www.mcilvainecompany.com

COMPANY NEWS

Ahlstrom currently has four business areas—Building and Energy, Filtration, Food and Medical and Label and Processing. The specialty paper business operated under the Label and Processing business area will be combined with Munksjö AB in a transaction is scheduled to be completed in two steps during the first and second quarter of 2013.

Under the new structure, the current filtration business area will be divided into two business areas: Transportation Filtration and Advanced Filtration. This will enable stronger focus within filtration.

Therefore, effective January 1, Ahlstrom's new business areas will be Building and Energy, Transportation Filtration, Advanced Filtration and Food and Medical.

In connection with the change in the business area structure, several changes will be made in Ahlstrom's executive management team. Tommi Björnman, executive vice president, Filtration, has decided to resign from Ahlstrom to pursue other career opportunities. He will continue in his current role until the end of the year. 


Fulvio Capussotti has been appointed executive vice president, Advanced Filtration, and a member of the executive management team. He will report to Jan Lång, president and CEO, as of January 1, 2013. Fulvio Capussotti has been working with Ahlstrom since 2002 in various senior management roles and currently leads the Advanced Filtration Business Unit.

Ahlstrom also named Jari Koikkalainen as the executive vice president of Transportation Filtration division, which will also be a member of the Ahlstrom executive management team, as of February 1, 2013. Koikkalainen will report to Jan Lång, President and CEO, Ahlstrom. In his new role, Koikkalainen will be responsible for leading and developing the transportation filtration business within Ahlstrom. He will be based in Beijing, China.

Koikkalainen joins Ahlstrom from Metso Corporation, where he has held various senior executive positions from 2000-2012. At present, Koikkalainen is area president, Metso Paper (China) Co., Ltd.

Ahlstrom recently signed an agreement to acquire the Sweden-based Munktell Filter AB as a strategic step to grow the advanced filtration business particularly in life science and laboratory applications.

Under the agreement, Ahlstrom will acquire 100% of the shares in Munktell Filter AB, as well as its holdings in Munktell & Filtrak GmbH, Filtres Fioroni SA and Munktell Inc. The enterprise value of the transaction is approximately €20 million, including the planned subsequent buyouts of minority interests. Through the transaction, Ahlstrom will become a global leader in life science and laboratory media filtration.

According to Jan Lång, president and CEO, the acquisition reinforces Ahlstrom’s leadership in filtration material markets worldwide. "There is a clear strategic fit with Munktell and Ahlstrom, and the transaction allows us to strengthen our product portfolio in advanced filtration materials. This move is a prime example of our focus on new type of high performance materials business with attractive future growth potential."

"When we combine Munktell’s strong position in the European advanced filtration market with our solid presence in North America, we will gain access to new markets geographically. Driven by global changes in demographics, life science and laboratory filtration are lucrative growth areas for us," adds Tommi Björnman, Executive Vice President, Filtration.

Munktell is based in Falun, Sweden and it has production sites in Germany and Sweden, a joint venture in France, as well as a sales office in the U.S. The company’s net sales amounted to approximately €15 million and operating profit margin was roughly 15% in 2011. It employs some 100 people. Munktell produces filtration materials mainly for life science and laboratory applications. End use examples include newborn screening, laboratory media filtration, filter materials for pollution control, as well as testing materials used by medical, sugar and beverage industries.

Ahlstrom is increasing capacity for filtration materials at its site in Turin, Italy. The investment will be operational by the third quarter of 2013 and will consist of an upgrade to a paper machine producing filter media for transportation and gas turbine applications. Total investment is approximately €10 million and it will significantly increase the Turin plant capacity to supply filter media to customers globally.

"This investment is another important step in our growth roadmap, where we are strengthening our platform in Europe. By expanding our filtration operations, we are reinforcing our position as a global supplier in the filtration market with a full offering of filter media," said Tommi Bjornman, executive vice president, Filtration. "Our global filtration platform has grown significantly in the past two years, with the recent investments in the new saturator line in Turin, the expansion at our plant in Louveira, Brazil and the acquisition and the expansion of the Binzhou plant in China."

