This document provides an overview and summary of the semiconductor industry outlook presented by John Ciacchella of Deloitte Consulting LLP at the GSA Asia Pacific Executive Forum on November 13, 2019. The presentation discusses the current outlook for the semiconductor industry, crosswinds impacting growth, opportunities in the shift to an "everything connected and data" era, and challenges companies face in capturing value in the new environment. Key takeaways focus on questions companies should consider around their business models, operating models, partnerships and other strategic issues.

1. Semiconductor Outlook and Perspective
John Ciacchella
Deloitte Consulting LLP
November 13, 2019
GSA Asia Pacific Executive Forum

2. 2Copyright © 2019 Deloitte Development LLC. All rights reserved.
§ Introduction
§ Outlook
§ Crosswinds
§ Opportunities
§ Challenges
§ Takeaways
Agenda

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Practice Overview
Intro - Deloitte’s Semiconductor Team
We pair pragmatic industry experience with leading edge thinking and technology
1. Sources: Gartner, Forrester, Kennedy, IDC
− Product and market strategy
− R&D Effectiveness and Productivity
− Supply Chain Transformation
− End-to-End Cost Reduction
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− Human Capital and Talent Development
− Technology solutions preconfigured for the industry (die
bank, performance binning, genealogy, yield, etc.)
Traditional
− Digital Supply Networks
− Cognitive Analytics and Embedded
Machine Learning
− Control Tower Alliances
− Industry 4.0
− Tech Stack/Architectures
− Robotic Process Automation
− End-to-End and Managed Analytics
− IoT/Emerging Tech Strategies/Labs
Digital
• Senior team of partners dedicated to the industry and supported by a team of
consultants in tech centers globally with semiconductor industry experience
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• Technology solutions and alliances customized for the industry
Consulting Services
Rankings & Accolades1
in
GLOBAL M&A
CONSULTING
in
MERGERS & ACQUISITIONS
in
BUSINESS
TRANSFOR-
MATION
in GLOBAL
SUPPLY CHAIN
MANAGEMENT
CONSULTING
in
CHANGE
MANAGEMENT
in
STRATEGY
CONSULTING
in
PRICING &
PROFITABILIT
Y MGMT
Deloitte named the
global leader in
Business Operations
Consulting Services
based on ability to
execute and
completeness of vision
- Gartner
“…the best at
challenging corporate
culture, directly
improving clients'
performance, and
recommending
change that
produces results”
– IDC
“Deloitte has
much deeper
and broader
capabilities and
is the strongest
of the group in
the strategic end
of the market.”
– Kennedy
Vanguard
“Strong delivery and
execution capabilities
for very large and
complex deals.”
– Forrester Research
Representative Project and Team Experience
• 200+ resources with electronics value chain industry experience, 70+ with
semiconductor industry experience
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Boston, Seoul, Tokyo, Taipei, Singapore, Malaysia, India, Germany and
Israel
• Member of and
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deep expertise and significant hands-on experience with their solutions
#1

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Outlook - Industry And End Market
Have we reached the bottom and is the industry poised for growth over the next 3 years?

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Outlook – Stock Market
Investor confidence has been growing steadily throughout the year
PHLX Semiconductor Sector (SOX)

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Outlook - Recent Capital Announcements
Share of capital spending by the top 5 (Samsung, Intel, TSMC, SK Hynix, and Micron) is at
an all time high

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However, macro events will continue to shape growth and deployment of investment
Crosswinds - Geopolitical And Economic
Macro Events Implications Impact to
Semi
1 China US Trade War • Trade war already impacting investments and configuration of industry supply chains High
2 Central Banks • Government and company debt reaching historic levels and will impact GDP growth High
3 US Elections
• Candidates aside, growing shift away from free and global markets and to more
control
Medium
4 EU / Brexit • Will UK be the domino that starts the unravelling of the union? Low
5 Mid East Conflicts • Escalation and war can drag down global growth, which is already fragile Unknown
6 Nationalism • Shift from Global to Local for jobs, taxes and technology creators, Silk Road, etc. Medium
7 Climate Events • Growing pressure to reexamine policies, rules and taxes to encourage sustainability Low
8 Cyber Threats • As companies digitize their business, the exposure to risk and damage increases Medium
9 Other Unknowns • Downstream failures in technology based systems, Demographics, Wealth Gap, etc. Unknown

