Trifluoride, and Chloro Trifluoride can be lethal in small doses. Toxic gases such as Arsene can be also cancerous if exposed to in small doses for prolonged periods. Highly flammable gases such as Hydrogen and Ammonia can also cause an explosion when exposed to sparks. Chart 1-2: A typical work environment for the construction of a UHP gas/chemical delivery system
Source: Kelington Group Bhd. There are three categories of companies involved in this industry as listed below: • Specialty gas/chemical companies (through their engineering divisions);
• UHP gas/chemical delivery system engineering companies; and
• UHP gas/chemical delivery system installation companies.

The specialty gas/chemical companies through their engineering divisions and UHP gas/chemical delivery system engineering companies are usually able to offer architectural and engineering­related services and/or technical conSUltancy to clients. This is in order to ensure that the network of UHP gas/chemical delivery system pipes to the manufacturing process achieves a certain level of purity. Certain companies also offer third party qualification services for UHP gas/chemical delivery systems to primarily meet the safety requirements and also incidentally meet insurance requirements. Typically, specialty gas/chemical companies through their engineering divisions and also UHP gas/chemical delivery system engineering companies are able to offer total UHP gas/chemical delivery system solutions. Total solutions include offering total UHP gas/chemical delivery system solutions from technologically driven design of UHP gas/chemical systems to maintenance services upon completion and successful qualification and validation. A typical UHP gas/chemical delivery system workflow involves the provision of the full range of UHP gas/chemical delivery system services which includes design of the system, building and construction of the system which includes piping, the procurement of UHP gas/chemical delivery equipments, installation of the equipment (hook up), qualification and certification and also maintenance. However, the general trend in the UHP gas/chemical delivery system currently is for specialty gas/chemical companies to outsource the total solutions for the UHP gas/chemical delivery system to UHP gas/chemical engineering companies. This would enable the specialty gas/chemical companies to focus on their core business which is the generation and supply of specialty gases/chemicals. The case for outsourcing as illustrated above is prevalent not only in the UHP gas/chemical delivery system industry but also throughout many other industries -both manufacturing as well as services. By outsourcing such services to companies that specialize in the provision of the same, companies are able to trim overhead costs -which aids their competitiveness -and allows them to maintain better focus on the key/core functions (or activities) of the company.
1.1 UTILIZATION OF UHP GAS/CHEMICAL DELIVERY SYSTEM IN DIVERSE INDUSTRIES Chart 1-3 below lists the areas where the UHP gas/chemical delivery systems are and can be applied. Chart 1-3: Key applications for the UHP gas/chemical delivery system Applications  Industry  1  Current Key Applications  Semiconductor Wafer fab, FPD fab etc.  2  Emerging Applications  LED, Solar Power, Pharmaceuticals, Biotechnology etc.
Source: Frost & Sullivan The semiconductor wafer fabs and FPD fabs are important application areas currently as far as UHP gas/chemical delivery systems are concerned. These sectors currently account for most significant proportion of the overall opportunities for the same. The emerging applications as mentioned above are expected to witness a greater adoption of UHP gas/chemical delivery systems as technology continues to progress from the milli (10-3) and micro (10.6) measurements to the nano (10.9) stages and beyond. The nano and subsequent technologies are currently at the embryonic stage (primarily at R&D and technology development stage) and have a high potential to be mainstream technologies in about 10-15 years, if not earlier. The main focus for this report is the semiconductor wafer fabrication and flat panel display (FPD) industry. These industries are expected to be the main driver for growth in the UHP gas/chemical delivery system industry through their massive capital expenditures on bUilding and expanding wafer and FPD fabs. The semiconductor wafer fabrication and FPD industries are therefore the current big markets for the UHP gas/chemical delivery system. The impact of the financial crisis in the United States of America that started with the subprime mortgage industry collapse in the first quarter of 2007 and the following downward spiral of spending in many leading countries impacted semiconductor sales. In 2008, worldwide sales of chips reached USD255.6 billion, a drop of 2.8 percent from 2007. According to Semiconductor Industry Association’s (SIA’s) annual mid-year forecast, the worldwide sales of semiconductors will be USD195.6 billion for 2009, a decline of 21.3 percent from sales of USD248.6 billion in 2008. According to the forecast, the year-on year growth for 2010 is projected to be 6.5 percent and in 2011 the industry is expected to reach USD221.9 billion. Many leading chipmakers have been witnessing a cash crunch ever since the onset of the financial crisis. Many chipmakers have suffered a significant drop in their sales in the second half of 2008 and Independent Market Research Report on the Ultra High Putity Gas / Chemical Delivery System Industry ©Frost & Sullivan 2009 into the calendar year 2009. The global foundry landscape is also likely to witness a consolidation. The factors driving this trend are; strong chipmakers buying out weaker rivals, and high development costs of cutting-edge chip technologies. The latest announcement comes from Abu Dhabi’s state fund, Advanced Technology Investment Co., or ATIC to buy the leading Singapore chipmaker Chartered Semiconductor for USD1.8 billion in September 2009. This move by ATIC will make the combined Globalfoundries* the number two pure play foundry. (* combined Chartered Semiconductor and Globalfoundries) The overall FPD market is expected to grow at a compound annual growth rate (CAGR) of around 3.1 percent from 2008 to 2013. In terms of revenue, the overall FPD market is expected to grow from USD85.9 billion in 2009 to USD120 billion in 2013. The fastest growing segment of the FPD industry is displays using OLED technology, which is expected to witness a CAGR of 14.9 percent from 2008 to 2013. With very stringent manufacturing requirements, a company that is proficient in UHP gas/chemical delivery systems for the semiconductor wafer fabs and FPD industries can potentially diversify into providing them for the LED, pharmaceutical, biotechnology, and food science industry. This would be easy for UHP gas/chemical delivery system companies as purity requirements for the said industries. although high, are not as stringent as the requirements for the semiconductor wafer or FPD industries. Emerging growth markets such as LED, pharmaceuticals, bio-sciences and solar panels are also expected to be key drivers in the future for the UHP gas/chemical delivery system industry. China’s pharmaceutical industry alone is expected to be one of the main drivers of the global pharmaceutical industry. China has the world’s fastest growing over-the-counter drug market and is already positioned as the world’s second largest pharmaceuticals chemical producer. China’s pharmaceutical industry experienced dOUble-digit growth from 2000 to 2005. The country’s production output value was approximately USD92.9 billion in 2007, an increase of 17.3 percent over 2006. Oil prices which peaked above USD140 a barrel in July 2008 tumbled to USD33 a barrel in December 2008 and as of August 2009 the price of a barrel was around USD70, alternative energy sources such as solar, hydrogen and wind energy have become very viable from a cost perspective. Prototype solar panels are now able to generate 1 watt of power for approximately USD1 compared to approximately USD8 for the same in 1990. The cost to generate power