"We will continue to work with our customers to grow in regions where they are focused," adds Gary Blevins, vice president, Transportation Filtration.

Pentair Ltd. (NYSE: PNR) recently announced the completion of the merger of Pentair, Inc. and the Flow Control business of Tyco International Ltd. (NYSE: TYC). Pentair, Inc. and Flow Control have combined to create Pentair Ltd., an industrial growth company that is a global leader in water and fluid solutions, valves and controls, equipment protection and thermal management products. Pentair Ltd. common shares are traded on the New York Stock Exchange under the symbol "PNR," which was Pentair, Inc.'s trading symbol prior to the merger.

"We now have an even stronger company, with the scale to capitalize on our growth opportunities, unlock substantial synergies and generate strong shareholder returns," said Randall J. Hogan, Chairman and Chief Executive Officer of Pentair Ltd. "We have significantly increased our global presence, and together have a broader offering and expanded capabilities for our customers. Looking forward, we believe Pentair is uniquely positioned to benefit from the increased demands on energy, water, infrastructure and agriculture resulting from the growing population and wealth of the world."

The company now has 30,000 employees located in more than 30 countries, operates more than 100 manufacturing facilities and markets its products and services around the globe.

"We are excited to welcome Flow Control employees to Pentair," said Hogan. "We believe our shared vision and commitment to operational excellence through Pentair's Integrated Management System will lead to better growth and success."

Transaction Details

The merger was structured as a tax-free "Reverse Morris Trust" transaction. Prior to the merger, Tyco spun-off Pentair Ltd. to its shareholders through a pro-rata distribution. At the time of the distribution, each Tyco shareholder received 0.239943 Pentair Ltd. shares for each Tyco share. Pentair, Inc. shareholders received one Pentair Ltd. common share for each Pentair, Inc. common share in the merger. As a result of the distribution and merger, Tyco shareholders own approximately 52.5% and former Pentair, Inc. shareholders own approximately 47.5% of Pentair Ltd. on a diluted basis, with approximately 210 million shares outstanding.

Governance and Management

The members of the Pentair, Inc. Board of Directors immediately prior to the merger, together with one new director designated by Tyco, are the members of the Pentair, Ltd. Board of Directors. In addition to Mr. Hogan, the Chairman and Chief Executive Officer of Pentair Ltd., the Pentair, Inc. executive team remains in place as the senior executive team of the combined company.

Pentair Ltd. is incorporated in Switzerland with its main U.S. offices remaining in Minneapolis, Minnesota.

The merger was approved by Pentair, Inc. shareholders on September 14, 2012.

HaloSource has entered into a strategic partnership with Pentair, a leading water solutions provider in Brazil, to market and sell its HaloPure Water Pitcher and replacement cartridges throughout Brazil. Over the next three years, Pentair will offer the co-branded point-of use devices through Pentair's retail and wholesale channels in the Brazil market.

The partnership will add HaloPure technology to Pentair's product offering to eliminate bacteria and viruses, providing safer drinking water for the consumer. Pentair is a global diversified industrial company headquartered in Minneapolis, Minnesota with sales of $3.5 billion in 2011. Pentair employs over 15,000 people worldwide.

According to Verify Markets' 2012 report on Global Water Treatment, the Brazilian market was the largest global residential water treatment market in Latin America in 2011, with estimated revenues of over $200 million. Consumers will find HaloPure-powered pitchers in Brazil starting in Q4-2012.

Martin Coles, CEO of HaloSource commented, "We are excited to mark our commercial entry into Brazil with Pentair. Our shared core values and complementary capabilities will deliver enhanced quality for drinking water to the people of Brazil."

Sam Karge, Pentair's Vice President of Global Marketing commented, "We look forward to taking these products with HaloPure technology to market. This unique media will provide additional benefits we have not yet been able to claim in this region. This provides a great way for Pentair to utilize the unique HaloPure technologies in a variety of applications in this strategic region for us."

