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Micrel Case Study: Reducing Costs for Industrial Micrel Gas Cylinders Management

Case Study 1/14/0814 January 2008

SUMMARY –I think this is too long I think for a summary and could be divided into sections for easy skimming – it should be past/current tense as I’ve revised

Micrel is a publicly traded semiconductor company with its fab operations based in San Jose, CA.

CHALLENGE:

Most of the fabMicrelMicrel owns a ’s 150mm fab which has a capacity of 30,000 wafer starts per month. This fab was constructed in the 1980’’s and the facilities and related automation technology is representative of that periodand is considered a legacy fab without full benefit of current automation technology..

They constantly assess technology upgrades to reduce cost and

improve productivity to remain competitive. . Managing the use of process gases, which is labor intensive and prone to gas shortages and/or waste, was identified as a key area of potential improvement.

Micrel is constantly assessing technology upgrades to reduce cost and improve productivity to remain competitive with current day practices.

Managing the use of process gases, traditionally labor intensive and prone to gas shortages and/or waste, has been identified as a key area of potential improvement.

Management considered installing transducers and monitoring equipment to automate gas rounds, but found the cost of installation, wiring, and disruption to ongoing operations prohibitive with poor payback.

SOLUTION:

In November 2007, MicrelMicrel evaluated and decided to proceed with the installationinstalled of new automation technology which did not incur

Copyright Cypress Systems Corp. 2008 20 February 2008

DRAFT ONLY - Micrel Case Study: Reducing Costs for Industrial Gas Cylinders Management

any disruption to ongoing processes and required minimal installation cost. . The solution, a non-invasive wireless sensor which “clips-on” to existing gauges and/or transducers, is one-third the costcosts 70% less than of alternative solution ofusing traditional transducers installation.

RESULTS:

The new technology is a non-invasive wireless sensor which easily “clips-on” to existing gauges and/or transducers, with a resulting installed cost only one third of traditional transducers.

Based on initial resultsreturn on investment - the first two months of use, baesd on how much time?, MicrelMicrel estimates annual savings to be in the range of $21550,000K, which correlates to an investment payback time of approximately 76six months.

Situation/BackgroundAs new semiconductor fabs continue to be built globally, there are over a hundreds of ”mature” fabs in the United States and thousands many more worldwide that are still the workhorses of the industry. . These legacy fabs are often twenty years or older, and , which are often twenty years or older, produce millions of chips for a huge array of electronics every day. . And while many newer fabs have automation features built in to enable peak efficiency and performance, older fabs seek new solutions to increase productivity, reduce downtime, and decrease operating costs. .

One such company is Micrel, based in San Jose, California, a leading IC solutions manufacturer for the analog, Ethernet and high bandwidth markets. The company manufactures high performance analog, power, advanced mixed-signal and radio frequency semiconductors, high speed communication, clock management, and Ethernet switch and physical layer transceiver integrated circuits. End markets served include cell phones, portable and enterprise computing, enterprise and home networking, wide area and metropolitan area networks and industrial equipment. Founded in 1978, Micrel has been profitable for 25 of its 26 years with revenues of $280M and regional sales and support offices, sales offices, distributors and technology design centers throughout the Americas, Europe and Asia. One such company is Micrel, based in San Jose, California, a leading IC solutions manufacturer for the analog, Ethernet and high bandwidth markets. The company manufactures high performance analog, power, advanced mixed-signal and radio frequency semiconductors, high speed communication, clock management, and Ethernet switch and physical layer transceiver integrated circuits. End markets served include cell phones, portable and enterprise computing, enterprise and home networking, wide area and metropolitan area networks and industrial equipment. Founded in 1978, Micrel has been profitable for 25 of its 26 years with revenues of $280M and regional sales and support offices, sales offices, distributors and technology design centers throughout the Americas, Europe and Asia.



Challenge: Gas Level MonitoringFor MicrelMicrel, it is critical to minimize unplanned downtime at its core San Jose 150mm fab. . At this facility, which has a capacity of 30,000 wafer starts per month and which houses 500 semiconductor manufacturing tools, wafer production requires hundreds of process recipes that use various combinations of gases to produce the desired chips. . It is critical that the required gases are provided for each wafer process step or the output will be unusable and system downtime occurs as a result. . Essentially, semiconductor production hinges on the availability of these gases so no chances can be taken -- ever. . The gases themselves, supplied by about 300 different cylinders (see Figure 1), are a precious commodity, ranging in cost from $800 to $17,000 per cylinder. . – I am not sure it is necessary to show what the cylinders look like

Figure 1 – Micrel Gas Cylinder Area (typical)Fig. 1 – Micrel Gas Cylinders



For years, like many older fabs, monitoring gas cylinder levels has been a manual process. . At MicrelMicrel, once every 12-hour shift, an employee armed with paper and a clipboard went to each gas cylinder location to manually check the pressure regulator gauges and/or the weigh scale depending on the gas type. . This process took about four4 hours each time or about eight8 manlabor-hours per day. . By 2001, a bar code system was employed to identify each gas cylinder, but an employee was still required to manually read and record each data point, so the process was still error- prone (we haven’t discussed errors…should do that before we mention it here?) and labor-intensive and error-prone.

