Business Overview

4.2 BUSINESS 4.2 BUSINESS 4.2.1 Overview The semiconductor manufacturing process can be grouped into front-end and back-end processes. Front-end processes are related to wafer fabrication while back-end processes involve the packaging/assembly of wafer into semiconductor devices, followed by the final testing and packing of semiconductors devices. Through our sUbsidiary, VRSB, we are principally involved in the R&D, design, assembly and final set-up/tuning of semiconductor equipment primarily used in the final testing and packing of semiconductor manufacturing process. This particular market segment is generally known as the semiconductor ATE industry. Our strength lies in the collective in-house technical expertise of our key personnel which spans across all the three core enabling technological areas (in the ATE business), namely mechatronics, control software and vision inspection. In addition, our key management is also experienced in the operational aspects of the semiconductor backend manufacturing processes. This combination of capabilities has provided us with the thrusts to develop and market semiconductor tesVbackend equipments to the global ATE industry that can compete favourably in essential performance aspects such as superior productivity, functionality and flexibility. Our office and production facility is located in Taman Perindustrian Malim Jaya, Melaka. We currently have thirty-seven (37) employees of which twenty (20) are engineers dedicated to R&D. In total we have close to 78% technical workers while the remaining are marketing and administration staff. Our vision is to be the semiconductor industry’s top choice for equipment solution provider through technical innovation, best-in-c1ass performance, excellent service and support, cost effectiveness, environmental friendliness and partnership with customers, peers, suppliers and employees. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4.2.1.1 Back-End Assembly, Test, Processing and Packing

Back-end assembly ,.
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~ Tape and reel Back-end final tesVpack Front-end Wafer Fabrication Processing Wafer fabrication plant turns silicon into wafer in a series of mainly chemical and photo processes. The end result is a wafer with a number of electrically functional parts or chips. This process is done in a dust and static-free clean room that requires a high level of capital investment. The finished wafers are then typically shipped to the assembly and test plant for further processing.
Back-end Assembly & Final Test/Pack Processing There are two (2) major phases in back-end processing, i.e. assembly and final tesVpack. During the assembly phase, the chips are electrically sorted (some manufacturers perform this in the wafer fabrication plant), diced, encapsulated, labelled and singulated. After assembly, all chips are subjected to a series of mechanical and/or electrical tests to ensure functionality in real life application condition. They are then inspected for cosmetic, material and dimensional conformity before being final packed. Final pack is highly critical in semiconductor manufacturing because it not only has to protect the parts from further tempering, but at the same time provide an effective packing medium that is very important for down stream automated manufacturing. TNR is the industry’s standard in packing lorm factor and is recognised as the best handling medium between semiconductor industry and all the automated down stream industries. 4.2.2 Group Structure An overview of our group structure is set out below: ­100% Details of our subsidiary are summarised below: ­VHB
VRSB
Corporation  Date/Place of Incorooration  Issued and Paid-up Share Capital iRMl  Effective Equity Interest (%l  Princioal Activities  Our SUbsidiary  VRsa  4 December 20021 Maiaysia  2.000,000  100%  R&D. design, assembly and final sef-upltuning of testlbackend semiconductor equipment
We do not have any associated company, 4.2.3 Types of Products and/or Services Our main focus is in the provision of semiconductor equipment for tesl/backend semiconductor manufacturing processes. particularly in the area of test, vision inspection and TNR. Our existing key products/services are as follows: i) Gravity-Feed Electrical Test, Vision Inspection & Taping System (“G6”) The G6 is a gravity-feed electrical test, vision inspection and TNR system for semiconductor manufacturers. Conventionally. test and TNR are done on separate machines that very often have conflicting requirement. and are normally designed and manufactured by different class of equipment suppliers. We believe that we produce one of the few gravity feed machines in the industry that offers integrated test, vision inspection and TNR functionality in a single platiorm. The G6 offers the attributes of high­speed and flexibility in semiconductor device handling without compromising one attribute at the expense of the other. This combination is not commonly found in other products offered by competitors, whose products would have either one attribute Or the other but seldom both. 47 The G6 performs automatic high-speed transfer of semiconductor devices from the tube format into the TNA format. The TNA format involves storing semiconductor devices in reels. The ‘eel consists of plasfic carrier tape with embossed pockets. Each pocket is to store a semiconductor device in it. The transfer involves flowing semiconductor device through an inclined frack by assistance of compressed air and gravity force. It is then followed by transferring the device from the track into the reel by pick and place mechanism. The carrier tape will be sealed with cover tape to secure the parts in the reel. During the high-speed transfer, visible quality (against cosmetic and dimensional defects) is to be inspected by our proprietary vision inspection system. Electrical test station can be added to further ensure the invisible internal quality of the parts. This is especially critical as G6 is operating at the last gate in the manufacturing of semiconductor devices. TheG6
ii) Rotary Gravity-Feed Electrical Test, Vision Inspection & Taping Hybrid System (“G6r”) In response to the industry trend in vertical integration and various new package form factors, the existing G6 model was significantly enhanced to a derivative model called the G6r series. The G6r is able to incorporate more parallel functionalities onto the successful G6, while maintaining its speed, flexibility and scalability. A rotator with multiple pick up heads is insened into the inclined track of G6r. The IC that is being transferred along the track is rotated out of the track and back into the track again. While it is rotated out of the track, the IC is exposed to multiple tests or vision inspections as opposed to only one (1} test and one (1) vision inspection that are available along the track of G6. To augment the increase in availability of test and vision stations, vision inspection of newly found feature of five (5} side inspections is introduced. We have also equipped the G6r with full functional test handling capability in addition to open/shan test handling. The G6r
