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Summary form only given. Controlling the rapidly increasing costs of semiconductor wafer fabricators presents a serious challenge to the semiconductor industry. SEMATECH, in cooperation with its members and SEMI/SEMATECH suppliers has developed a methodology to maintain the historic price per function decline rate for semiconductor products. A series of 0.25 micron generation fab cost models were developed at SEMATECH. The models incorporated advanced logic and DRAM processes, operational and financial inputs and equipment cost and performance goals. Wafer processing costs from the model were compared to affordable costs developed by the SEMATECH Competitive Analysis Group. The result of this process has been a set of mutually agreed upon cost and performance targets for the 0.25 micron generation of equipment. Equipment meeting those targets will be more cost effective than that currently available. High operating efficiency as measured by overall equipment effectiveness (OEE) is essential to achieving improved capital productivity goals.