Consolidated Key Figures

The SEZ Group

The SEZ Group is the leading provider of single-wafer, wet-clean processing solutions for the global semiconductor industry, with an installed base of over 750 tools. The company maintains operations in Europe, Asia-Pacific, Japan and North America. Since 1996, registered shares of SEZ Holding Ltd. are traded on the SWX Swiss Exchange under the symbol SEZN.  Additional information about the company is available on the Internet at www.sez.com

Report on the Half-Year 2003

Financial development
The ongoing unfavorable conditions in the global semiconductor market have impacted the SEZ Group's business activities in the first half of 2003. In the first six months of 2003, net sales dropped by 28.6 percent to CHF 69.0 million, compared to CHF 96.6 million in the first half of 2002. Over the first half of 2003, the SEZ Group registered a consolidated operational loss (EBIT) of CHF 12.0 million and a net loss of CHF 5.8 million, compared with a positive EBIT of CHF 3.0 million and a net loss of CHF 2.1 million in the first half of 2002. The negative half-year results include costs of CHF 1.9 million (primarily personnel and other operating expenses) related to corporate restructuring after dissolving its wet-bench business, and the related closure of SEZ Germany. In the first six months of the financial year 2003, the SEZ Group invested CHF 9.8 million in property, plant, equipment and intangible assets, primarily relating to development and customer demonstration systems. An amount of CHF 19.7 million, or 28.5 percent of net sales, was spent on research and development-a portion above the industry average due to heavy counter-cyclical investment in new process applications and system platforms, such as SEZ's new Da Vinci platform recently launched in June. Since the beginning of the year, net financial assets were raised from CHF 40.4 million to CHF 64.4 million. Over the same period net working capital dropped from CHF 121.0 million to CHF 85.7 million. As of 30 June 2003, equity stood at CHF 242.6 million with a ratio of 74.9 percent, compared to CHF 245.1 million and an equity ratio of 72.5 percent on 31 December 2002. 

Market development
Over the first half of 2003, SEZ Group registered new orders amounting to CHF 64.6 million, compared to CHF 108.8 million over the first half of 2002. On 30 June 2003 the order backlog stood at CHF 37.3 million, compared with CHF 59.0 million on 30 June 2002. The book-to-bill ratio was 0.94 over the first half of 2003, compared to 1.1 over the first half 2002. While the first half of the year saw market demand for 200-mm systems primarily limited to replacement investments in existing capacities, the second quarter registered significant increased investments from the 300-mm market. Nevertheless, the current price pressure for semiconductor manufacturing equipment will continue in a short- to mid-term. Orders for 300-mm systems totaled a record share of almost 50 percent in the second quarter alone, and more than 30 percent over the entire first half of 2003. Almost 40 percent of sales were four-chamber Spin-Processors for frontside polymer removal.

The major share of sales for the first half of 2003, once again originated in the Asia-Pacific region at 38.2 percent, compared to 50.0 percent over the same period last year. Sales in Japan increased significantly from 10.6 percent to 30.2 percent-testament to the SEZ Group's stronghold in the highly competitive Japanese market. The share of sales in Europe increased slightly from 20.0 percent to 20.8 percent, while U.S. sales decreased from 19.4 percent to 10.8 percent. 

Currently, there is a significant increase in orders from customers throughout the Asia-Pacific and Japanese regions. Today, the entire market for wet chemical wafer surface preparation equipment is expected to double to USD 1.8 billion by the year 2005, corresponding with a potential market volume of USD 500 million for single-wafer equipment.

Focus on single-wafer technology
According to Gartner Dataquest (July 2003), since the start of one of the global semiconductor industry's worst downturns in 2001, the market for wet-chemical wafer surface preparation equipment has halved to USD 890 million. The challenging economic conditions have triggered high pricing pressure on the semiconductor equipment sector, particularly in the wet-bench technology market sector. At the same time, semiconductor technology development requiring more specialized cleaning procedures accelerated an increased demand for single-wafer systems. Based on ongoing advanced developments in the market, there are rising expectations that the share of single-wafer technology will continue to grow at a disproportionate rate when compared to the total market share for wet wafer processing systems.

As a result, the SEZ Holding Ltd. board of directors strategically decided on 5 March 2003 to close SEZ Germany GmbH-the company's production center for wet-bench systems. The SEZ Group's activities now focus on its core business-the development and production of single-wafer processing systems. At the same time the SEZ Group reduced its global workforce by more than 20 percent to now total less than 600 employees as of 30 June 2003. In addition to closing its German facility located in Donaueschingen (SEZ Germany GmbH), the distribution and sales locations in Scotland (SEZ UK Ltd.) and France (SEZ France S.A.R.L.) were closed on 30 June 2003. The recent business reorganization will not affect the SEZ Group's proven global customer support network that its customers have come to expect.

Research and development
During the first half of 2003, the SEZ Group focused its development activities on its new, multi-chamber, single-wafer cleaning system, the DV-38F, which was recently launched in June. This first product in the innovative Da Vinci series combines the greatest possible level of serviceability and reliability with increased productivity and reduced footprint. With these performance advantages, the Da Vinci series has the potential to speed the industry transition from batch processing (multiple wafers) to single-wafer technology methods, and to significantly increase the SEZ Group's market potential in high-volume microchip production. The launch of the Da Vinci Spin Processor platform signifies another step forward in SEZ's strategic roadmap to become a one-stop supplier of wet clean processing solutions based on its proprietary single-wafer technology.

Outlook
Due to the increase in orders over the first half of 2003, which is expected to further continue through the third quarter, the SEZ Group is raising the lower-end of its previous revenue guidance for the business year 2003 by CHF 10 million to CHF 140 million, while leaving the upper-range unchanged at CHF 165 million. The SEZ Group therefore expects consolidated net sales of between CHF 140 million and CHF 165 million for the business year 2003.
 

Comment to the Half-Year Accounts 2003

Consolidation and accounting principles
The consolidated half-year accounts have not been audited. The consolidated financial statements of SEZ Holding Ltd. and subsidiaries (the "Group") are based on the accounts of the individual subsidiaries at June 30.  All figures have been prepared in accordance with uniform Group principles and International Financial Reporting Standards (IFRS) and comply with the regulation under Swiss Law.

All accounting principles applied in the half-year report correspond with the reporting policies specified in the Annual Report 2002. No changes in accounting standards have been made during the reporting period. Moreover, the half-year report is consistent with IAS 34.

Basis of presentation
Certain amounts in prior year consolidated statements have been reclassified to conform to the current year presentation. Net operating results have not been affected by these reclassifications. Negative values are presented in parentheses.
 

Consolidated Income Statements