iii) Vision Inspection System Vision inspection system is a combination of electronic hardware, software, lighting, optics and camera to analyse and inspect objects. The system utilises electronic camera(s) to capture images of the objects. The images from objects being scanned are digitised and processed in the software to extract their qualitative and quantitative information. Vision inspection system is used to detect visual­mechanical defects of semiconductor devices during semiconductor manufacturing processes. Vision inspection generally performs the final inspection of semiconductor devices prior to their preparation for shipment to the end-user. Funhermore, the vision inspection system also provides statistical data to allow the semiconductor manufacturers to make timely corrective actions. The Vision Inspection Kit
iv) Change Kit The Change Kit is an innovative solution developed by us and offered as one of the major features of the G6 series. It is a ‘Plug and Play’ module which will enable the users of G6 and its derivative, the G6r to keep up with changes in semiconductor device form factors. With the Change Kit. the changeover speed for G6 and its derivative products ranges from 10 to 30 minutes. Semiconductor packaging technology and trend are continuously changing, driven by increased functionality and miniaturisation of semiconductor devices. Following different packaging trend, ICs are packaged differently. Semiconductor handling equipment can be rendered obsolete quickly as different IC packaging will require quite different handling techniques. The G6 and the G6r differentiate themselves and protects customers’ capital investment in G6 and the G6r against such risk with the Change Kit. The G6 and G6r’s base equipment will always remain relevant as far as TNR process is concerned, while its Change Kit will be able to adapt to cope with the semiconductor packaging trend. The Change Kit
v) Equipment Upgrading Services We undertake customised projects of upgrading customers’ existing equipment (including those produced by competitors) in test. vision inspection and final packing of semiconductor devices for enhancement in functionality, device handling, operationai features and operational speed. We are readily able to customise and to retrofit our OEM vision inspection system onto customers’ existing semiconductor component handling equipments which could otherwise become obsolete due to lack of automatic in-process inspection for quality assurance of components being handled. vi) Supplementary Equipments As our flagship G6 product is being continuously developed and improved, we are enriched with our own modular hardware and software design libraries. We have taken advantage of our design libraries to come up with supplementary product range within two (2) years after the introduction of the G6 that complements activities at the semiconductor backend manufacturing process. Briefly. the said product range that has been fully developed and are in our product offerings are as follows: Product M3 Manual TNR Machine G3 Mid Range TNR Machine PSA Peel Strength Analyser DT-3 De-Taper  Time of Introduction April 2003 December 2003 May 2004 October 2004
THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4.2.4 Technology We have teams of mechanical, electrical design and software development engineers with a combined high level of experience and expertise in three core areas of technology, namely: mechatronics, control software and vision inspection. 4,2.4.1 Mechatronics Mechatronics is a combined discipline of mechanical engineering, electronics engineering and software engineering to develop high efficiency automated system. The key challenges in mechatronics design are the control of the dynamics of the machine and the ability to handle the numerous package types of semiconductor devices. Our prior hands·on experience in semiconductor manufacturing processes is an invaluable input to the design of the automated system. We have developed a master-referencing technology that enables the G6 to be an all-in·one machine. G6 is a modular machine with several sub-modules that the user can purchase when needed. Master referencing ensures that the sub-modules are interchangeable from one G6 machine to another in a true ‘plug-and­play’ sense. Emphasising master referencing technology, G6 enables the customers to handle numerous package types on a single platform hence reducing costs required for training, spares and maintenance. 4.2.4.2 Control Software Control software is used to control the various operations of the machine. It stores relevant parameters that are needed to manoeuvre and manage the various functions of the machine for subsequent retrieval. We have developed advanced software modules which are not easily replicated by our competitors. With in-depth knowledge of electronic components, innovation and proper software structure, our control software is designed to be modular which can be used in various models without much modification, scalable and able to perform mUltiple functions. 4,2,4,3 Vision Inspection The vision inspection system (also known as machine vision) is a system that consists of a computer equipped with special vision processing software connected to a video camera. The camera is used to capture image of the subject being inspected and the image would be digitised. The subject under inspection will be illuminated with various lighting techniques that we have developed. The vision processing hardware and software is used to extract features from the digital image, verify the identity of the subject and inspect for features such as surface defects and dimensional measurements. Vision technology comprises three components, namely: software, optics and illuminations as well as hardware. It provides solutions in measurements and/or image processing of the object being inspected. 52 4.2.5
We have developed our proprietary vision inspection software library and optics/illuminations technology. The hardware component encompasses the design of vision inspection station that incorporates lighting, optical lenses and third party cameras, usually mounted in the restricted space in equipments. Measurements with high accuracy are derived from our library of extensive mathematical computation in 2D and 3D geometries. This technology enables exceptional repeatability/reproducibility and accuracy in semiconductor chips measurement as fine as 5 Ilm. Advanced image processing involves pattern-matChing method which is used to compare markings and cosmetic defects on the semiconductor device. A host of other imaging processing methods have also been fUlly developed including blobbing, edge detection, image segmentation, image transformation, noise reduction and statistical image analysis. From the start, our machine vision engineers have put in a lot of effort to develop our own vision software library, the building blocks in all machine vision applications. This in the long term would reward us with unlimited scalability and enhancement opportunity, lower cost and flexibility in choosing vision hardware platform (the vision engine). Our stand of developing our own image processing tools has not only reduced cost but also enabled us to customise our own software libraries which will enhance our technology level in years to come. Over the last two years, we have fine-tuned extensive mathematical routines and library tools by moving some of the processing bottlenecks into MMX and assembly codes to enhance speed of processing.