using current conventional technologies is approximately USD4-USD6 per watt and increasing rapidly depending on the prices of raw materials. Technological advances in solar panels manufacturing is expected to lead to cheaper solar panels with increased efficiency in power generation. This will help to further drive down the cost per watt of generated power, which will eventually lead to the widespread adoption of solar technology. With costs for both methods of power generation being almost comparable and countries eager to meet their carbon emissions obligations under the Kyoto Protocol, solar panel and other alternative energy generation usage is expected to increase exponentially in the short to medium term. 2 MARKET ANALYSIS OF THE ULTRA HIGH PURITY GAS/CHEMICAL DELIVERY SYSTEM INDUSTRY -CHINA, TAIWAN AND MALAYSIA As highlighted above, the current large markets/applications for UHP gas/chemical delivery systems are the semiconductor and FPO industries. The global semiconductor market declined by 2.7 percent to reach 248.6 billion in 2008 and global FPO revenues grew 16.3 percent to US0103 billion. These are global industries with a very strong manufacturing presence in Asia -notably in Taiwan, China, Singapore, South Korea, Japan and Malaysia. Taiwan and China are the growth drivers for these industries as far as the construction of fabs (for semiconductors as well as FPOs) are concerned. However, in Malaysia, planned investments for semiconductor wafer and FPO Fabs are relatively smaller as compared to that of China and Taiwan, also, the investment amounts are not constant and experience fluctuations between years. With planned investments of approximately US02.6 billion over the next 3 years into the solar cell manufacturing industry in Malaysia, Malaysia is increasingly becoming a hub for the manufacture of solar cells which also employ UHP gas/chemical delivery systems in their manufacturing facilities. The resultant effect is that the UHP gas/chemical industry revenues generated from the solar cell manufacturing industry is expected to be quite significant and have a similar impact to the revenues generated from the semiconductor wafer and FPO fabs in Malaysia for the forecast period of 2008­2013 The solar cell manufacturing industry is expected to be one of the key drivers of the UHP gas/chemical delivery system market in Malaysia for the forecast period. Due to this and the potential of Malaysia’s budding solar cell manufacturing industry, Frost & Sullivan has decided to include revenues generated from this industry into the market size calculation for the Malaysian UHP gas/chemical delivery system industry. However, the UHP gas/chemical delivery system markets for China and Taiwan are still expected to be driven by the semiconductor wafer and FPO industries. The UHP gas/chemical delivery system markets in China, Taiwan and Malaysia for these applications are at different stages of growth as depicted in Chart 2-1.
Chart 2-1: The UHP Gas/Chemical Delivery System Market in China, Taiwan and Malaysia (2008) Measurement  China  Taiwan  Malaysia1  Revenue Base Year (2008)  USD238.8 million  USD393.6 million  USD35.9miJlion  Potential Revenue (market size in 2013)  USD439.3 million  USD622.0 million  USD36.5million  Forecast Period Compound Annual Growth Rate (2008-2013)  Around 12.96%  Around 9.59%  Around 0.33 %
Source: Frost &Sullivan Note: 1) The UHP gas/chemical delivery system market size for Malaysia includes estimated revenues generated from solar cell manufacturing facilities in addition to those generated from semiconductor wafer and FPD fabs. The growth trend for the UHP gas/chemical delivery system industry in Malaysia, Taiwan and China considering the two main applications -semiconductors and FPDs -is shown in Chart 2-1. In light of the present industry trends and the current substantial base market size of semiconductors and FPDs in China and Taiwan, any incremental expansion of the existing base market size represents significant growth opportunities for the existing market players. Market growth rates of 12.96 percent in China and 9.59 percent in Taiwan represent quite a significant growth rate for a market of this size. In this forecast period, the market size of the UHP gas/chemical delivery system industry in Malaysia is expected to hold steady in the mid USD30 million region. Chart 2-2: The UHP Gas/Chemical Delivery System Market Size in Malaysia, China and Taiwan, (2006-2013) I-+-M’sia Total (USD thousands)–Taiwan Total (USD thousands) China Total (USD thousandS)] $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 2006 2007 2008 2009 2010 2011 2012 2013 Source: Frost & Sullivan Historically growth of the UHP gas/chemical delivery system in China has been driven by the growth in the semiconductor manufacturing sector. The semiconductor manufacturing sector, a particularly profitable segment of the market for the UHP gas/chemical delivery system industry due to the requirement for ultra high levels of purity, had total sales revenue of US083.2 billion in 2007, an increase of 19.8 percent over 2006. In Taiwan, historical growth has been influenced by growth in the FPO industry. Taiwan’s share in global FPO production has been constantly increasing since it started being involved in the FPO industry. In 2004, Taiwan’s value of FPO production increased by 34.0 percent over 2003, crossing US012.37 billion, and reached US050 billion dollars in 2008. Historically, the growth of the UHP gas/chemical delivery system in Malaysia is largely based on the construction and upgrading of semiconductor wafer fabs. The construction of the power logic fabrication plant for Infineon Technologies AG in Kulim, Kedah, provided a significant amount of revenues for local UHP gas/chemical delivery engineering and specialty gas/chemical companies. The total cost for the project was around RM4.3 billion, with around RM64.8 million for the UHP gas/chemical delivery system. 2.1 CHINA AND TAIWAN China registered strong economic growth in 2006. The country’s real GOP expanded by 13.0 percent in 2007. However in 2008 the Chinese economy experienced a slowdown and the real GOP stood at 9.0 percent. The GOP for the first quarter of 2009 reached US09,621.6 billion. Foreign direct investment (FOI) inflow to China amounted to US0160.9 billion in 2008, up 8.0 percent from the previous year, with most of it focused in manufacturing, machinery, and other high­tech areas. In China, the semiconductor, FPO manufacturing, and the pharmaceutical industries are the main areas driving the growth of the UHP gas/chemical delivery system industry. In Taiwan, the semiconductor wafer and flat panel display manufacturing industries are the main drivers of the growth of the UHP gas/chemical delivery system industry. With Intel having perfected the 65 nm semiconductor manufacturing process and starting on its 45nm processes and Taiwanese foundry giants such as UMC and TSMC having perfected the mass production of wafers using 65 nm technologies, the semiconductor industry is ahead of the International Technology Roadmap for Semiconductors (ITRS) technology road map. This ramping­up of production of a new process generation every two to three years advocates the beliefs of Moore’s Law which states that there will be a dOUbling of transistors on the same real estate of silicon every 18 months. In order to keep up with this cycle of relentless pursuit of new technological nodes, there will be a need for constant investments, regular upgrades, and the establishment of new fab facilities. Companies are also moving from 200 mm to 300 mm wafer production to quadruple production capacity. This has also led to increased investment in wafer processing facilities. Similar to other products, UHP gas/chemical delivery systems, after a particular time, are usually upgraded or decommissioned. Different application segments have different UHP system life cycles, as the life cycles are primarily determined by the level of technological development as well as the amount of pressure placed on companies within those application segments to rapidly evolve their product lines to cope with market demands.