In addition to monitoring gas levels manually, to further reduce risk of low or empty cylinders, gases were typically? It is or isn’t I would think… replaced on a regular schedule – which meant even if a given cylinder may be changed out even if it is a quarter or even a third full, just to be safe. . -this is redundant. Despite these precautions, gas supply disruptions still periodically occurred due to unforeseen circumstances and were not discovered with the manual rounds (e.g. such as cold weather impacts which can condense a gas). . Any other circumstances? Such disruptions often resulted in lost yield and process downtime, which translated into additional operational expense.

Altogether, these labor, gas, and downtime related expenditures, year after year, were continuing to add up and needed to be addressed to keep the fab competitive. . Operations management sought new ways to better utilize manpower, ensure gases were expended before replacing bottles, and proactively detect situations which cause downtime.

Evaluation of Traditional Automation Solution Too Costlyshow them don’t tell them

One solutionMicrel that was explored considered was to replacereplacing the manual gauges with all-new transducer based gas panels, which would automate the monitoring of gas levels. . However, making this change would require MicrelMicrel to stop the affected the affected processmanufacturing production lineion ? for up to a few days – I



thought it was a lot longer? Guess not. or even weeks while it reconfigures gas piping and retests for leaks and safety. . For some cases, thThis can also e replacement can in turn triggerinvolve ana even broadermuch larger rework of the entire wiring system in order to conform to the latest safety and fire codes – required by government regulations when a legacy subsystem is significantly modified. .

MicrelMicrel chose not to implement this solution due to the prohibitive cost of the equipment, the installation and rework labor, and most of all, the associated downtime and lost production, which together added upaltogether approached was to over $4,0003,500 per gas cylinder (or more than $400,000 to instrument 100 cylinders)..

The Cypress Systems Solution

In 2007, MicrelMicrel learned of new “Wwireless Ggauge Rreader” and “Wwireless Ttransducer Rreader” why the quotes? technologies that can provide automated gas cylinder monitoring without the high cost and disruption of installing traditional transducer based panels. . The Wwireless Ggauge Rreaders non- invasively do not require the existing manual regulator gauges to be removed. Instead, they simply “clip” onto the front of the legacy manual gauge, and transmits the reading wirelessly to a central server (Figure. 2). . Similarly, the Wwireless Ttransducer Rreaders simply attach to existing gas weigh scales without the need to remove or replace the scale. . Pre-set aAlarms to notify of low or critically low gas levels? may be programmed to alert operator stations, pagers, or cell phones when required.

Figure 2 – Non-Invasive Mounting for Wireless Gauge Reader Non-Invasive Mounting



MicrelMicrel electeddecided to implement thisthe Cympress solution because it incurreds no process downtime, requireds minimal installation labor and training, and did not does not involveno need retesting and revalidation for leaks. . The resulting installed cost at $1,250 per point (list pricet) (or $125,000 to instrument 100 cylinders) is only aboutjust 35% of the cost of traditional transducer panels (Figure. 3).

Figure. 3 – Comparison of Installed Cost per Pointfor Traditional Transducers vs. . Wireless Gauge Reader

WGR Traditional Transducer

Process Downtime (Est.)* $0 $1,000

Transducer/Sensor (per point) $1,200 $300

Installation/Wiring Labor, Materials, Design $50 $1,500

Bring legacy system up to present day safety/fire codes (where applicable) $0 $1,000

I/O Panel Termination $0 $200

Total Cost (per point) $1,250 $4,000

Wireless Gauge Reader Wired Transducer

Process Downtime (Est.)* $0 $1,000

Transducer/Sensor $1,200 $300

Installation/Wiring Labor, Materials, Design $50 $1,500

Bring legacy system up to present day safety/fire codes (where applicable) $0 $1,000

I/O Panel Termination $0 $200

Total Cost (per point) $1,250 $4,000

ResultsBenefitsIn Q4tehe fall of 2007, MicrelMicrel decided to install a mix of 100 Wwireless Ggauge Rreaders and Wwireless Ttransducer Rreaders from Cypress Systems to monitor its most critical process gases, along with the Cypress Systems’ Blue Box RReceiverer (BBR-



100), which sends the data to MicrelMicrel’s existing network and operator stations. . Each data point required between 10 and 30 minutes to install, and did not involve breaking any pressure seals anywhere in the gas system or any process downtime. Additionally, future integration of the data with existing operator software is also possible via industry standard OPC and/or BACNet protocols. Within the first two months of operation, the following benefits were identified: of any sort.