 

4.2.4.4 Combination of Enabling Technologies The most important of all, is the convenience of combining all enabling technologies together. Each technology, be it mechatronics, control software and vision inspection has its own strengths and weaknesses when performing a certain function. We have a free hand to adopt the best approach by miXing and matching the technologies. None of the technologies here is able to perform to its best without complimentary help from the others. Approvals, Major Licences and Permits Obtained Approvals, major licences and permits that we have obtained for our activities are set out below:­No Authority 1 MITI  Description Major Conditions tmposed Status of ComDlIance Pioneer Certificate Bil. 1948 1) VRSB to achieve at least 30% Complied dated 25 June 2004 issued value added on its output, pursuant to the Promotion of Investments Act 1966 with 2) Management, Technical and Complied income tax exemption of 100% Administration staffs of VRSB on statutory pioneer income for a must constitute at least 15% of period of five (5) years with eftect the total number of staHs in from 1 June 2003. VRSB: and
No Authority Description Major Conditions Imposed Status of Comoliance 3)  Extension  of  Pioneer  Status  To be  with  income tax exemption of  complied  100%  on  statutory  pioneer  income for further period of five  (5) years must be submitted on  and before 30 May 2008.  2  Kastam Diraja  1)  Warehouse  License  with  1)  No dutiable goods, except for  Complied  Malaysia  serial  no.  046113  dated  3  raw  material/components  and  August 2005 issued pursuant  machines used directly in the  to Section 65 of Customs Act  production and finished goods  1967 (Act 235) effective from  approved by Director General  1 August  2005  to  31  July  of  Kastam  Negeri,  can  be  2006.  stored  in  Licensed  Manufacturing Warehouse,  2)  Manufacturing  Warehouse  License with serial no. 30155  2)  Total  80% of  the  finished  Complied  dated 3 August 2005 issued  goods (according to value) are  pursuant to Section 65A of  for export and total 20% of the  Customs Act 1967 (Act 235)  finished  goods  are  for  local.  effective from 1 August 2005  Any  local  sales  will  attract  to 31 July 2006.  dutiesltaxes where applicable;  and  3)  VASB to provide General Bond  Complied  totalling AM 50,000.00 (Ainggit  Malaysia: Fifty thousand) only  for the  purpose of guarantee  on the security to the duties /  taxes  on  the  raw  material  I  components  and  finished  goods  stored  in  Licensed  Manufacturing Warehouse and  any  movement  of  dutiable  goods.  3  Majlis  Trading I Advertisement License  None  Not  Bandaraya  with  file  no.  l4.07359  issued  applicable  Melaka  pursuant  to  Akta  171,  Akta  Bersejarah  Kerajaan  Tempatan  1976  with  expiry  date  on  31  December  2006.  4  MITI  Manufacturing license with serial  I}  VASB to inform MITI  on any  To be  no.  023670  and  license  no.  sales of the shares in VASB.  complied  A015328  dated  23  December  and  2005  issued  pursuant  to  Industrial  Co-ordination  Act,  2)  VASB to inform MITI on any  To be  1975.  appointment and changes in  complied  the composition of the Board  of Directors of VASB.
Note: The above licences from Kaslam DiRaja Malaysia are subject to annual renewal and we have obtained the licences since August 2003 4.2.6 Brand Names, Patents, Trade Marks, Licences, Technical Assistance Agreements, Franchises And Other Intellectual Property Rights Our intellectual property rights are prolected by relevant stalutes such as the Copyright Act. 1987 and the Patents Act. 1983 and al common law. Our automation and vision inspection systems are mainly developed in-house using programming tools and technology available in the market Such programming tools include various device drivers that come with control hardware (such as stepper motors, servo motors, cameras etc.) used in its system, Inventor CAD software from AutoDesk, Microsoft Visual C++ .Net compiler, Microsoft Office for documentation, data analysis and technical presentation. The common technology used in developing Our systems includes material science in selection of parts, servo motor tuning techniques, dynamics of motion, digital image processing techniques, statistical analysis of noise in digital image and design at experiment. These automation and vision inspection systems are owned by US and are accorded copyright protection pursuant to the relevant laws. No royalties are payable to any third party. We have also submitted our applications to the relevant authorities for the following: • Registration with the Registrar of Trademark in relation to our brand name “VisDynamics”. Application for the brand name registration was made on 8 November 2004;
• Registration of patent with Perbadanan Harta lntelek Malaysia for our method for component inspection system (innovation in developing a method for component inspection system in which front and back illuminations are required Whereby front illumination may intertere with back illuminated features and in which inspection is performed within a single image capture by a single camera). This application was made on 19 November 2004; and
• Registration of patent with Perbadanan Harta lntelek Malaysia for our method for component inspection system (innovation on inspecting marking on semiconductor packages wherein laser inscribing or marking may be made). This application was made on 17 June 2005.

