2015 Vol .1 - Tower Semiconductor

NEWSLETTER—MARCH 2015

“The Time Ahead of Us…Open and Unshaped, Feather Light in its Freedom”

Message from Mr. Russell Ellwanger—TowerJazz CEO & TPSCo Chairman

“What could and should be done with all the time that lies ahead of us…”
– Pascal Mercier

In the book, “The Night Train to Lisbon,” Pascal Mercier writes: “What could and should be done with all the time that lies ahead of us, open and unshaped, feather light in its freedom and lead heavy in its uncertainty?” The question forcibly hit me.

Thoughts of “What could and should be done” pulse through my arteries “oxygenating” my being, while the second idea of “lead heavy uncertainty” casts an ominous darkness. Yes, the future is open and unshaped. Hence, it is feather light in its freedom, awaiting us both in our respective individual lives and as groupings of people, to find that which inspires us and drives us towards excellence.

However, the last part does not echo as truth. The future need never be “lead heavy in uncertainty.” Individuals that have the proper knowledge, skills and (resolute) attitude (KSA) can make a reality of what others may see only as unachievable dreams.

We increase our own ability sets (knowledge, skills and attitude) by partnering with others that have an inspiring presence and attitude, and who possess complementary knowledge and skills. The highest level of such complementary combinations for a company is true partnership with valued customers and suppliers.

Eleanor Roosevelt stated, “If life were predictable, it would cease to be life and be without flavor.” Even the “best of the best” cannot predict every outcome, but those with KSA will view a setback as an enabler to the future and see every moment as a new start “feather light in freedom,” both to propel greater achievement atop recent successes or to change the course of setbacks to stronger achievement.

They do not see failure. In its place they see lessons learned and GROWTH.

For such people and companies, the non predictability of the future is what adds flavor to the feather light freedom of a new day, and never drives a feeling of “lead heaviness.”

For TowerJazz, it is our chosen path to be a company that, based upon our knowledge, skills and attitude, inspires both customers and suppliers to partner with us to achieve what others may not dare to begin. Thank you for your partnership in this journey.

CEO, TowerJazz
Chairman, TPSCo

For All CEO Messages

FINANCIALS HIGHLIGHTS

Q4 and FY 2014

Highest Ever Quarterly and Full Year 2014 Revenues

Record Q4 revenues of $235 million, up 75% year over year, including 23% organic growth (non-Micron and non-Panasonic)
2014 record revenues of $828 million, up 64% year over year
Number one in pure play foundry year over year growth
“Organic” (excluding Micron and Panasonic) top 10 customers’ 2014 revenue growth of approximately 34% over 2013
Record design wins and masks entering the factories, with masks’ growth of 41% year over year

Q1 2015 Revenue Guidance

Mid-range guidance of $225 million
70% year over year growth
EBITDA for 2014 was $154 million, significantly higher than $89 million
recorded in 2013
Recorded $84 million non-GAAP gross, reflecting 36% margins. Gave to Wall Street target of 40% by Q4’15
FY non-GAAP net income of $128 million, more than doubled 2013 results of $56 million
2014 GAAP Net Profit with strong cash generation
Strong balance sheet financial ratios
Cash on hand $187M as of Dec. 31 2014 compared to $123M as of Dec. 31, 2013
TowerJazz Annual Revenues
2005-2014

TowerJazz Annual Revenues
2005-2014

TECHNOLOGY FOCUS

On the Way to the Internet of Things (IoT) Market

Yakov Roizin, TowerJazz Fellow

The Internet of Things (IoT) refers to the world where humans, machines and environment communicate between themselves using various sensor enabled semiconductor devices. Huge amounts of data are generated and processed in the IoT world through network structures. In the semiconductor industry, this will extend the markets of mobile applications, power management and data processing, thus opening new business opportunities.

IoT demands diverse silicon chips with integrated sensors, memories, processors, energy harvesting blocks, communication means, interfaces and security systems. The majority of IoT related designs to be implemented in semiconductor foundries require high reliability, low-power and low-cost technologies.

According to IBM market research, more than 220 billion sensor enabled objects are expected in 2020. Each one billion smart phones and radios for machine-to-machine communication devices would require approximately one million 200mm SOI RF CMOS wafers.