The Coca-Cola Company has developed and tested at commercial scale a first-of-its-kind beverage process water recovery system to produce high-quality water that meets and/or exceeds drinking water standards for use in selective non-product activities such as clean-in-place and bottle washing. The innovative system expands the range of manufacturing applications for recovered process water and sets precedent for conservation and reuse in the beverage industry. The company states it could save up to 100 billion liters per year if adopted across its bottling network.

Coke’s system takes highly treated process water and subjects it to biological treatment in a membrane bioreactor, ultrafiltration, reverse osmosis, ozonation and ultraviolet disinfection. Water produced meets or beats drinking water standards, according to the company, which trialed the system using pilot projects in Mexico and India but plans a system wide roll out from 2013.

By reusing rather than treating and discharging the water used in bottling facilities, Coke states it can reduce operational water needs and improve water use efficiency by up to 35%, contribute to growth and local economic development opportunities, further support local communities, and reduce its water footprint.

In the Coca-Cola system alone, this new water reuse approach could save as much as 100 billion liters of water annually if implemented across all bottling plants. Perhaps even more significant is that the project's multi-year bench- and commercial-scale testing, specific operating criteria, best practices, and excellent finished water quality set precedent for the beverage industry by expanding the range of manufacturing processes that can benefit from water reuse. The Company is currently reviewing internal plans to rollout this technology to its bottling partners and align plans for implantation across bottling facilities in 2013 and beyond.

Pentair Ltd. (NYSE: PNR) announced third quarter 2012 sales of $866 million, an increase of 1 percent from the prior year quarter. Adjusted operating income was $108 million, up 7 percent, and operating margins expanded 110 basis points to 12.4 percent.

Pentair completed its merger with Tyco's Flow Control business on September 28, 2012, more than doubling the revenue for Pentair. The combination of the two companies better positions Pentair to fully participate in fast growth regions where rising GDP and urbanization are driving infrastructure, energy, and water demands. The company's fourth quarter earnings will include the results related to Tyco's Flow Control business.

"Although the global economic environment remains cloudy and foreign exchange continues to negatively impact the top line, we continue to drive strong margin expansion led by price and productivity," said Randall J. Hogan, Pentair chairman and chief executive officer. "Great execution allowed us to deliver record third quarter adjusted earnings per share while also closing the transformational merger with Tyco's Flow Control business."

Third Quarter Highlights

Water & Fluid Solutions sales were down 1 percent year-over-year to $605 million, but increased 2 percent when excluding the impact of foreign exchange. In fast growth regions, Water & Fluid Solutions sales grew 11 percent driven by strength in Latin America and the Middle East. Within Water & Fluid Solutions, the third quarter sales performances were as follows:

• Flow Technologies, which accounted for approximately 40 percent of Water & Fluid Solutions sales, was down 5 percent versus the prior year quarter, as strength in agriculture and infrastructure was offset by continued weakness in Western Europe and flood related products in the U.S. impacted by the unusually dry weather.

• Treatment/Process, which accounted for approximately 40 percent of Water & Fluid Solutions sales, was flat. Foreign exchange was a major headwind, which negated a 5 percent volume and price gain on strength in energy and residential markets.

• Aquatic Systems, which accounted for approximately 20 percent of Water & Fluid Solutions sales, was up 6 percent year-over-year driven by pool dealer expansion and continued strong demand for Pentair's energy efficient products and solutions.

Technical Solutions delivered third quarter 2012 sales of $260 million, down 6 percent versus the prior year quarter, including a three-percentage point unfavorable impact from foreign exchange.

HaloSource Delivers HaloPure® Technology to Global Drinking Water Market

HaloSource, Inc. (HALO.LN, HAL.LN) the clean water technology company, has entered into a development and production agreement with Tupperware Brands Corporation, the U.S.-based global direct selling company, to provide HaloSource’s patented HaloPure® technology in cartridges for Tupperware’s new line of gravity-based water purifiers that will be initially launched through Tupperware India.