All the above applications are still pending registration. Save as disclosed above, we do not own any other intellectual property rights.

4.2.7 Dependency On Patents, Licences, Commercial Or Financial Contracts • Patents
We are not dependent on any patents to operate.
• Licences
We have procured the licences required for our operations as listed in Section 4.2.5.
• Commercial or financial contracts

We are not dependent on any specific commercial or financial contracts to operate.
4.2.8 R&D, Design and Assembly Process The business process used by us to produce an order for our test equipment is illustrated below and described in the ensuing paragraphs. 1. ReceivinQ Order ~. 2. Machine Design
3. Purchase of Fabrtcated Parts and Standard Parts

 

5. Assembly Continuous R&D Activities
6. Testing I Alignment
7. Vision and Machine Software Functionality Setup
8. Quality Assurance Testing I Final Improvement .;…. 9. Machine Delivery
10. Installation I After Sales Servicel: ,­1.
2.
3.
4.
5.
6.
7.

B. The respective sales representative and Sales and Marketing Division will approach current/prospective customers in getting lhe equipment specification and purchase order. Upon the receipt of a specificalion from a customer, the Mechanical Design Department will conduct project evaluation and discussion to study the customer’s requirement/specification and prepare project scheduling. If the proposal is accepted, design work will be commenced with the Mechanical Design Departmenl responsible lor the design 01 the mechanical functions and outlook of the machine with machine control wiring design. The Machine Software Department together wilh the Vision Software Department will undertake the design of machine control software design and vision software design concurrenlly. Machine design drawings will dictate the machine parts and components required 10 build lhe entire machine. Approved drawings are used for procurement of standard and fabricaled precision machine parts and components from either the suppliers or the contractors. The Equipment Assembly Department is responsible for the procurement of fabricated precision and slandard machine parts and components either locally or overseas according to specification. Tight quality assurance inspections are applied in order to ensure all the input raw material, either standard or contract, meet its quality and specification requirement. With the procurement 01 the said machine parts and components, then the assembly works including wiring by the Equipment Assembly Department will begin on modular basis to complete the machine and equipment casing. Testing on the sub-modules will be carried out 10 predefined functionalities and specificalions stated by the customers. Once the machine is completely assembled, the Equipment Assembly Department will perform mechanical and electrical functionality test to ensure the machine conforms to the set of criteria laid down by the customers. Vision syslem set up with the installation of vision inspection system will begin aller the Equipment Assembly Departmenl has performed necessary testing on lhe complelely assembled machines. The installation of automation system and programme that conform to lhe requirements of the customers will be carried out on the machines either concurrently or after the installalion of vision inspection system. In order 10 ensure successful implementation of automation system and programme thaI represenls the brain of the whole machine, machine sequence tesl will be carried out 10 inspect the programming logic and synchronisation of the entire machine parts movement. Upon completion of the main processes of assembly and testing above, the fully assembled machine will have 10 go through several in-house testing phases and quality conlro! procedures. Initially, lhe machine will have 10 pass lhe 101al machine lesting which will emphasise on the mechanical functionality testing, vision inspection functionality testing and automation and software functionality testing to provide a mean of assurance so as to conform to the total machine functionality requirements as requested by the customers. 57 4.2.9 4.2.10 Quality assurance will be carried out thereafter with the inspection check on the quality of the machines which mimics the processing environment by passing through samples of devices/packages that are to be run on the machine provided by the customers. Final improvement and fine tuning of the machine will be conducted prior to delivery to the customers. 9. The finished products will be crated carefully to avoid unnecessary damage done to the products during the journey to the customer’s site. f O. Our responsibilities do not stop when the completed machine left its location. Service engineers will be appointed to attend to the machine at each site to ensure proper installation of the machine and to resolve any technical issues arising thereof. Estimated Market Coverage, Position and Share The global ATE market is a competitive market with no domination by any single company due to the nature of the semiconductor industry that is complex and characterised by rapid changes/evolution of technology. Based on data from Gartner Dataquest. the ATE market is valued at USD3.021 billion in 2003, USD4.790 billion in 2004 and estimated to be USD3.780 billion in 2005. (Source: Gartner Dataquest’s “Semiconductor Capitat EqUipment Hot in 2004, but likely to Cool” 6 December 2004 and “Dataquest Alert: Semiconductor Capital Equipment Demand to Rise in 2006” 19 December 2005) Our sales for FP 2003, FP 2004 and FYE 2005 are RMO.8 million, RM8.3 million and RM8,0 million respectively. Based on these figures, our sales represented approximately 0.01%, 0.05% and 0.06% of the global ATE market in 2003,2004 and 2005 respectively. New ar Prapased Praducts Within the next few years, we plan to launch the following products:· i) Other G6 Derivatives Apart from the introduction of the G6r, which is a significantly enhanced version of the successful G6 model, we also have plans for three (3) more derivatives from the G6 model: G5, a medium cost model with functions, performance and price which fills the gap in between the G6 and G3 models; G6-RR, a reel to reel transfer equipment; and G6-PS, an automatic high speed post seal in-tape vision inspection machine. ii) High Speed Tray Transfer Equipment Mirroring the success of G6, the tray equipment will adopt a one­model-far-all solution with options for full vision inspection capability. Being a new comer to this section of business, we have had the opportunity to research into the strengths and weaknesses of existing competing products in this field. To-date, there are only a handful of known equipment manufacturers with true 3D inspection capability. 