TowerJazz started IoT related R&D activities several years ago, most of these projects in tight cooperation with customers and partners. As one of the main strategic directions, SOI technology, where the basic IoT building blocks could be integrated in one chip, was selected.

In addition, other relevant IoT chip building blocks have been developed in TowerJazz fabs. Some of them, like unique RF front-end modules, including SOI antenna switches with record values of the figure of merit (FOM), are already widely used in customer products. Low power consuming CMOS transistors and IPs, and ultra-low power, low-cost non-volatile memories were already qualified and included in the TowerJazz offering. Feasibility of other smart SOI solutions, including a series of unique sensors, energy harvesting arrays and high voltage power management devices was demonstrated, and a part of these solutions patented. Besides the standard set of semiconductor sensors (like temperature and visible light sensors), several unique solutions well suited for IoT applications (on SOI and bulk silicon) were developed.

Ultra low-power consuming non-volatile memories (NVM) are considered one of the major IoT chip distinguishers. In this field, TowerJazz has a strong record of accomplishments and an extensive patent portfolio, which includes the well-known in the industry Y-Flash and C-Flash memories, successfully implemented in mobile applications

Being the only foundry that succeeded in embedding MRAM modules (joint project with Crocus Technologies) and working to introduce one of the ReRAM ultra-low power flavors, TowerJazz is excited to provide its customers with technologies allowing fabricating intelligent chips for diverse future IoT applications

Please submit the form below to download the TowerJazz white paper on IoT.

TPSCO HIGHLIGHTS

TPSCo’s Advanced Processes and Strengths Have Significantly Boosted Business

Guy Eristoff, TPSCo CEO

Since the founding of TowerJazz Panasonic Semiconductor Co., Ltd. TPSCo in April of 2014, we have achieved several significant successes. In December, mass production started at our Tonami, Japan fab for Fairchild Semiconductor; a process transfer of multiple high performance discrete devices for the industrial and consumer markets.

We are very excited to become a first tier supplier for Fairchild, and we look forward to enhancing our relationship with Fairchild by providing them with the benefit of both specialty TowerJazz and TPSCo technologies and capabilities. We were able to pull in mass production start to just eight months from project inception due to the significant efforts and collaboration between TPSCo and Fairchild.

TPSCo technology development teams are currently engaged with 13 separate third party customers working on 21 active projects. Several of these projects are targeted to enter volume production in the first half of 2015, and include embedded NVM, CIS and high voltage power devices.

In addition, we have over 100 qualified consumer and high reliability process flows developed by Panasonic that are available for our foundry customers.

There is strong interest in several of the advanced IDM process technologies already qualified in the Hokuriku, Japan fabs that are available to our customers.

TPSCo is focused on providing semiconductor process technology solutions in three defined areas:

Automotive and high reliability processes
High-end image sensors (both CIS and CCD)
Mobile communications peripheral processes for the Internet of Things (IoT)

With 35 years of experience in automotive part manufacturing and many high reliability IDM flows from 0.3um to 65nm that are now available to our customers, this is an area of focus and differentiation for TPSCo. We are enhancing this position with the transfer to TS18 PM with Y-flash for multiple customers including a major Japanese tier 1 automotive customer. In early January, we produced extremely good electrical results on first silicon in less than four months from project transfer inception. TPSCo is also enhancing our 65nm RFCMOS process in order to be suitable to run 77GHz mm wave technology for collision avoidance systems.

Regarding imaging, TPSCo is widely recognized as one of the top two or three image sensor manufacturing providers worldwide. Our 65nm 1.12um pixel process has best in world 74% green quantum efficiency and the lowest dark current of 6.5 electrons per second at 65 degrees Centigrade.

In the first week of January, we started first silicon on 65nm RFSOI for a mobile communications front-end module (FEM) switch.

This lot contains both conventional and trap-rich SOI running on a modified TPSCo 65nm RFCMOS process flow.

The initial test chip mask set designs were made in close conjunction with TowerJazz R&D in Newport Beach, CA and included customer RF switch circuits for evaluation. Initial results are expected in mid-March.