HaloSource and Tupperware Brands spent over a year developing customized cartridges for the devices that incorporate HaloSource’s innovative HaloPure® drinking water disinfection technology, which reduces waterborne viruses and bacteria. The modular design will allow for flexibility of performance, depending on the various water quality conditions found around the world.

This agreement with Tupperware Brands, which sells multiple brands through its global independent direct sales force of 2.7 million, will allow HaloSource to further deepen its presence in the water purification market.

In 2009, HaloPure® became the first new drinking water technology in 30 years to be granted both Manufacture-For-Use and Device registrations by the United States Environmental Protection Agency (USEPA), widely recognized as having the world's most stringent performance requirements for water purification. In addition, HaloPure media and devices have received registration by the China Ministry of Health and cartridge/device registrations in the US and Brazil.

Martin Coles, Chief Executive Officer of HaloSource commented, "Tupperware is a major consumer brand with solid distribution across the world. We are very excited to be working with a company with such high quality standards and market reach. The addition of our HaloPure technology will allow Tupperware to deliver safer drinking water at an affordable price. This alliance represents our shared values and common goal of making a real difference in the lives of others."

HaloSource (halosource.com) is a global clean water technology company headquartered in Bothell, Washington, U.S.A.

•HaloPure® media is the most flexible, price-competitive disinfection solution for clean drinking water in the industry. In 2009, it became the first drinking water technology in 30 years to be registered by the United States Environmental Protection Agency (USEPA), widely recognized as having the world’s most stringent performance requirements for water purification. In 2010, HaloPure media was approved by China's Ministry of Health (MOH) and recognized for meeting the world’s most stringent water purification requirements, a key differentiator for our multi-national partners. In Brazil, the use of HaloPure media has met or exceeded all appropriate standards of the National Institute of Metrology, Standardization and Industrial Quality (INMETRO).

The Semiconductor Industry Association (SIA), representing U.S. leadership in semiconductor manufacturing and design, announced that worldwide sales of semiconductors reached $24.40 billion for the month of July 2012, a slight increase of 0.2 percent from the previous month when sales were $24.34 billion. Sales from July 2012 were 1.9 percent lower than the July 2011 total of $24.86 billion, but the year-over-year decrease was smaller than it has been since October 2011. All monthly sales numbers represent a three-month moving average.

"July’s sales figures offer some encouraging signs for the global semiconductor industry, but it’s clear that macroeconomic challenges are restricting stronger growth," said Brian Toohey, President and CEO, Semiconductor Industry Association. "Meanwhile, the regional outlook remains uneven. Japan has rebounded strongly from last year’s natural disaster and Asia Pacific has held steady, but Europe and the Americas have lagged."

Semiconductor sales in July 2012 increased compared to July 2011 in Japan (4.2 percent) and Asia Pacific (1.4 percent), but were significantly lower in Europe (-10.0 percent) and the Americas (-10.4percent). On a sequential monthly basis, sales increased in Japan (5.4 percent) and Asia Pacific (0.3 percent), remained flat in Europe, and declined in the Americas (-3.9 percent). Japan had its strongest month-over-month growth since September 2009 and largest year-over-year increase since January 2011.

SEMI released an update to its World Fab Forecast database, which indicates that total fab spending for equipment needed to ramp fabs, upgrade technology nodes, and expand or change wafer size could increase 16.7 percent in 2013 to reach a new record high of $42.7 billion. The estimate includes new equipment, used equipment, or in-house equipment but excludes test assembly and packaging equipment.

The largest edition of the SEMI World Fab Forecast lists over 1,150 facilities (including 300 Opto/LED facilities), with 76 facilities starting production this year and in the near future. The database tracks projected spending on equipment and construction. Since the previous fab database publication in May 2012, SEMI analysts have made over 296 updates to more than 230 facilities (52 Opto/LED fabs) n the database.