When compared to semiconductors, UHP gas/chemical delivery systems for wafer fabs usually have a longer life span. UHP gas/chemical delivery systems are usually built one or two generations ahead of current technology node requirements. Usually, the UHP gas/chemical delivery system will be designed two generations ahead but built according to current technology’s requirements. When upgrades become necessary, and if they are performed within the initial UHP gas/chemical delivery system design limit, the cost is approximately 20.0 percent of the original UHP gas/chemical delivery system. Upgrade works are generally more focused on adding or changing to other specialty gases and adding equipment and upsizing the gas/chemical delivery system. This upgrading takes approximately three to six months and does not impact current productions runs as it is done in parallel. This enables the uninterrupted production of semiconductors for a few generations, until the UHP gas/chemical delivery system design limit has been reached. When this happens, a completely new UHP gas/chemical delivery system is required. Generally, fab owners build a new fab in a different location because the price of upgrading the UHP gas/chemical delivery system is the same as bUilding a new system, and bUilding a new system entails a total shutdown of current production. The basic architecture and design of a UHP gas/chemical delivery system for a FPD fab is similar to a semiconductor wafer fab. Although the variety of gases and chemicals utilised are slightly less for a FPD fab, the volume of the gases/chemicals used are significantly higher. Thus the size of the piping for the UHP gas/chemical delivery system needs to bigger. The structure of the piping has to be also more robust as the volume and pressure of gases/chemicals in the system are significantly higher compared to a semiconductor wafer fab. FPD fabs have less stringent requirements for UHP gas/chemical delivery systems; thus, the life span of these systems for the FPD industry tends to be longer when compared to that of semiconductor wafer fabs. The growth rate for the UHP gas/chemical delivery system industry in China and Taiwan is expected to remain at the current trend of growth. Compound annual growth rates (CAGR) of 12.96 percent is expected for China and 9.59 percent expected for Taiwan for the forecast period of 2008 to 2013. This is mainly due to the fact that a significant amount of investments in the semiconductor wafer and FPD fabs are in these two countries. Most of the investments will be for fabs with newer technologies so that companies can keep up with industry technology trends. Kelington Group has just recently penetrated the China and Taiwan market, but is gradually establishing itself as a player in these markets. However as of 2008, their market share is negligible.
2.2 MALAYSIA The development of the UHP gas/chemical delivery system industry in Malaysia is highly correlated to the condition of its dependent industries, especially the semiconductor wafer fabs and FPD industry. With very stringent manufacturing requirements, a company that is proficient in UHP gas/chemical delivery systems for the semiconductor wafer fabs and FPD industries can potentially diversify into providing them for the LED, pharmaceutical, biotechnology, and food science industry. Historically, the growth of the UHP gas/chemical delivery system in Malaysia is largely based on the construction and upgrading of semiconductor wafer fabs. The construction of the power logic fabrication plant for lnfineon Technologies AG in Kulim, Kedah, provided a significant amount of revenues for local UHP gas/chemical delivery engineering and specialty gas/chemical companies. The total cost for the project was around RM4.3 billion, with around RM64.8 million for the UHP gas/chemical delivery system. With the completion of this project, market revenues from the semiconductor wafer fab sector will be mainly tied to upgrading of fab capacity (hook up) projects and maintenance works. This will largely be the industry trend till the construction of new semiconductor wafer fabs. The solar panel manufacturing industry in Malaysia is still at its infancy stage. Presently, major manufacturers in the world such as First Solar GmbH, Q-Cells AG and SunPower Corporation have decided to set up production plants in Malaysia. US-based renewable energy company First Solar has started production in Kulim Hi-tech Park and is presently extending its production line facilities while Q-Cells’ plant, is under construction. Sun Power Corporation will set up its next solar cell fabrication plant in Malaysia. The Malaysian government is launching efforts to lure leading Japanese solar companies to tap into the opportunities in the solar cluster being developed in Malaysia. First Solar operates manufacturing plants in the U.S. and Germany with total annual nameplate production capacity of 210MW. Currently, the company is in the midst of constructing two additional manufacturing plants in Kulim, with a total annual nameplate of 540MW. Upon completion of this expansion project by the end of 2009, First Solar projects its total annual nameplate production capacity to be at 570MW. The company has invested USD150 million for its plant expansion plans. First Solar’s expansion plans stems from increased demand from its existing customers such as Blitzstrom GmbH, Conergy AG, Gehrlicher Umweltschonende Energiesysteme GmbH, Phoenix Independent Market Research Report on the Ultra High Purity Gas / Chemical Delivery System Industry 15 ©Frost & Sullivan 2009 Solar AG, and Reinecke + Pohl Sun Energy AG and ASSYCE Fotovoltaica, a Spanish renewable energy project developer and system integrator focused on large scale, grid connected solar power plants. First Solar expects potential additional sales of approximately USD1.1 billion as a result of recent contracts and contract extensions with these customers from 2007 to 2012. Solar modules made in Malaysia will be exported for use in projects in European countries such as France, Greece and Portugal. Q-Cells, a German solar cell manufacturer, have most recently entered the Malaysian market with plans to construct a manufacturing plant for photovoltaic products. The company has plans to invest USD311.0 million from 2009 to 2010 for manufacturing and supporting technology development. This plant will be the company’s first in the Asian region. In June 2009, the construction of solar cell manufacturing facility for Q-Cells was completed. Q-Cells will be further expanding production capacity in its subsidiary, Calyxo, which specializes in thin-film module production. The expansion will be carried out in two phases. Phase 1, with planned production in Quarter 1, 2009, will result in production capacity of more than 300MW. Production in Phase 2 is expected to begin in Quarter 2, 2009 and will enable Q-Cells to produce up to 60MW. Besides production, the company will also be carrying out R&D of new thin-film technologies. The photovoltaic market has been growing at a cumulative average rate of 45% per annum over the last few years. Sun Power Corporation announced in May 2008, that it has plans to build a solar cell fabrication plant in Malaysia in two phases. This plant will be known as Fab 3. SunPower, a Silicon Valley­based company, manufactures high efficiency solar cells, solar panels and solar systems. In Phase 1, the company will build fourteen solar cell production lines. Each line will have a nameplate capacity of 40MW. Phase 2 will include solar panel manufacturing and dedicated ingot growing and wafering by partner companies. Production is expected to begin in 2010. Sun Power plans to increase production of the higher