One of TPSCo’s strengths is our application of automated advanced process control (APC) virtual metrology technology. TPSCo engineers have developed some of the most advanced process control schemes for critical processing steps and stages that are employed for high reliability and automotive integrated circuit manufacturing. In December 2014, a paper submitted by TPSCo engineers was awarded, “#1 Best Paper” at the International Symposium on Semiconductor Manufacturing 2014 (ISSM2014).

In addition to the 21 third-party foundry projects from 13 separate customers based in Asia, the U.S. and Europe, TPSCo has active engagements with another 12 customers on 15 potential projects.

In December, TPSCo co-hosted TowerJazz Global Symposium (TGS) Japan with TowerJazz in Tokyo. Our foundry strategy and technologies appealed to the attending Japanese customers and prospects. There were more than 100 participants from 70 companies. We are working very diligently to solidify our position as a recognized international specialty foundry, and look forward to growing our customer base in support of the TowerJazz Group of Specialty Foundries.

2014 TowerJazz & TPSCo Technical Global Symposium (TGS) US and Japan Events

TowerJazz hosted our 9th annual US Technical Global Symposium (TGS) on November 19 and our 3rd annual Japan TGS on December 16. For the first year, the event was co-hosted with TowerJazz Panasonic Semiconductor Co. TPSCo to deliver the message that we are a group of specialty foundries with enhanced technology offerings and increased capacity.

At each event, starting with a keynote speech from our CEO, Russell Ellwanger, we focused on our advanced technologies and dedication to meeting the growing needs of our customers around the world.

We not only offer more technologies to our customers through TPSCo, such as leading edge 45nm CMOS, 65nm RF CMOS and 65nm 1.12um pixel technologies, but offer geographical presence in Japan and close proximity for customers in the Asia-Pacific region.

In the US, we also presented technology capability updates from our Aerospace & Defense Business Unit including highlights from our U.S. subsidiary, Jazz Semiconductor Trusted Foundry (JSTF) which is accredited as a Category 1A and 1B Trusted Supplier by the United States Department of Defense (DOD) as a manufacturer of semiconductors that may be used in trusted applications.

The 2014 TGS events were attended by hundreds of customers and potential customers. Over 90% responded that they were very satisfied with the symposium and it fulfilled their reasons for attending; primarily content (technical material and company strategy/messages) and networking opportunities.

At all TGS events, along with TowerJazz’s advanced specialty technologies, we presented updates on our set of sophisticated design kits and models, and our comprehensive analog IP portfolio.

TGS also provides a forum for TowerJazz to showcase our partners – the leading EDA vendors and tool providers – who exhibit and demo their solutions to address the design needs of our mutual customers. We would like to thank our worldwide sponsors for their continued support!

In 2015, TowerJazz and TPSCo will host TGS in Korea, Japan and the U.S. Please stay tuned for dates and exact locations. We look forward to seeing you there!

Dr. Marco Racanelli presenting on TowerJazz’s Specialty Technology Offerings at TGS USA

Thank you to our TGS sponsors!

PARTICIPATION AT INDUSTRY EVENTS

VISION

November 4–6, 2014 | Stuttgart, Germany

TowerJazz exhibited for the second time at VISION, the world’s leading trade fair for the machine vision industry. The show took place in Stuttgart, on November 4–6, 2014 and hosted 432 exhibitors with over 8700 visitors from all over the world. The event was a big success as attendees were excited to see the latest technological advancements.

Every two years, hundreds of companies within the machine vision industry meet in Stuttgart and present a range of products and services from sensors to processors, cables to cameras, and software to illumination systems.

The main exhibitor crowd consisted of machine vision systems and very specific applications for various industries such as mechanical engineering, automotive, and medical technology, among others. At such an event, TowerJazz’s presence as a specialty foundry leader was unique.

With a focus in the field of CMOS image sensors and technology offerings for optical sensors, TowerJazz drew the visitors’ attention and was very well received by its customers that attended the show as well.

In addition, this is the first time TowerJazz has exhibited at VISION since it formed TowerJazz Panasonic Semiconductor Co. TPSCo with Panasonic Corporation.