Semiconductor manufacturing foundries were significant drivers of fab equipment spending in 2012 with over $10 billion combined investment. Their dominance is expected to continue with approximately $10 billion additional equipment sending in 2013.

In 2012, the Americas had the largest percentage of fab construction. From 2010 to 2012, over $6 billion will be spent in the Americas on fab construction projects led by Intel, Globalfoundries, Samsung, and Micron. Most of these construction projects will be completed by the end of 2012. No immediate new fab projects in the Americas are anticipated, resulting in projected investment for 2013 construction to drop below $500 million from almost $3 billion in 2012.

In 2013, most of the fab construction will occur in Taiwan, China, and Korea. Samsung has begun an aggressive conversion of up to four existing Memory lines to System LSI. A transition from Flash to System LSI is difficult; some drop in capacity in Memory in expected, but the company is expected to compensate by building a new fab for Memory, in Xian, China, with a massive investment of $7 billion. The fab is expected to begin construciton mid-September 2012.

The SEMI World Fab Forecast provides additional detail about the phases for ramping this leading-edge Flash fab with huge potential capacity. Other increases in fab construction investment will come from SMIC’s new fab in Beijing, and TSMC and UMC fab projects in Taiwan.

The SEMI World Fab Forecast uses a bottom-up methodology for evaluating capex for construction projects, fab equipping, technology levels, and products. It provides high-level summaries and graphs; and in-depth analyses of capital expenditures, capacities, technology and products by fab. Additionally, the database provides forecasts for the next 18 months by quarter. These tools aid understanding of how semiconductor manufacturing will look in 2012 and 2013.

SEMI, the global industry association for companies that supply manufacturing technology and materials to the world’s chip makers, reported that worldwide semiconductor manufacturing equipment billings reached US$10.34 billion in the 2^nd quarter of 2012. The billings figure is 4 percent lower than the 1^st quarter of 2012 and 13 percent lower than the same quarter a year ago. The data is gathered jointly with the Semiconductor Equipment Association of Japan (SEAJ) from over 100 global equipment companies that provide data on a monthly basis.

Worldwide semiconductor equipment bookings were $9.70 billion in the 2^nd quarter of 2012. The figure is 10 percent lower than the same quarter a year ago and 4 percent lower than the bookings figure for the 1^st quarter of 2012.

North America-based manufacturers of semiconductor equipment posted $1.28 billion in orders worldwide in July 2012 (three-month average basis) and a book-to-bill ratio of 0.87, according to the July Book-to-Bill Report published by SEMI. A book-to-bill of 0.87 means that $87 worth of orders were received for every $100 of product billed for the month.

The three-month average of worldwide bookings in July 2012 was $1.28 billion. The bookings figure is 10.2 percent lower than the final June 2012 level of $1.42 billion, and is 1.5 percent lower than the July 2011 order level of $1.30 billion.

The three-month average of worldwide billings in July 2012 was $1.48 billion. The billings figure is 3.9 percent lower than the final June 2012 level of $1.54 billion, and is 2.9 percent less than the July 2011 billings level of $1.52 billion.

"Bookings and billings for North American semiconductor equipment in July are close to values reported exactly one year ago," said Denny McGuirk, President and CEO of SEMI. "Seasonal slowing of investment activity in the current cycle is reflected in reduced orders as the industry enters the second half of the year."

Weakening economic conditions are spurring reduced demand for PCs and related electronic components, prompting IHS to downgrade its forecast for 2012 global semiconductor market chip revenue.

Global semiconductor revenue now is expected to decline slightly for the year, contracting by 0.1 percent, according to preliminary results from the IHS iSuppli Application Market Forecast Tool from information and analytics provider IHS. The previous IHS forecast called for marginal growth of less than 3 percent. This will mark the first annual decline for the global semiconductor industry since 2009.