efficiency Gen 3 solar cells and will launch manufacturing operations with its 22% minimum rated Gen 2 solar cells. Malaysia is also increasingly becoming a destination for solar cells manufacturing activities. Industry leaders such as Q-Cells AG, First Solar GmbH and SunPower Corporation have in total committed to invest approximately USD2A billion to set up their respective manufacturing facilities in Malaysia. This presents a huge opportunity for the UHP gas/chemical delivery system industry in Malaysia. Similar to product Iifecycles, the UHP systems have a period of time after which they are usually upgraded. Upgrading of UHP gas/chemical delivery systems will occur when the line widths of current semiconductor manufacturing become too small for the current UHP gas/chemical delivery system. Therefore this presents another significant source of income for the companies involved in this industry. In terms of revenue, the UHP gas/chemical delivery system market in Malaysia reached US035.9 million. In this forecast period, the market size of the UHP gas/chemical delivery system industry in Malaysia is expected to hold steady in the mid US030 million region from 2008-2013. However, the industry’s revenues fluctuate a lot due to the high dependency of new projects, especially semiconductor and FPO related fabs. The market for the UHP gas/chemical delivery system is also relatively smaller when compared to China and Taiwan as seen above. Based on these assumptions, using a conservative approach, the revenue for Kelington Group (KE) in the UHP gas/chemical delivery system industry in Malaysia for 2008 was US06.6 million or approximately 18.4 percent, taking into account the estimated market size of USD35.9 million. According to Frost & Sullivan, the dominant market player is MOX (MOXLINDE Gases Sdn Bhd), with estimated revenues of over US027 million, translating to a market share of more than 75 percent. MOX was the first to market and could therefore leverage on its reputation in the UHP gas/chemical delivery system industry. As such in terms of market positioning in 2008, Kelington appears to be the next leading player in Malaysia after MOX. As Kelington Group operates as more of a service provider compared to a manufacturer in the UHP gas/chemical delivery system market, therefore it is not susceptible to any goods/products that might be imported. 3 INDUSTRY DYNAMICS FOR THE ULTRA HIGH PURITY GAS/CHEMICAL DELIVERY SYSTEM IN CHINA, TAIWAN AND MALAYSIA The UHP gas/chemical delivery system industry in China, Taiwan and Malaysia share similar market drivers and restraints as a result of the global nature of the semiconductor and FPD industries. Most of these drivers and restraints are generic and have similar effects on the growth and development of the UHP gas/chemical delivery system industry in the said countries.

 

3.1 MARKET DRIVERS: • Technological advances in client industries Rapid changes of process/manufacturing technologies in client industries leads to very short life cycles and a high frequency of upgrades of the UHP gas/chemical delivery system. This is done to keep up with the ever stringent requirements of manufacturing processes. Where semiconductor wafer fabs constantly face challenges when it comes to the miniaturization of line widths, FPD fabs are facing challenges with the ever increasing sizes of glass substrates causing the amount of UHP gas/chemicals to be delivered to increase likewise. Both sets of these ever stringent requirements pose very different challenges to the UHP gas/chemical delivery system company. The company that is able to constantly update itself and keep pace with these technological changes will have a significant advantage over its competitors. • Shifting drivers for demand of consumer electronics The advent of the Internet boom and also the widespread use of wireless and portable communications have led to a huge demand for semiconductors from the consumer electronics sector. This has led to significant investments in semiconductor wafer fabs to meet this growing demand. The flat panel display market totalled USD103 billion in 2008. In terms of revenues generated, LCD is the most dominant technology, with almost 89 percent of the market share. This trend is expected to continue up to 2013, from where it would average around 88 percent. The increased demand in LCD 1Vs is also another key driver as LCD 1Vs use digital technologies to produce images and therefore consume a higher level of semiconductor content when compared to analogue CRT sets. An LCD 1V has approximately 2.5 times more semiconductors compared to an analogue CRT 1V. • Government support for client industries The strong backing of national governments towards capital intensive industries such as semiconductor wafer and FPD fabs is critical. This is especially so in China and Malaysia as heavy initial investments are needed to jumpstart these industries. Government support eases the access to funds, procurement of equipment and land and also removes any political red tape that might hinder the development of these industries. Strong government support will also enable more foreign direct investments to enter the respective countries. • Increasing fab capacity The rise in present fab capacity provides a steady stream of income for UHP gas/chemical delivery system companies, while new projects are being tendered. This driver is closely tied to the ever increasing demand for client industry products of the UHP gas/chemical delivery system industry. 3.2 MARKET RESTRAINTS: • Revenue cyclicality The semiconductor industry is cyclical and overly dependant on the servicing industries, particularly the E&E industry. Semiconductor companies face constant booms and busts in
demand for products. Demand typically tracks end-market demand for personal computers, cellular phones, and other electronic equipment.
• Dependency on FDI and reinvestments The UHP gas/chemical delivery system industry’s clients rely heavily on foreign direct investment and reinvestment to increase capacity. This is largely due to the fact that it costs
billions of dollars to build a single semiconductor wafer or FPD glass substrate fab. The costs to upgrade fab capacity can also run into millions of dollars.
• Smaller market size (As applies to Malaysia only) After the construction of the Infineon power logic wafer fabrication plant in Kulim, Kedah, in recent years there has not been any significant investment in the Malaysian FPD and wafer fab industry. The companies that are involved in the UHP gas/chemical installation would then have

to compete for a share of the market, which would be relatively smaller compared to Taiwan or China. One of the main revenue generators would then be the upgrading of foundry capacity, or in industry terms called “hook up”. 3.3 BARRIERS TO ENTRY: Barriers to entry for the market in the UHP gas/chemical delivery system industry include: • Technical expertise
The design of an UHP gas/chemical delivery system is very technical and complex. The design of these systems requires not only a detailed knowledge of gas and chemical properties but also an in-depth knowledge with regard to the safety requirements of gas and chemicals systems to fulfil international safety requirements as well as process requirements.
• Reputation and track record
UHP gas/chemical delivery systems are a critical part of a manufacturer’s production facility. Mistakes that are made can lead to serious safety hazards and also tremendous time and financial loss. Therefore, the reputation and safety track record of a UHP gas/chemical delivery system service provider is an extremely important factor that clients consider before they decide whom to award contracts to.