This has enabled TowerJazz access to best of class 65nm CMOS image sensor dark current and quantum efficiency performance and additional 45nm digital technology as well as added available capacity of approximately 800,000 wafers per year (8 inch equivalent) in three manufacturing facilities in Japan.

PARTICIPATION AT INDUSTRY EVENTS

ICCAD Conference

December 11-12, 2014 | Hong Kong

IC CAD 2014, one of the most important events in the semiconductor industry, was held in Hong Kong Science Parks on December 11–12, 2014. TowerJazz exhibited to showcase our foundry technologies and global footprint while demonstrating our continued dedication to meeting the needs of Mainland China and Hong Kong customers.

We exchanged several beneficial communications at the booth and we look forward to exploring many new business opportunities in the future.

Approximately 1400 people in total attended the event. Mr. Lei Qin, China Country Manager, presented TowerJazz’s rapid growth as an analog foundry in the APAC region. Of the nearly 100 people who attended his presentation, many were pleased to learn about our recent growth in APAC and our partnership with Panasonic to form TPSCo. This enterprise enables TowerJazz access to three fabs in Japan which expands technology offerings and manufacturing capabilities for TowerJazz customers in Asia.

SOCIAL RESPONSIBILITY

GAIA Girls Love Science

As part of TowerJazz’s community outreach program in Israel, we donate funds to the Global Awareness Investigation and Action (GAIA) project. On December 11, female GAIA students traveled to Migdal Haemek to visit our facility. These students currently attend the American International School in Israel and come from the U.S., China, South Korea, India, Germany, Israel, and Nigeria.

Our Director of Process Engineers in FAB 1 (6” FAB), Lilach Zinger and other leading female scientists at TowerJazz met with the students to share their stories and passion for science. In Migdal Haemek, TowerJazz’s engineering staff is made up of ~35% women and this is not by accident.

As a leading global company, TowerJazz has a social agenda which strives to contribute to the community through a variety of activities while focusing on increasing diversity and gender equity throughout the company’s different sites.

By the end of the day, it became evident to the GAIA girls that this course was as much about fulfilling dreams as it was about science. According to GAIA, the girls walked away with an appreciation for science, being curious, learning every day, trying to become someone that will lead others, and recognizing that success is often the result of helping others succeed.

Many of the girls seemed interested in studying science in school and possibly pursuing it as a profession.

GETTING TO KNOW US

Christine Olson

Customer Operations Manager

Christine joined the company in 2010 as a Customer Operations Manager (COM) in the Newport Beach fab in the Customer Solutions group. Previously, from 2000-2005, she worked for Conexant, the company from which Jazz Semiconductor spun off in 2002.

Q. Please tell us about your position, focus areas, etc.

A. As a COM, I am one of the primary points of contact for our customers with regard to their orders, backlog, logistics and any other issues pertaining to order fulfillment. My job is to support customers with the highest quality of customer service.

Q: What do you enjoy about your position and what challenges you?

A: I am extremely fortunate to work with a wonderful group of people whom I respect personally and professionally, and I enjoy the interaction with my coworkers and customers.

Even though my position can be busy and challenging at times, knowing that you come to work each day supported by a strong team and good friends makes it so much easier. In this position, one must be meticulous to detail, constantly multi-tasking, and always be several steps ahead of where you are at the moment. But, I’ve found that there is a tremendous amount of satisfaction found in rising to these challenges and doing my job well.

Q: What is your focus this year from a business standpoint?

A: My primary focus this year is to maintain high customer satisfaction especially as the business and customer base continue to grow.

Q: What are some of your hobbies?

A: I enjoy kayaking, skiing, camping, hiking and riding on the back of my husband’s motorcycle. I am also working on finishing my Private Pilot’s License. Additionally, I volunteer with the Pacific Marine Mammal Center (an organization that rehabilitates sick/injured seals and sea lions and returns them to the wild) and the DreamCatchers (a philanthropic organization).

Q: What is your favorite travel destination?

A: Having lived in Japan for a number of years, it is one of my favorite places to visit and I’ll jump at any opportunity to go back. I also love spending time in the California Eastern Sierra Mountains and the Pacific Northwest.