Maybe we should have bullet points for results since there are a number of them? It would be easier to read.As a result

The Cypress Solution enabled of this system, Micrel was able to rReduce the manpower devoted to making gas rounds by one full-time equivalent technician, who could then may then be redeployed to other more pressing tasks. .

In addition, Micrel estimates thataDecrease gas consumption wouldto be reducedreduction by approximatelyby about 10% in the first yearannually,. by using more gas in each cylinder before change-out.

Minimize unplanned downtime. (e.g. the system detected loss of gas pressure/gas condensation due to Finally,

even unseasonably cold weather – situation which can now be anticipated and avoided in the future).

during its first month of operation, the new system was able to detect trends and fluctuations in gas pressure due to unseasonably cold weather in January and helped to avoid future downtime and yield loss. this doesn’t seem to go with the other points and is a bit awkward.

Altogether, Tthe combined operational benefitsreturn on investmentsavings are estimated to be in the range of $200,000$-21550,000K per year (Figure. 4). . The resulting investment payback period is only seven months (for $125,000 initial installed cost).

ComparedWhile with the cost of installing the system at $125,000K, the payback period is only 6 to-8 months (Figure. 5).



Figure 4. – Savings Derived from Wireless Gauge Reader and Wireless Transducer Reader Solution – I can’t revise this figure but a few comments - do we really need to have all this

explanation? Such as “basis” and “comments”? You’ve already explained it in the text and I think you might get into too many details, they may have a different situation and you are locking yourself

into this one. The opint is to give an example of savings. I would eliminate at the least the “Comments” call “basis” “Cost Basis”. We also need a title for Labor Savings, etc. How about “Cost

Area”?

BasisSavings

Amount per year

Comments

Labor Savings2 rounds per day at 8 man-hours total => one full time equivalent technician

$125,000 Can redeploy labor to more efficient use

Consumables Savings

Save 10% of $750,000 per year gas spend $75,000

More fully utilize gas bottles (ie. Do not return gas bottles half full)

Avoid DowntimeEstimate $5000 per incident, one per month $60,000

eg. Cold weather caused loss of vapor pressure in some gases. WGR was able to find this and avoid process impacts (put blanket over bottle)

$260,000Total Savings per Year:

Annualized Savings

Labor Savings: One Full-time equivalent technician $95,000

Gas Savings: 10% of gas usage $80,000

Reduced Downtime: $5,000 per incident, avg. 8 per yr $40,000

Total Savings per Year: $215,000

Figure 5. – Payback Analysis for Wireless Gauge Reader and Wireless Transducer Reader



Cost per point for wireless gauge reader or wireless transducer reader $1,250

Number of Points Installed 100

Total System Cost $125,000

Annual Calibration/Maintenance of System $12,500

Full annual cost $137,500

Payback period (based on annual savings of $260K) 6.3 Months

Cost per point for WGR's $1,250

Number of Points installed 100

Total Cost of WGR System $125,000

Payback period (based on annual savings of $260,000) 7.0 Months



About Cypress Systems Corporation:

Cypress Systems is a subsidiary of Cypress Semiconductor (NYSE: CY) with a mission to introduceprovide leading edge technologies to legacy plants and buildings , with minimal cost and disruption. . WeThe company produces products and solutions to optimize energy and water use, improve uptime, reduce scrap, and lower maintenance costs. .I thought cost would be higher up.

Cypress Systems combines the latest technology knowhow from Cypress Semiconductor with our team’s extensive industry and automation experience to deliver solutions with tangible savings and attractive payback.

For more information, pPlease visit: http://www.cypress.com/systems or call (408) 943-2644.For more information about Micrel, visit http://www.micrel.com

About Micrel, Inc.: - I already did this in the text, I think this is unnecessary. I would just put a brief paragraph,, like “for more inforation about Micrel, visit…or call…”

Micrel Inc., is a leading global manufacturer of IC solutions for the worldwide analog, Ethernet and high bandwidth markets. The Company’s products include advanced mixed-signal, analog and power semiconductors; high performance communication, clock management, Ethernet switch and physical layer transceiver ICs. Company customers include leading manufacturers of enterprise, consumer, industrial, mobile, telecommunications, automotive, and computer products. Corporation headquarters and state-of-the-art wafer fabrication facilities are located in San Jose, CA with regional sales and support offices and advanced technology design centers situated throughout the Americas, Europe and Asia. In addition, the Company maintains an extensive network of distributors and reps worldwide. Web: http://www.micrel.com.


http://www.micrel.com/

http://www.micrel.com/

http://www.cypress.com/systems

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