• Orbital welding technology

Due to the high level of purity required by foundries, UHP gas/chemical delivery system providers utilize a specialised welding technique known as orbital welding for the joining of piping systems. Orbital welding, which was initially developed for the aerospace industry and later by the high-technology industries to produce superior welding joints for piping and connecting of parts. The operation of orbital welding equipment requires extensive hands-on experience and is not easily perfected. Orbital welders are usually certified by internationally recognised bodies to ensure that they have the necessary accredited skills to perform the welding. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
3.4 CRITICAL SUCCESS FACTORS FOR CHINA, TAIWAN AND MALAYSIA The critical success factors for China, Taiwan and Malaysia are: •  Good reputation and credibility with track record  A primary factor for success in the UHP gas/chemical delivery system industry is reputation. UHP gas/chemical delivery systems are a crucial component of a manufacturer’s production process; thus, mistakes can be very time consuming and extremely costly to fix.  With the cost of the UHP gas/chemical delivery system being relatively insignificant when compared to the cost of the fab itself, fab owners are willing to pay slightly over-the-market price to ensure that the UHP gas/chemical delivery system can be installed and functions per specification. Therefore, UHP gas/chemical delivery system companies with high credentials/reputation and an impeccable safety record are highly preferred by multinationals.  •  International Operations  Global wafer and FPO manufacturing investments are concentrated in the Asian region of China, Taiwan, South Korea, and Japan. This makes it crucial for the UHP gas/chemical delivery system companies to have international operations, so that they are able to follow their clients elsewhere and continue to provide services to them.  •  Support from semiconductor and FPO Fabs  The support from semiconductor and FPO fabs is crucial as they are the main clients for UHP gas/chemical delivery systems. However, due to the critical nature of the same in these capital intensive projects, the fab owners typically select the relevant UHP engineering companies through a rigorous process based on their technical expertise, experience and skilled human resources. For example, KE is a pre-qualified bidder for the projects by Semiconductor Manufacturing International Corporation (SMIC); SMIC is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in Mainland China, which is a testament to the quality of its delivery solutions.  •  Total Solutions Provider  The UHP gas/chemical delivery system company that can provide total solutions for the UHP gas/chemical delivery system will stand to gain the most as margins for the whole project are significantly more than just subcontracting parts of it, especially the installation part.  This ability of a UHP gas/chemical delivery system company to provide total solutions from the design phase right up to the maintenance phase is also highly sought after by semiconductor wafer and FPO manufacturers.
• Welding technologies Welding of pipes in the UHP gas/chemical delivery system requires a specialized set of welding techniques. Orbital welding technology is one of the more common approaches to welding in the UHP gas/chemical delivery system industry. It is a skill set that requires a number of years of experience and it is not easily perfected, welding is done in a clean environment and requires a level of precision and detail that is not easily attainable. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] COMPETITIVE ANALYSIS OF THE ULTRA HIGH PURITY GAS/CHEMICAL DELIVERY SYSTEM INDUSTRY -MALAYSIA, CHINA AND TAIWAN The UHP gaslchemical delivery system industry in Malaysia, China and Taiwan consists of three categories (Category 1, Category 2 and Category 3) as outlined below: Chart 4-1: Differentiation of the 3 Main Categories in the Ultra High Purity Gas/Chemical Delivery System Industry Company  Capabilities  Category 1  Multinational specialty gas and chemical providers through their gaslchemical system engineering divisions  Total UHP gaslchemical delivery system solutions: (inclUding gas/chemicals supply) • Design ­UHP gas/chemical delivery system design seNice • Building & Construction -Building and construction of the UHP gas/chemical delivery system • Procurement -Procurement of the UHP gas/chemical delivery system equipment . • Installation -Installation of the UHP gas/chemical delivery system equipment • QA ­Qualification and verification of the UHP gas/chemical delivery system • Maintenance ­Maintenance of the gas/chemical delivery system • Gas/Chemicals ­Provide supplv of specialtv aas/chemical Total UHP gaslchemical delivery system solutions: (excluding gas/chemicals supply) • Design ­UHP gas/chemical delivery system design service Building &Construction -Building and construction of the UHP • gas/chemical delivery system • Procurement ­Procurement of the UHP gas/chemical delivery system equipment • Installation ­Installation of the UHP gas/chemical delivery system equipment • QA ­Qualification and verification of the UHP gas/chemical delivery system • Maintenance ­Maintenance of the gas/chemical delivery system Installation and building works for the UHP gaslchemical delivery system: • Building & Construction -Building and construction of theUHP .. gas/chemical delivery system • Procurement -Procurement of the UHP gas/chemical delivery system equipment • Installation ­Installation of the UHP gas/chemical delivery system equipment • Maintenance ­Maintenance ofthe gas/chemical delivery system  Category 2  UHP gaslchemical delivery system engineering companies  Category 3  UHP gaslchemical delivery system installation companies
Source: Frost & Sullivan Independent Market Research Report on the Ultra High Purity Gas / Chemical Delivery System Industry 23 Companies in Category 1 are primarily European and U.S. multinational specialty gas and chemical providers through their gas/chemical system engineering divisions. Category 1 companies have the capability to offer total UHP gas/chemical delivery system services, which would include consulting, system design, system execution, qualification, and maintenance. This is one of the advantages that main turnkey contractors for wafer and FPD fabs gain if they subcontract the total gas/chemical project to these specialty suppliers. This ensures that the gas/chemical that reaches the point of use will be contaminant-free, and if not, they will be able to hold the relevant party accountable. Category 1 companies have the necessary resources and global reach. They usually compete against each other for big scale UHP gas/chemical delivery system projects normally from securing the contracts for the supply of gas/chemicals on an ongoing manner. As most Category 1 companies are gas/chemical companies, they tend to outsource the total UHP gas/chemical delivery system solutions to Category 2 companies. By outsourcing such specialized services, the gas/chemical companies are able to trim overhead costs -which aids their competitiveness -and allows them to maintain better focus on the key / core functions (or actiVities) -primarily the supply of gas and chemicals. In this manner, Category 2 companies such as KE have managed to obtained contracts from Category 1 companies to provide total solutions for the UHP gas/chemical delivery system in semiconductor wafer fabs for foundries such as Silterra, Taiwan Semiconductor Manufacturing Corporation (TSMC) and also FPD glass substrate manufacturer Hannstar Display Corporation. Category 2 companies include Asian (excluding Japan) UHP gas/chemical delivery system engineering companies (namely from Malaysia and Taiwan). These Category 2 companies are also able to provide total UHP gas/chemical delivery system services, which would include consulting, system design, system execution, qualification, and maintenance. However they might not posses enough resources to manage, coordinate, and/or execute large-scale projects. They tend to compete more for smaller scale projects. However, these UHP gas/chemical delivery system