KLA-Tencor Corporation is the world's leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries. The company's comprehensive portfolio of products, software, analysis, services and expertise is designed to help IC manufacturers manage yield throughout the entire wafer fabrication process-from R&D to final yield analysis. Since yield improvements are key to increasing manufacturing productivity and profitability, the yield management market that KLA-Tencor leads has outperformed the semiconductor capital equipment market segment as a whole.

Ranked among the world's top ten semiconductor equipment manufacturers, KLA-Tencor offers a broad spectrum of products and services that are used by every major semiconductor manufacturer in the world. These customers turn to KLA-Tencor for in-line wafer defect monitoring; reticle and photomask defect inspection; CD SEM metrology; wafer overlay; film and surface measurement; and overall yield and fab-wide data analysis. These advanced products, coupled with the company's unique yield management consulting practice, allow KLA-Tencor to deliver the complete yield management solutions customers need to accelerate their yield learning rates, reduce their yield excursion risks and adopt industry-leading yield management practices.

Competing in rapidly expanding markets where its leading-edge technology and comprehensive solutions provide a significant competitive edge, KLA-Tencor's primary market remains the semiconductor industry. In recent years, the company has also increased its focus on the rapidly growing data storage industry.

To support its growing, global customer base, KLA-Tencor maintains a significant presence throughout the United States, Europe and Asia, with local sales and applications engineers, customer and field service engineers and yield management consultants. The company counts among its top customers leading semiconductor manufacturers from each of these regions, and derived approximately 70 percent of its 1997 revenues from outside the U.S.

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Corporate History

KLA-Tencor was formed in May 1997 through the merger of KLA Instruments and Tencor Instruments, two long-time leaders in the semiconductor equipment industry, each with over 20 years of experience. With combined revenues of nearly $1.5 billion and a global workforce of over 5,300, KLA-Tencor offers a breadth and depth of process control and yield management solutions unmatched in the industry.

Founded in 1976 and credited with pioneering the yield management market, KLA started its inspection legacy in 1978 with an automated inspection system that reduced photomask inspection time from eight hours to 15 minutes. The company went public in 1980 and shortly thereafter, broadened its inspection product portfolio to include wafer inspection. Two years later, the company expanded into the wafer metrology business with optical overlay and linewidth measurement systems. KLA continued to broaden its product line, developing software products to integrate inspection and measurement data for analysis, and ultimately forming the industry's first yield management group to provide customers with expertise in yield enhancement through engineering consulting services. At the time of the merger with Tencor, KLA had revenues of approximately $695 million and 2,500 employees worldwide.

Tencor was also founded in 1976, and introduced its first product, the Alpha-Step stylus surface profiler, just seven months later. The Alpha-Step provided a significant improvement in step height measurement, a critical parameter in measuring film layer thickness. In 1984, the company launched its first Surfscan product, a particle and contamination detection system based on laser scanning technology that soon became a production standard. In the 1990s, Tencor expanded its product mix to include defect review and data analysis tools. Following an initial public offering in 1993, Tencor acquired Prometrix, a leading supplier of thin-film measurement tools, further expanding its product portfolio. At the time of the merger with KLA, Tencor had revenues of approximately $403 million and 1,400 employees around the world.

KLA-Tencor is headquartered in San Jose, California, with sales and support facilities around the world. It is traded on the Nasdaq National Market under the symbol KLAC. The company was selected by Standard and Poors to be part of the S&P500 Index in September 1997. In 2005, Forbes Magazine named KLA-Tencor one of the Best Managed Companies in America in its annual list of America’s Best Big Companies. KLA-Tencor was one of only four high-technology companies, as well as the only company in the semiconductor industry, to be honored with this accolade for that year.

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The Critical Need for Yield Management and Process Control Solutions

Several factors inherent in the semiconductor industry drive the critical need for comprehensive yield management and process control solutions. Among the most significant of these are: increasing device complexity; shrinking geometries; reduced product life cycles; and increased competition.

To meet the needs of the dynamic markets it supplies, the semiconductor industry is constantly increasing the functions incorporated into a single device, while simultaneously reducing device size. Today, leading-edge products have design rules that are 0.25 micron or smaller, hence a single device may combine the functions provided by as many as five or more separate devices in previous product generations.

At the same time, intense competition in the computing, electronics and communications industries shorten product life cycles, which has a corresponding effect on the semiconductor industry. While ten years ago, a semiconductor product life cycle, from design to production, could span several years, today, six months or less is the norm.

These challenges are further complicated by intense competition within the semiconductor industry, which drives an expectation for declining prices despite increasing product complexity. Thus, IC manufacturers simultaneously face continuing pressure on profitability, shorter product cycles and increasing manufacturing complexities.