58 Consequently, we have formulated optimum product specifications to ensure our proposed tray equipment will be among the most competitive in the market in terms of price-performance. Currently, we are constructing a prototype of high-speed tray transfer and vision inspection equipment, code named T8, utilising 3D vision inspection technology based on laser triangulation_ T8 is designed and developed to handle ICs in tray format, which are typically of higher dollar value and higher inpuVoutput pin count (such as microprocessor, memory and PGA chips) as compared to les in tube format. The high-speed tray transfer equipment is expected to be introduced in 2006. iii) CSPIWLP Test Equipment The next major equipment development is in the probing, vision inspection and transferring of ICs in the area of CSPIWLP. CSPIWLP is a packaging trend in semiconductor assembly process due to continuous miniaturisation of IC packages. The enabling technology and experience gathered from laser triangulation technique and advanced vision inspection for micro cracks will be further employed in this range of product. The CSPIWLP test equipment is expected to be introduced in 2008. iv) Estimated Timeline of Release of New or Proposed Products FY Ending 3t October  2006  2007  2008  tH’ 2H’ ,I ~  1H’ 2H’ ~ ~  tH’ 2H’ ~  Product Name G5 G6-RR G6-PS High Speed Tray Transfer Equipment CSPIWLP Test Equipment
.Indicates Ihe fI,sl or second half of Ihe fmanclal year. 4.2.11 Principal Markets for Products/Services Our main products could be supplied to any global market with semiconductor assembly/test manufacturing plants. We have successfully penetrated Southeast Asia, North Asia and North America namely China, Malaysia. Philippines, Singapore and the USA, with the acceptance of the machines by major MNCs present in the respective countries. We are geared to go into other countries in Southeast Asia, North Asia, North America and the European markets in the foreseeable future. Our customers for FYE 2005 are shown in Section 4.5 of this Prospectus. 4.2.12 4.2.13 Types, Sources and Availability of Inputs The main raw materials for the production of our products are standard parts and fabricated precision parts made from various metallic or non-metallic engineering material. The main components used are as follows: i)  Motion control components such as servo motor, stepper motor, and  AC current motor;  ii)  Computer  peripherals  such  as  CPU,  monitor,  mouse,  digital /  analogue input output cards;  iii)  Camera components such as CCO, lens, prism:  iv)  Pneumatics parts such as cylinder, solenoid, valves and fittings;  v)  Vision components such as frame grabber; and  vi  Control and electrical parts such as sensors, switchers, power supply
and wiring materials. These raw materials are supplied by either local contractors/suppliers save for camera components which are imported tram Singapore.

Quality Control Procedures Capitalising on the past experience of founding members in qualifying equipment for the global market, we instil quality control right tram the designing stage of all our products. The components also carry international safety standards such as the CE mark and SEMI standards and are constantly scrutinised at the design stage in areas of ergonomics, equipment operational safety frisk / hazard assessment and electrical/acoustic noise emissions. We have geared ourselves to officially certify our flagship products through recognised bodies to obtain internationally recognised quality standards in the near future. We place stringent quality control on the raw materials used to ensure the highest and reliable pertormance of the equipment produced. The raw materials are broadly classified into two categories: standard parts and fabricated precision parts. For fabricated precision materials, we work closely with the fabrication contractors/suppliers in selecting the most optimum base material and tolerance controls and the most cost effective and reliable fabrication processes. The contractors/suppliers are featured integrally in our continuous quality improvement of raw materials used. All raw materials are inspected at the incoming for unconformity in functional, cosmetic and dimensional specifications. We have invested in precision measuring tools including calipers, target calibrator and profile projector. First level in-process quality control is enforced at sub-module assembly process of the equipment. At this level, sub-modules are mechanically assembled and then functionally tested according to predefined test checklist. Where required, master reference jigs are used to align parts that require critical alignment We develOp master referencing technique in assembly to ensure that all sub-modules can be assembled standalone with high repeatability. When assembled into complete equipment, these sub-modules will click with one another seamlessly in a short turn around time. 60 4.2.14 We also market a module called Change Kit for our flagship G6 machine to accommodate each different IC package family. Subjecting each Change Kit to master referencing ensures it is compatible with any base G6 machine that has existed at any customer site with minimum alignment required. Once the complete equipment has been assembled. final stage in-process quality control will take place, which is often referred to as final buyoff stage. At this stage, we will test the equipment repeatedly using the actual samples from the designated customers. Performance parameters for the equipment and vision inspection systems are set up and fine-tuned. Mechanical alignment and design refinement is perlormed until all committed perlormance specifications are achieved. Packing and shipping of equipment are conducted with the highest quality control to ensure maximum protection against harsh environment and handling during transportation. We carry quality control beyond the perimeters of the factory to ensure full satisfaction for the customer. Once any equipment is ‘pushed onto’ the production floor at a customer’s place. a project team comprising key engineers from both the customer and us will be established even as the equipment is being set up and commissioned at the customer place. Our project leader will document and track outstanding issues pertaining to the project, formulate and implement corrective actions pro-actively and the team as a whole will always strive to close all issues in the shortest time possible. We adopt quality documentation in design. All mechanical drawings and software libraries and application releases are stringently version controlled lor maintenance and back tracking. We are proactively and continuously upgrading our approaches in the management, human resource, mechanical design, software development, manufacturing and on-site service to ensure continuous Quality improvement in all aspects. We have also geared ourselves towards obtaining a full certification in a recognised quality system such as the IS02000 in the near tuture. Research and Development (i) Overview As a technology company. we rely on R&D to stay ahead of competitors and to create new business opportunity. Technology is critical in order to maintain and increase our competitive edge, maintain strong margins and build market presence. With substantial years of experience and possession of core technologies in mechatronics, control software and vision inspection. R&D activities will be continuously intensified to roll out new equipment.  (ii)  R&D Facilities and Personnel  We have measuring  invested profile  in essential development tools projector, latest workstations,  including software