engineering companies should not be considered as installers as they posses a significant technical advantage and expertise in designing a UHP gas/chemical delivery system as compared with an installation company that typically works according to schematics/drawings provided. Category 2 companies are able to provide value added services such as design, qualification and validation and much more. The advantages of Category 2 companies over Category 3 companies are highlighted in Chart 4-1. Depending on the working relationship between Category 2 companies and the MNCs, Category 2 companies with a strong track record can usually leverage on a good working relationship for recurring projects. The competition among the players in Category 2 is medium because each player has their own expertise and is usually quite established in the local markets that they operate in. UHP gas/chemical delivery system companies with high credentials and an impeccable safety record are highly preferred by MNCs, this is especially so due to the stringent requirements of the UHP gas/chemical delivery system industry. Category 3 are companies that typically perform subcontracting jobs such as installation, hence the name installers, for the specialty gas and chemical companies and the UHP gas/chemical engineering companies in the execution phase of the UHP gas/chemical system project. They do not posses enough experience or capability to offer total UHP gas/chemical delivery system solutions. For some UHP gas/chemical delivery system companies, their capabilities are region/country dependent. They might not have a strong UHP gas/chemical delivery system engineering team in countries with a relatively small market size, but have a very strong presence in countries that have a lucrative market. Chart 4-2: Leading Players in the UHP Gas/Chemical Delivery System Industry in Malaysia, China and Taiwan, (2008) China  Taiwan  Malaysia  Category 1 .  Airliquide” Air Products” BOC China (Holdings) Co Ltd.A Linde Electronics & Specialty Gas” Messer Group” Praxair”  Air Liquide” Air Products~ BOC Lienhwa”A Super Clean Technology Co Ltd. (Subsidiary of Taiyo Nippon Sanso) Kelington Group Berhad Marketech International Corp Wholetech System Hitech Limited 60 ­70 companies (Companies thatact as installers of UHP systems)  Air Products STB Sdn Bhd MaX-LINDE Gases Sdn Bhd (MO)()~ . Kelington Group Berhad Kinetics Process Systems Sdn Bhd 2 ~ 4 companies . (Companies that act as installers ofUHPsystems) ,  Category 2  Kelington Group Berhad Marketech International Corp Wholetech System Hitech Limited Kinetics Process Systems (ShanghaifTianjin) Ltd  Category 3  50 ­60 comPanies (Companies that act as installers of UHP systems)
Source: Frost & Sullivan • Note: Denotes subsidiaries andjoint ventures of MNCs with local companies of the respective countries. Companies are listed in alphabetical order and are not presented in any particular ranking or order. ‘Note: • BOC (BOC is now a division of Linde Group)
• BOC Edwards (BOC Edwards was spun off from the Linde Group to become Edwards. As at 21″ May 2008, Edwards sold its chemical management division of Edwards Vacuum, Inc 10 Air Liquide Electronics)

‘Note: MOX is part of the Linde Group Independent Mart<et Research Report on the Ultra High Purity Gas / Chemical Delivery System Industry 25 Chart 1-7 shows a sample of the top players in the UHP gas/chemical delivery system industry in China, Taiwan and Malaysia. Category 1 is dominated by multinationals (MNCs) such as Air Liquide, BOC (BOC is now a division of Linde Group) and Linde Gas through their respective subsidiaries in these countries. These companies usually compete amongst themselves to secure the supply of gas/chemicals on an ongoing manner for semiconductor wafer and FPD fabs. Design and construction of the UHP gas/chemical delivery system is usually a part of this agreement for the supply of gas/chemicals. Outsourcing the design and construction of the UHP gas/chemical delivery system enables these gas companies to focus on their core business, which is the supply of specialty gas/chemical. Category 2 companies such as KE, Marketech International Corp and Wholetech System Hitech Limited compete amongst themselves to provide total UHP gas/chemical delivery system solutions to these Category 1 companies. Category 3 companies comprise mostly local companies who act as installers for the UHP gas/chemical delivery system. They usually obtain contracts outsourced from Category 1 or Category 2 companies to install the piping and equipment for UHP gas/chemical delivery systems. The highlighted box in Chart 1-7 represents the competitive landscape for KE. Chart 1-8, Chart 1-9 and Chart 1-10 lists the core competencies of a sample of leading players in the UHP gas/chemical delivery system industry. Companies from Category 1 and 2 are able to provide total solutions for the UHP gas/chemical delivery system, whereas companies in Category 3 offer mostly installation solutions. Chart 4-3: Leading Category 2 and Category 3 Players in the UHP Gas/Chemical Delivery System Industry in China (2008) Company Name  Design  B&C  Procure  Install  QA  Maintain  Kelington Group Berhad  ,f  ,f  ,f  ,f  ,f  ,f  Marketech International Corp  ,f  ,f  ,f  ,f  ,f  ,f  Wholetecll System Hitech Limited “”,  ,f  ,f ”  ,f  ,f  ‘>,f , “””  ./ ”  Kinetics Process Systems (ShanghailTianjin) Ltd  ,f  ,f  ,f  ,f  ,f  ,f  Approximately 50·60 Companies Acting as Installers  ,f  ,f  ,f  ”  ,f
Source: Frost & Sullivan • Note: Denotes subsidiaries andjoint ventures of MNCs with local companies of the respective countries. Independent Market Research Report on the Ultra High Purity Gas / Chemical Delivery System Industry ©Frost & Sullivan 2009 Chart 4-4: Leading Category 2 and Category 3 Players in the UHP Gas/Chemical Delivery System Industry in Taiwan (2008) Company Name  Design  B&C  Procure  Install  QA  Maintain  Kelington Group Berhad  ./ .  ./  ./  .. ./  ./  ./  Marketech International Corp  ./  ./  ./  ./  ./  ./  Wholetech System Hitech Limited  ./  ./  ./  ./ .  ./  ./  Approximately 60-70  ./  ./  ./  ./  Companies Acting as  Installers
Source: Frost & Sullivan • Note: Denotes subsidiaries andJoint ventures of MNCs with local companies of the respective countries Chart 4-5: Leading Category 2 and Category 3 Players in the UHP Gas/Chemical Delivery System Industry in Malaysia (2008) Company Name  Design  B&C  Procure  Install  QA  Maintain  Kinetics Process Systems Sdn Bhd  ./ . ./ .  ./ ./ I ./  ./ ./ ./I .  ./ I … ./ ./ .  .”.. ./ ” ..  ./ . ……• ./ ./.  Kelington Group Berhad  Approximately 2-4 Companies Acting as Installers
Source: Frost & Sullivan Legend: Design -UHP gas/chemical delivery system design service B&C -Building and construction of the UHP gas/chemical delivery system Procure -Procurement of the UHP gas/chemical delivery system equipment Install-Installation of the UHP gas/chemical delivery system equipment QA -Qualification and verification of the UHP gas/chemical delivery system Maintain -Maintenance of the gas/chemical delivery system Gas/Chemicals -Provide supply of specialty gas/chemicals Semiconductor wafer and FPD manufacturers usually prefer UHP gas/chemical delivery system companies that are able to provide turnkey solutions to their UHP gas/chemical delivery system needs. Leveraging on this advantage UHP gas/chemical delivery system engineering companies such as KE have the capability to gain a greater share of the UHP gas/chemical delivery system market. 5 GOVERNMENT REGULATIONS, POLICIES, AND INCENTIVES IN CHINA, TAIWAN & MALAYSIA

5.1 CHINA AND TAIWAN There are no specific laws or regulations governing the UHP gas/chemical delivery system industry in China or Taiwan. However, the Chinese Government does offer incentive and preferential policies to attract foreign investment -particularly sectors with high growth potential, such as manufacturing, pharmaceutical, and biotechnology. The government has specified certain areas where industrial operations are encouraged, such as industrial parks, Special Economic Zones (SEZs), and Free Trade Zones (FTZs). The types of benefits and incentives offered vary across parks or zones, but they are similar in nature and are designed to attract foreign investments.