"The expected decline in 2012 represents a major event for the global semiconductor market," said Dale Ford, Senior Director at IHS. "Throughout all of 2011, even though electronics markets were very weak, IHS never projected revenue to decline for the entire year. However, the disappointing results in the 2^nd quarter and weak 3^rd-quarter expectations driven by poor economic conditions are expected to cause the semiconductor market to retreat this year."

Global semiconductor revenue dropped modestly by 3.6 percent in the 1^st quarter of 2012 compared to the 4^th quarter of 2011 — reflecting normal seasonal patterns.

However, revenue growth in the 2^nd quarter amounted to only about 3.0 percent compared to the 1^st quarter — a tepid level of increase when seen against historical averages. Revenue guidance from key chip suppliers for the 3^rd quarter indicates the overall market will grow by just slightly more than 6.0 percent sequentially, another weak performance.

PCs and related peripherals are the key market segment pulling down the overall semiconductor market in 2012. The previous IHS forecast predicted that the expansion of the wireless communications sector would be sufficient to propel growth for the overall semiconductor market in 2012. However, the downward pressure created by the worsening deceleration of the PC semiconductor market will outweigh the mid-single-digit growth in semiconductor demand forecast expected for wireless communications and the smaller industrial electronics segment.

"While the introduction and shipment of exciting new products such as ultrabooks and other ultrathin PC platforms in the second half of the year will give the PC market a much needed boost, the counterweight of growing economic worries will place strong downward pressure on the overall PC market and limit both consumer and corporate spending in 2012," said Ford.

The weak performance will result in a broad-based revenue decline in 2012 across most semiconductor component categories.

At this point, IHS is still forecasting a strong growth rebound of more than 9 percent in 2013, based on expectations of improving economic conditions. However, multiple high-impact events still present the risk of a strong downturn in the economy in 2013, which would also pull down the electronics and semiconductor industries. These potential events range from the Eurozone crisis, to significantly slower growth in China, to the potential federal tax and budget fiscal cliff in the United States, to turmoil in the Middle East.

Despite reducing its 2012 planned capital spending by $1.0 billion on September 7, 2012, Intel and four other large semiconductor suppliers are still expected to account for almost two-thirds of industry-wide capital expenditures in 2012, according to new data released by IC Insights. The top five capex spenders for 2012 — Samsung, $13.1 billion; Intel, $11.2 billion; TSMC, $8.3 billion, SK Hynix, $3.7 billion; and GlobalFoundries, $3.1 billion — are forecast to account for 64 percent of the $61.4 billion in semiconductor capital expenditures forecast for 2012.

The expected 64 percent marketshare held by the top five spending leaders is significantly greater than seven years ago (2005), when the top five companies represented just 40 percent of total semiconductor industry spending. Similarly, the top 10 capital spending leaders are now forecast to account for 77 percent of total industry spending in 2012, a jump of 22 percentage points from 2005 when the top 10 companies represented 55 percent of spending. The figures reveal there are fewer suppliers that, on their own, can afford to spend the enormous dollars necessary to build and equip a new fab. As a result, more companies are pursuing the fab-lite or fabless business model and relying on foundries to manufacture their devices.

The $61.4-billion capital expenditure forecast for 2012 represents a 6 percent decline from the $65.6 billion spent for semiconductor capex in 2011. Only six of 35 leading semiconductor suppliers are forecast to increase their capital expenditure budgets in 2012 compared to 2011, led by Rohm with a 78 percent increase. Other major suppliers that are forecast to increase their semiconductor capex budgets for 2012 include UMC, 26 percent; SK Hynix, 16 percent; TSMC, 13 percent; Samsung, 11 percent; and Intel 4 percent. More details of semiconductor capital expenditure trends and spending plans for individual companies can be found in the 2012 edition of IC Insights’ "The McClean Report" or by attending IC Insights’ upcoming "Fall Forecast Seminar."

TSMC announced its net sales for August 2012:  On an unconsolidated basis, net sales were approximately NT$48.9 billion, an increase of 2 percent over July 2012 and an increase of 32 percent over August 2011. Revenues for January through August 2012 totaled NT$327.57 billion, an increase of 16 percent compared to the same period in 2011.