development tools CAD design software and C++ compilers. We have also set up a vision development laboratory equipped with various cameras, image grabbers, optical lenses. various types of illuminations, 3D profiling laser beam projector and camera. (iii) There are a total of twenty (20) engineers and managers who are directly involved in R&D. spanning four (4) departmental sections, namely: Mechanical Design, Machine Software. Vision Software and Equipment Assembly. The R&D team is led by Mr Lee Chong Leng who is our CTO. Mr Lee has overall responsibility for the R&D activities being undertaken by us and his profile is set out in Section 5.5.2 of this Prospectus. Our organisation of the R&D team is as follows: CTO •Equipment Assembly Section Head  “•Vision Software Section Helid  •Mechanical Design Section Head  •Machine Software Seelion Head  •  …  …  …  Equipment Assembly Engineers  Vision Software Engineers  Mechanical Design Engineers  Machine Software EngIneers
The key members of the R&D team individually have between six (6) to seventeen (t 7) years of experience in the semiconductor assembly and semiconductor equipment industry. We intend to use part of the proceeds from the IPO, to expand our present R&D center with the set-up of a mOTe advanced R&D laboratory complete with necessary facilities and equipments. Along with the new set-up, the R&D team will also be strengthened by the recruitment of experienced and skillful personnel who specialises in their respective core technologies. R&D Activities and Achievements Through continuous R&D activities since our commencement, we have been able to deliver customer-driven product innovations based on performance and flexibility, with a competitive price range. Technology is critical in order to increase our competitive edge, maintaining strong margins and building market dominance. Our R&D efforts also resulted in the feature introduction of a test and vision inspection system within one year of the incorporation of VRSBin 2002 We have, in our G6. a proven product in the market. The G6 is a major achievement in the ATE Industry as it combines the capability of electrical testing, vision inspection and taping functions in one platform. which,  to  the best  knowledge of  our  Directors.  are  not  commonly  available  in  other  semiconductor  back-end  testing  equipments.
(iv) We also develop our own proprietary vision inspection technology that uses mathematical computations in 2D and 3D laser based measurement techniques as well as advanced image-processing methods to measure micro semiconductor components. These solutions have been developed by the in-house R&D team and are currently being incorporated in our test and inspection products. Our successful initiatives in R&D are a testament 01 our commitment to technology development and it is envisaged that our R&D capabilities will not only add value to us but will also introduce to the industry solutions that will increase efficiency within the semiconductor industry. Future Development in R&D In order to expand and build on our positioning in the competitive semiconductor equipment market, we have drawn out our tuture technology and product roadmap based on the present and emerging trend in package form factors for ICs. We are developing a prototype of high-speed tray transfer and vision inspection equipment, code named T8, utilising 3D vision inspection technology based on laser triangulation. In future, transfer equipment in CSPIWLP will be developed. We have undertaken/intend to undertake the following R&D activities in the following technologies for incorporation into our future products: Tray Inspection and Transfer Technology The tray transler equipment pertorms automatic transfer of ICs from the tray into the tape format, incorporating sophisticated vision inspection system to detect visual and mechanical defects of the ICs as they are being transferred. The equipment could also be configured to pertorm ICs transfer from tray to tray, with vision inspection for automatic screening of defects. The handling technology that will be developed include various stages of X,Y and Z-axis transfers, such as automatic stacking or un­stacking of trays, singulation of a tray from a stack of trays, pick-up of multiple ICs from the tray, fine-stepped pitching in between adjacent pick up, high speed transporter of pick-up over various stages of vision inspection stations, placement of good ICs into the tape and automatic sorting of rejects into reject trays. Vision inspection is to be on-the-fly and to include all essential cosmetic and dimensional inspection criteria; on-the-fly inspection has the advantage of minimal inspection over-head which is critical to maintain our product reputation in productivity leadership. The tray transfer equipment is a natural progression for us as we are presently strong in the tube format transfer equipment, to cater for a large volume of ICs handled in tray formal. ICs that are in tray format are typically of high dollar values and with high count of input / output pins (such as microprocessor, memory and PGA chips). The package types of ICs handled in tray formats include QFP, BGA and CSP. Unlike ICs handled in tube format, ICs in tray format are characterised by pins populating one entire surface of the package or the four sides of the package. BGA package. for instance, has its input I output pins in the form of solder balls arranged on all over the bottom surface of the ICs while a QFP package has pins on all four sides of the package. BGA package as viewed from one of its side I … . …….• , •