5.2 MALAYSIA The Malaysian Government offers a variety of incentives to promote the growth of the value-added and manufacturing sectors. The major tax incentives for companies that are in these sectors are the Pioneer Status or Investment Tax Allowance. There are other incentives such as Incentives for Relocating ManUfacturing Activities to Promoted Areas, Incentives for High Technology Companies, Incentives for Strategic Projects, and many others. All these are offered to encourage foreign direct investment and encourage local companies to invest in more value-added technology. There are also designated FTZs where companies that set up operations would enjoy a certain amount of tax holidays. Through agencies like the MIDA, various state governments and also the board of directors of the various FTZs, foreign corporations are enticed to set up operations in the country with incentives like Pioneer Status or Investment Tax Allowances. INDUSTRY OUTLOOK The UHP gas/chemical delivery system industry is an industry where precision counts. UHP gas/chemical delivery systems are systems that deliver gas/chemicals to the specific point of use with as little impurities (high purity) or foreign material/s (contaminants) as possible to ensure consistent and high quality yield. UHP gas/chemical delivery systems are typically used in semiconductor wafer fabrication processes and FPD manufacturing. These are also used in other manufacturing industries like LED, pharmaceuticals, bio-sciences, solar panel manufacturing and also nanotechnology processes where purity requirements are extremely critical to product quality. The performance of the UHP gas/chemical delivery system industry is highly correlated to the performance and prospects of its key application markets -primarily the semiconductor wafer and FPD fabs -where the extremely high levels of UHP requirements is one of the critical success factors for good yield rates and quality. Fast cyclical changes in technological advancements or the relatively short to medium life cycle nature of these key markets often result in the construction of new wafer and FPD fabs and the refurbishment of older ones. With the increase in end-user demand for semiconductors and FPDs, existing fabs will also need to upgrade their current production capacities. Thus, UHP gas/chemical companies with the adaptability to keep up with the ever-stringent requirements of the UHP gas/chemical delivery system industry are expected to witness success both in China, Taiwan and Malaysia. UHP gas/chemical delivery system engineering is a very precise and specialized engineering centric industry, where measurements and part sizes are measured in nanometres and part-per-bil/ion (ppb) counts. This industry has extremely low margins for error (bordering on none) as slight variances in manufacturing processes causes a disproportionate effect on process Cost of Poor Quality (COPQ) resulting in losses totalling millions of dollars. The semiconductor and FPD markets largely provide the current opportunities for UHP gas/chemical delivery system industry and Frost & Sullivan has therefore focused on these industries for providing the industry data. The UHP gas/chemical delivery system industry is an industry that is highly correlated to the performance of its dependant industries -in this case, semiconductor fabs as well as FPD (LCD) fabs, in the relatively high growth markets of China and Taiwan followed by Malaysia. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] China: The future growth for China is much more encouraging due to the expected set up of newer fabs as well as expansion of the existing fabs for semiconductors as well as FPDs in these two countries. China’s industrial sector recorded USD1.09 trillion in its overall added industrial value in 2007, up by 18.5 percent over the same period last year, while its total investment in fixed assets grew by 25.5 percent in 2008. The fast growing economy is being reined in for a soft landing under the government’s balanced development strategy and continued macroeconomic control policies. China has maintained an average annual economic growth rate of around 10 percent for the past four years, namely 10.1 percent in 2004, 10.4 percent in 2005, 10.7 percent in 2006 and 11.4 percent in 2007. In 2008 the Chinese economy experienced a slowdown and the real GDP stood at 9.0 percent. Manufacturing and construction growth, hampered by bottlenecks in energy and transportation, land constraints, and reduced levels of investments, are expected to slow slightly. Foreign direct investment (FDI) inflow to China amounted to USD160.9 billion in 2008, up 8.0 percent from the previous year. According to the China Semiconductor Industry Association, China currently has 47 fabs. The bulk of those produce four, five, six and eight-inch wafers, (30 percent, 19 percent, 26 percent and 21 percent of total fab capacity, respectively) but new investment is mainly flOWing into 12-inch wafers, currently comprising four percent of fab capacity. Most of the newer fabs are financed by Taiwanese companies or investors. In 2008 the China semiconductor industry stood at USD85 billion, one of the biggest drop in its growth rates in its history. This drop is attributed to the financial meltdown and SUbsequent pressure on the Chinese semiconductor manufacturers to sustain its operations in the face global competitive. The Chinese FPD market is expected to closely mirror global FPD market, with revenues of USD95.6 billion and a growth rate of 18.4 percent in 2007. Similarly, the Chinese UHP gas/chemical delivery system industry with USD238.8 million revenues in 2008 is expected to grow at a CAGR of approximately 12.96 percent in the forecast period of 2008-2013. Considering the current substantial base market size of the semiconductors and FPDS, growth rates of approximately 12.96 percent represents quite a significant value. UHP gas/chemical delivery system companies such as KE with the ability to provide total solutions for the UHP gas/chemical delivery system of these semiconductor and FPD fabs are poised to benefit from this high growth trends in the Chinese markets. Being a qualified supplier of services with fab owners, such as KE is with SMIC, will help companies to gain a stronger foothold in the Chinese UHP gas/chemical delivery system industry. The Chinese semiconductor and FPD industries have recorded the highest FDI in recent years. Many leading semiconductor companies have shifted their assembly and testing centres from the Western hemisphere to Asia. For instance, in 2007 Intel chose China as the next destination to open a chip fabrication plant. Intel’s planned investments totalled US02.5 billion and this plant is Intel’s first silicon-wafer fabrication plant in Asia. Moving forward, this trend is expected to continue. Taiwan: The Taiwanese GOP in 2008 reached US0414.9 billion. In 2008, Taiwan’s economy contracted due
to severe global economic meltdown. In the last quarter of 2008, the economy contracted to 8.36 percent, marking the biggest slump since 1961. Taiwan’s GOP for 2008 increased by a mere 0.12 percent, the lowest since 2001, while the country’s economic growth pegged at 2.17 percent. As a result, capital expenditure for new technologies in the semiconductor and display industries is expected to remain high from 2010 onwards, most of these investments will be used to upgrade current manufacturing capabilities, for example, from the current wafer size of 200 mm to 300 mm, thereby increasing factory capacity by two to three factors; fabs will also upgrade to more advanced lithographic nodes for semiconductor volume manufacturing, from the current 65 nm to 45 nm. Taiwan is home to the world’s top two foundries in Taiwan Semiconductor Manufacturing Corporation (TSMC) and United Microelectronics Corporation (UMC), which cumulatively hold a 65 percent share in terms of worldwide foundry revenue. In this context, the foundries are defined as semiconductor wafer manufacturing facilities that are available on a contract basis to companies that do not have wafer fab capability of their own, or semiconductor manufacturing companies that have insufficient capacity. In order to hold on to the top two positions, these foundries have to keep up with the ever-evolving volume manufacturing technologies. Thus, a significant share of these companies’ profits will be reinvested to upgrade fab capacity and semiconductor manufacturing technology. TSMC has been Witnessing an upward trend in it second quarter sales in 2009. TSMC has raised its 2009 capital spending bUdget from a previous bUdget of US01.9 billion at the beginning of financial year 2009 to US02.3 billion. In a similar move, UMC raised its capital spending budget from USO 400 million to US0500 million. With a positive correlation of the amount of investments going into capital expenditures and the UHP gas/chemical delivery system industry, the UHP gas/chemical delivery system industry is also expected to grow further in Taiwan. UHP gas/chemical delivery systems are a critical component of any fab, be it a semiconductor or FPO fab. Increase in investments in fabs also means the construction or refurbishment of UHP gas/chemical delivery systems. The Taiwanese UHP gas/chemical delivery system industry with revenues of US0393.6 million in 2008 is expected to grow at a CAGR of approximately 9.59 percent in the forecast period of 2008­2013. Considering the current substantial base market size of the semiconductors and FPOs, growth rates of approximately 9.59 percent represent a very healthy growth rate. With increasingly developed clusters of FPD and semiconductor manufacturers in Taiwan, the country looks more likely to become a high-end manufacturer of semiconductors and FPDs in the near future.