On a consolidated basis, net sales for August 2012 were approximately NT$49.5 billion, an increase of 2 percent over July 2012 and an increase of 31.5 percent over August 2011. Consolidated revenues for January through August 2012 totaled NT$331.59 billion, an increase of 14.8 percent compared to the same period in 2011.

"TSMC’s 3^rd quarter 2012 revenues are now expected to be slightly higher than the guidance announced on July 19, primarily due to pull-in of certain customers’ shipments and better-than-expected mask revenue," said TSMC Chief Financial Officer, Spokesperson and Senior Vice President Ms. Lora Ho.

Spending on research and development by semiconductor companies worldwide is expected to grow 10 percent in 2012 to a record-high $53.4 billion compared to the current peak of $48.7 billion set in 2011, according to the "Mid-Year Update of IC Insights’ McClean Report." The increase will lift R&D spending by chip companies to 16.2 percent of total semiconductor sales in 2012, which are now forecast to rise 3 percent to $329.8 billion from revenues of $321.4 billion in 2011.

A dozen semiconductor companies spent more than $1.0 billion each on R&D in 2011 for the first time ever, based on the "Mid-Year Update’s" analysis of data taken from IC Insights’ online "Strategic Reviews" database of IC suppliers.

Intel’s R&D expenditures accounted for 32 percent of the top-10 spending and about 17percent of total R&D expenses at all semiconductor companies worldwide — counting integrated device manufacturers (IDMs), fabless suppliers and foundries. Intel’s 27 percent increase in R&D expenditures was the largest among companies spending $1 billion or more on research and development last year. Fifth-ranked Qualcomm, the industry’s largest fabless semiconductor supplier, increased its R&D spending by 25 percent in 2011, while silicon foundry giant Taiwan Semiconductor Manufacturing Co. (TSMC) raised its amount 23 percent.

For more than three decades, R&D spending as a percentage of total semiconductor sales has zigzagged higher due to increasing costs in developing more complex IC designs and the creation of next-generation process technologies for large-diameter wafers (currently 300 mm but heading toward 450 mm later this decade). R&D spending as a percentage of semiconductor sales by chip companies was typically 7-8 percent in the late 1970s and early 1980s. R&D-to-sales ratios grew to 10-12 percent of revenues by the early 1990s and then jumped to over 15 percent during the last decade, reaching a record 17.5 percent in 2008.

IC Insights’ "Mid-Year Update" shows that U.S. companies accounted for 57 percent of worldwide semiconductor R&D spending in 2011, followed by suppliers based in Japan, 17 percent; Europe, 10 percent; Taiwan, 8 percent; South Korea, 7 percent; and mainland China, 1 percent. The analysis of expenditures from IC Insights’ "Strategic Reviews" online database shows IDMs accounting for about 66 percent of R&D spending by semiconductor companies in 2011, while fabless suppliers represented 29 percent, and pure-play foundries made up the remaining 5 percent of the total.

It is worth noting that the world’s largest IC foundry — TSMC — entered the top-10 R&D ranking in 2010 for the first time ever. In 2011, TSMC increased R&D spending by 23 percent, nearly double the 12 percent average growth recorded by the top 10 last year. With the influx of IDMs turning to foundry capacity and major fabless customers needing lead-edge CMOS processes, TSMC is spending more money on both new 300-mm fabs and R&D. In July 2012, TSMC Chief Executive Morris Chang noted that his company’s 2012 R&D budget is now double the amount spent in 2009 (which was $656 million), in addition to raising capital expenditures 13 percent to an all-time high of $8.25 billion compared to $7.33 billion in 2011. TSMC’s R&D-to-sales ratio stood slightly above 8 percent in the first half of 2012 versus 7.9 percent in 2011, 5.1 percent in 2005 and 3.1 percent in 2000.

Website: www.mcilvainecompany.com