Bal/’s height I 0 0 0 0 0 _::::::t= Only bal/s at the package edge are visible, bal/s at the inner rows are obstructed trom view The most challenging aspect to vision inspection system in tray format is the ability to view and to measure the height of all the pins or solder balls from the package surface (to resolution as fine as 5 11m, at very high throughput). To measure the height of the solder balls, the package has to be viewed from the side. Only balls nearest to the package edge are visible (not obstructed) and in sharp focus when viewed through the camera. To overcome this technical barrier, we have developed an enabling technology in the use of laser triangulation for 3D profiling. Laser Triangulation Technique for 3D Profiling Using conventional optics arrangement involving a camera and suitable Iightings to acquire image of an object of interest, one can only obtain image data of the object from a limited perspective angle. One is not able to extract height and shape information of the said objects from this image data. Laser triangulation is a technique where a very thin laser line is projected across the object of interest. The camera is arranged slanting at a known angle from the laser line. In one of possible implementation, the object of interest will be transported over the laser line and the camera will continuously capture image of the 3D profile of the objects as carved out by the laser line. As a result, a complete collection of 3D profile image data will be gathered as the objects are moved across the laser line to enable a complete 3D profile of the objects to be plotted. Information such as heights, shapes and volume of the objects are mathematically retrievable from this collection of 3D profiles. In practice, however, one will require enabling technology in availability of very high speed and sensitive camera and a very thin and homogeneous laser line, which consist of very high speed image acqUisition hardware and powerful processing unit, to implement high precision production measurement tool as required by semiconductor industry. (v) A good grasp of this laser triangulation technology and experience with its system design and applications will open up a vast business opportunity to meet sophisticated vision inspection requirement where the features to be inspected can be of any shape and size. CSPIWLP Inspection and Transfer Technology Despite challenges in manufacturability, CSPIWLP packages are expected to be the most promising soiution to ultimate miniaturisation of semiconductor devices. Before going into TNR format, presently esP’s are handled in the manufacturing line in tray format or in a smaller version of a tray called waffle. Waffle handling technology, a close variant of tray handling technology, will need to be developed. Handling technology thus involves pick-and-place mechanism with X,Y and Z-axis transfers, transport over (on-the-fly inspection) various inspection stations, as in tray transfer technology. For WLP however, all package assembly and test are performed on the wafer itself. Before going into the tape, each wafer will be mounted on an adhesive tape that is stretched all around and held in a fixture called wafer ring. The wafer will then be sawn to individual parts but the parts remain adhered in the wafer even after sawing. WLP transfer technology is concerned with precise X-Y positioning of the wafer ring, pick up of ICs from the wafer, high-speed transporter of pick up over a host of vision inspection stations (on-the-fly inspection), placement of ICs into the tape and automatic sorting out of rejects into reject bins. Unlike in the tray or waffie format where ICs are always in “circuit down” orientation, the ICs in the wafer may be in “circuit up” orientation which requires a full 180 degree flip over by a flipper module. Wafers come in several sizes in diameter of 150mm, 200mm, 300mm or even the future 450mm and need to be handled correctly. Vision inspection technology required for WLP ICs is mark inspection, measurement of bumps or solder balls (position and height), package defects and surface defects. Since wafer appears like a reflective glass. technique to reduce glaring noise from reflective surface must be developed. Our laser triangulation technology which is under development can be extended to be used in CSPlWlP inspection. Future Plans for Implementation Our future R&D activities include developing new and improved products, which we hope to bring on stream within the next three (3} years after admission to MESDAQ Market. Our tray inspection and transfer technology as well as laser triangulation technology will be used in the development of high speed tray transfer equipment expected to be completed by 2006. Meanwhile, the CSPIWLP inspection and transfer technology as well as laser triangulation technology will be incorporated in the CSPIWLP test equipment expected to be introduced in 2008. Please refer to Section 4.2.10 of this Prospectus for further descriptions of our future products as well as the expected timeline for the roll-out. (vi) Investments Made for Research and Development We have incurred approximately the following amount in terms of staff costs and other expenses for R&D for the past three (3) financial periods/year: FP 2003  FP 2004  FYE 2005  II(Actua~lRM’OOO  (Actua~~ IAM’OOO  II(Actua~~RM’OOO  Total R&D Spending  232.7  394.2  892.0  Turnover  814.5  8,309.3  8,035.9  % of Turnover  28.6%  4.7%  11.1%
4.2.15 Interruptions in Business for the Past Twelve (12) Months There have not been any interruptions in lhe form of trade disputes or major operational breakdown involving us that had significantly impaired our business performance during the past twelve (12) months. 4.2.16 Employees As at 6 March 2006 (being the latest practicable dale prior to the printing of this Prospectus), we have thirty-seven {37} full-time employees. They are employed in the categories set out below: No. of  Average Period in  Emolovees  Service  Executive Directors  3  3 years and 1 month  Managerial and Professional  9  2 years and 5 months  Engineers and Technicians  21  1 year and 4 months  Executives and Clerks  4  1 year and 10 months  Total  37
We recognise the importance of our employees and update them regularly on the latest developments in the industry including by sending them for courses to improve and update their knowledge in their areas of responsibility such as Enterprise Resource Planning solution training and CAD tool training. Training is also conducted in-house and on-the-job basis. Engineers and technical personnel are also encouraged to attend the latest international semiconductor trade show to update themselves with the latest information and technology in the industry. We are a non-union company and our employees are not involved in any sort of union activities. Our management is of the opinion that our dedicated, efficient and trained employees are instrumental to our success. Our management enjoy a good working relationship with the employees. As at 6 March 2006 (being the latest practicable date prior to the printing of this Prospectus), we have not been involved in any industrial disputes with any of our employees.