Malaysia: For Malaysia it is expected that there will be very few new entrants into the UHP gas/chemical
delivery system industry in the short term due to the high barriers of entry and the migration of multinational operations and FDI into China. From early 2008, Malaysia has received significant investments in the solar cell manufacturing
industry. As of June 2009, the country has attracted almost RM12 billion worth of investments through FDI’s. Companies such as First Solar, SunPower and Q-Cells are the major investors. In June 2009, the Malaysian Industrial Development Authority has identified solar energy as one of the growth areas and is keen on promoting this industry. The solar cell manufacturing industry is expected to be one of the key drivers of the UHP gas/chemical delivery system market in Malaysia for the forecast period. The rise in semiconductor fab capacity and upgradation of UHP gas/chemical delivery systems are expected to provide a steady stream of income for UHP gas/chemical delivery system companies. This activity of upgrading fab capacity or “hook up” is generally awarded to the company that built the UHP gas/chemical delivery system because of its familiarity with the existing UHP gas/chemical delivery system, and sometimes based on prior agreements.
Operating margins are typically higher during the “hook up” phase of the upgrading exercise as compared with the base build phase of the project as this industry is somewhat characterised by the “incumbency” factor. This means that the UHP gas/chemical delivery system engineering company (incumbent) that has been awarded the contract for the “base build” is more likely to be awarded the “hook up” contract as well since they are more familiar with the gas and chemical delivery systems and are therefore able to hook up equipment to the gas and chemical delivery systems in a more speedy and efficient manner.
This phase of the UHP gas/chemical delivery system is usually carried out by UHP gas/chemical delivery system engineering companies because specialty gas and chemical providers prefer to focus on their core business, which is the production of industrial gases to the semiconductor wafer fab. This would enable UHP gas/chemical delivery system companies to have a steady stream of income whilst diversifying into China and Taiwan in search for new projects.
The current 0.13um (micrometers) lithograph etching technology being used in most wafer fabs in Malaysia requires upgrading in order for these fabs to stay competitive. Upgrading the lithograph etching technology also requires the upgrading of UHP gas/chemical delivery system with the increase in purity requirements. Upgrading work like these is expected to be another source of revenues for UHP gas/chemical delivery system companies.
In the absence of FDI into the semiconductor wafer and FPD industries, the Malaysian government is expected to look to jumpstart these industries. The Ninth Malaysia Plan (9MP) outlines the government’s aim to provide more focused incentives for high value-added industries. This will be particularly so for new growth areas, and will cover areas such as R&D and technology transfer, job creation, especially in E&E (Electrical and Electronics), digital content, and biotechnology. The E&E sector includes semiconductors and FPDs in addition to the other segments such as electronic contract manufacturing, consumer electronics, etc. In addition, existing companies will also be encouraged to expand and diversify into high-end industries as well as move into related services. With the approval of new non-semiconductor or FPD related projects that involve UHP gas/chemical delivery systems, the signs are encouraging that UHP gas/chemical delivery system companies can reduce their reliance on semiconductor and FPD projects for their future revenue growth. UHP gas/chemical delivery system companies are expected to provide their expertise in the emerging solar cells manufacturing industry in Malaysia. Malaysia is currently becoming a target destination for solar cells manufacturing activities. Industry leaders such as Q-Cells AG, First Solar GmbH and SunPower Corporation have in total committed to invest approximately USD2.4 billion to set up their respective manufacturing facilities in Malaysia. This presents a huge opportunity for the UHP gas/chemical delivery system industry in Malaysia. With the case for outsourcing the UHP gas/chemical delivery system in semiconductor wafer and FPD fabs becoming more prevalent, the prospects are bright for companies that are able to provide total UHP gas/chemical delivery system solutions. UHP gas/chemical delivery system engineering companies such as KE, leveraging on their proven track record and physical presence in China and Taiwan have very good prospects in this industry. Conclusion: UHP gas/chemical delivery systems are typically used in semiconductor wafer fabrication processes and FPD manufacturing, which are its key market drivers. It is also used in other manufacturing industries like LED, pharmaceuticals, bio-sciences, and solar panel manufacturing where purity requirements are extremely critical to product quality. The growth in the semiconductor and FPD industries in China and Taiwan is expected to drive business opportunities for UHP gas/chemical delivery systems in these markets over the forecast period of 2008 to 2013. Frost & Sullivan expects UHP gas/chemical delivery system engineering companies to secure projects in these countries either directly from the turnkey contractors or the specialty gas /chemical companies. The companies that have already successfully penetrated into the Taiwan and China markets -with a strong track record and customer references -are expected to have the comparative advantage vis-a-vis other competitors. These companies that have an established presence can leverage on their existing reputation to increase their respective market share. Established market players also Independent Market Research Report on the Ultra High Purity Gas I Chemical Delivery System Industry ©Frost & Sullivan 2009 have a better understanding of the local language, culture and business practices, which will enable them to run their operations more efficiently. Market participants like KE having the core elements of UHP gas/chemical delivery system design and engineering internally as well as installation (which can be outsourced to save costs) and qualification/validation with the appropriate business networkls and relationships in China and Taiwan are better placed to capitalise on the emerging market opportunities for UHP systems in the Semiconductor and FPD markets. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

 

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