In the semiconductor manufacturing industry, production resembles an automated assembly line in which many similar products with slightly different specifications are manufactured step-by-step, with each step being a complicated physiochemical batch process performed by a number of tools. This constitutes a high-mix production system for which effective run-to-run control (RtR) and fault detection control (FDC) can be carried out only if the states of different tools and different products can be estimated. However, since in each production run, a specific product is performed on a specific tool, absolute individual states of products and tools are not observable. In this work, a novel state estimation method based on analysis of variance (ANOVA) is developed to estimate the relative states of each product and tool to the grand average performance of this station in the fab. The method is formulated in the form of a recursive state estimation using the Kalman filter. The advantages of this method are demonstrated Using Simulations to show that the correct relative states can be estimated in production scenarios such as tool-shift, tool-drift, product ramp-up, tool/product-offline and preventive maintenance (PM). Furthermore, application of this state estimation method in RtR control scheme shows that Substantial improvements in process capabilities can be gained, especially for products with small lot counts. The proposed algorithm is also evaluated by an industrial application. (C) 2008 Elsevier Ltd. All rights reserved.