4.2.17 Key Achievements/Milestones Our achievements/ milestones are as follows: Date  Milestone  Dec 2002  Incorporation of VRSB  Feb 2003  Roll-out of G6 & Vision Inspection System  Apr 2003  First delivery of G6  Roll-out of M3  May 2003  First delivery of OEM Vision Inspection System  Jun 2003  Pioneer status granted by MITI  Aug 2003  LMW licence granted by Kastam Diraja Malaysia  Nov 2004  Successfully completed the development of the innovative at On­ Track Mark & 3D inspection (patent pending)  Jun 2005  Successfully  completed  the  development  at  the  innovation  on  inspecting  marking  on  semiconductor  packages  wherein  laser  inscribing or marking may be made (patent pending)  Aug 2005  Third place in the Golden Bull Award 2005  Sep 2005  First delivery at G6r  Dec 2005  Recipient of Small Medium Business Emerging Businesses Award  2005
4_2.18 Modes of Marketing/Distribution/Sales We manage the sales and marketing activities centrally through our office in Melaka where the Sales and Marketing Division is located. The Sales and Marketing Division carries out the functions of development of marketing plans, conducting market research and analysis. public relations, handling worldwide sales representatives/agents affairs. organising promotional activities globally, handling customers’ orders and complaints. coordinating the delivery of machines to customers and arranging installation and after-sales services for customers. The Sales and Marketing Division will service tile presenVprospective customers based in Malaysia and certain anchor global customers (the house accounts), while local sales representatives and distribution houses are used in the Southeast Asia, North Asia. and North America on commission basis. In addition to marketing activities, the sales representatives/agents also carry out technical and after-sales support to their customers with our assistance.
4.2.19 Location Of BuSiness Our place of business is located at the following address: No. 19.21 and 23, Jalan IMJ2 Taman Industri Malim Jaya 75250 Melaka This office houses our head office, R&D facility as well as the current assembly facility. Our assembly facility occupies approximately 3,000 sq. ft and has an annual capacity of approximately forty (40) units of G6 equivalent machine per annum. The capacity will vary according to the size and complexity of the machines produced.
4.2.20 Single Purpose Corporation We are not a single purpose corporation. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4.3 SUBSIDIARY AND ASSOCIATED CORPORATIONS 4.3.1 VRSa (al History and Business Overview VRSB was incorporated in Malaysia under the Companies Act, 1965 on 4 December 2002 as a privale limited company. VRSB commenced operations on 4 December 2002. The company is principally engaged in R&D, design, assembly and final set-up/tuning of tesVbackend semiconductor equipment. (bl Share Capital The authorised share capital of VRSB is RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each. The issued and paid up share capital is RM2,000,000 comprising 2,000,000 ordinary shares of RM1.00 each. The changes in VRSB’s issued and paid up share capital since incorporation are as follows: ­
Cumulative  issued and  Date Issued 04/12/2002  No. of shares allolled 2  Par value RM 1.00  Consideration Subscribers’  paid up share capital RM 2  shares  27/03/2003  309,998  1.00  Cash  310,000  12/12/2003  190,000  1.00  Cash  500,000  06/01/2005  1,500,000  1.00  Bonus Issue­ 2.000.000
The bonus issue of 1,500,000 ordinary shares of RMI.OO each in VRSB was on the basis of 3 new ordinary shares for every 1 existing share held. (e) Substantial Shareholder VRSB is our wholly-owned subsidiary. The substantial shareholders of VRSB are as follows: Name  Direcllnlerest No. of Ordinary Shares of RM1.00 each  %  Indirect Interest No, of Ordinary Shares of RM1.00 each  %  VHB Choy Ngee Hoe  2.000,000  100.00  2,000,000′  100.00
Note;­• Deemed interested by virtue of shareholding of not less than 15% in VHB pursuant to Section 6A of the Act. (d) Subsidiary/Associated Corporations VRSB does not have any subsidiary or any associated corporation. (e) Employees As at 6 March 2006 (being the latesl practicable date prior to the printing of this Prospectus), VRSB has thirty-four (34) employees.
4.3.2 Associated Corporations We do not have any associated corporation. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

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