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Opportunity – “Silicon to Everything Data and Connected” Era
1960 1970 1980 1990 2000 2010 2020+
Si 2D Si 2B Si 2C Si 2E
Aerospace and
Defense
Enterprise Computing and
Communications
Consumers and
Cloud
Everything Data and
Connected
● Government
spend cadence
● Small volume,
high per unit cost
& price
● Mainframe -
Mission critical
processes and
applications
● Tens/Hundreds of
clients
● Aerospace &
Defense
Applications
● Enterprise capital spend
cadence
● Medium volume, medium per
unit cost & price
● Client Server – enterprise
transaction processes
● Analog to Digital
communications
● Interaction across platforms
was limited at best
● Hundreds/thousands of clients
● Enterprise applications
● Consumer spend
cadence
● High Volume,
lower per unit cost
& price
● Mobile devices –
broad access to
internet/eCommer
ce
● Millions of clients
● Consumer/Cloud
applications
● Mixed spend
cadence – data,
services, industries
● More volume
segmentation and
economics
● Enabling data and
service capabilities
from device to edge
to cloud
● Billions of clients
● Data driven “Future
of X” = Mobility,
Work, Govt., Etc.
Era
Demand
Generator
Demand
Characteristics
Social
Media
WWW
Mobile
phones
Smart
phones
WiFi
ARPANET
Open
Source
Cloud OpenStackTCP/IP
5G
AI/ML
Future
of X
The Si2E era is driving new data centric opportunities as it transforms markets and industries
Mainframe

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Higher
Lower
Lower Higher
Drones
Military
Vehicles
Smart
WeaponryTraining
Simulators
Areospace & Defense
Shoes
Headband
Wristband
Wearables
Glasses
Power Management
Appliances
Delivery
Home
Telematics
GPS
Mobility
Sensors
Space Monitoring
Construction
HVAC Monitoring
Sensors
Security
Monitoring
Machine to Machine
Manufacturing
3D Printing
Gaming Consoles
Entertainment
OTT Devices
ValueofDigitization
Volume of Data
Healthcare
MRI
Machines
Pacemakers
Precision
Instruments
Source: Deloitte analysis
Management Systems
Opportunity – Everything Connected And Data Is Transforming Whole Industries
These opportunities are massive, disruptive, spreading and crossing over
Preliminary
Video

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Challenges – How To Capture Value In The New Era of Everything Connected And Data
• Large disrupting “Future of X” markets will require deeper vertical and ecosystem expertise
• Shift to “as a service” and “pay for use” offer potential alternative monetization models
• Demographics and limited talent pools will increase value of soft assets and capabilities
• Design for experience and business value vs design for performance or cost alone
• New future markets will require increased hedging strategies, better agility and speed to secure
key lead customers and partners as they establish future market and ecosystem control points
• Technology proliferation, convergence and disruption will challenge existing established architectures,
methods and standards, presenting new opportunities for technology innovation
• Managing successful legacy businesses and markets while simultaneously pioneering new markets will
require operating models that are ambidextrous and cost effective
Semiconductor companies will need to innovate beyond product/process and rethink their
business model and how to play and position as the technology value chain evolves

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Takeaways
• Do we have the market/customer/ecosystem “sensors” needed and in the right place?
• What are the opportunities and risks to our Business Model?
• Position in the changing technology value chain and ecosystem
• Potential monetization models (beyond component and product)
• Necessary capabilities we need to add/reduce/transform
• Where do we need to change our Operating Model and how?
• Leveraging the disruption inside (cloud, “as a service”, collaborative platforms, etc.)
• Workforce of the future
• Collaboration/partnerships/alliances
Key questions to keep in mind for today’s summit and back home with your management teams

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Contact Info
John Ciacchella
Senior Partner
Deloitte Consulting
Silicon Valley/San Jose
jciacchella@deloitte.com
www.deloitte.com
Deloitte Semiconductor
John Ciacchella is a technology and transformation veteran with over 30 years of experience advising some of the leading global and emerging high
technology companies with shaping, transforming and growing their businesses worldwide. His career reflects a successful track record working side by
side with client executives to validate their strategies, optimize their business and operating models, and design their transformation programs and
roadmaps. He also actively assists in the execution of their operational, functional, technology and M&A initiatives supporting these programs. John
brings 7 years of engineering know-how and over 25 years of consulting experience from working with over 40 public and private technology, service and
industrial companies spanning technology processes, systems, software and services. He is currently a senior partner in Deloitte Consulting’s Technology,
Media and Telecom Industry practice serving the semiconductor segment. He also leads one of the firm’s premier global client account relationships.
Previously John led Deloitte’s Technology Industry Sector. He honed his expertise as an advisor and consultant to senior executives of Fortune 500
companies at A.T. Kearney, where he co-led and developed the firm’s Communication, Media and Technology Practice, growing it from a start-up industry
group to a multi-million dollar practice focused on providing strategic and operations expertise to a select portfolio of global technology clients. John
started his career at Fairchild Semiconductor where he spent 4 years as a process engineer and member of the research staff. He went on to join National
Semiconductor as a product manager for processors/controllers used for the US Navy and Air Force fighter program. He has also served on the board of
Joint Venture Silicon Valley, where he helped sponsor early development of the Silicon Valley Index and local workforce development initiative. John also
holds two patents in silicon on insulator process technology.