<PAGE>

                                                                   EXHIBIT 10.19

August 16, 2002
Revised August 23, 2002

Douglas Raymond
14 Fay Memorial Drive
Tynsboro, MA 01879

Dear Doug:

         On behalf of PDF Solutions, Inc. ("PDF" or "the Company"), I am very
pleased to extend to you this offer of employment. Your position will be that of
Executive Vice President, Client Services reporting to me. This offer of
employment with PDF is conditioned upon your acceptance, in writing, of the
terms and conditions as enumerated below.

     1.  Compensation. Commencing on your Start Date, you shall be paid a base
         salary of $275,000 per annum, paid to you semi-monthly at a rate of
         $11,458.34 per payroll period. Your salary shall be paid in accordance
         with the Company's standard payroll policies (subject to applicable
         withholding taxes as required by law).

     2.  Stock Options. Upon commencement of your employment, and subject to the
         approval of the Company's Board of Directors, you will be granted an
         option to purchase 250,000 shares (the "Total Option Shares") of the
         Company's Common Stock with an exercise price equal to the fair market
         value of the Common Stock on the date of grant. Such option shall vest
         over a four year period commencing on your Start Date, according to the
         following vesting schedule: 1/4 of the Total Option Shares shall be
         exercisable on the twelve (12) month anniversary of your Start Date and
         1/48th of the Total Option Shares shall be exercisable on a monthly
         basis thereafter. Vesting of the options shall be contingent upon your
         continued employment with the Company. The options will be incentive
         stock options (ISO) to the maximum extent permitted by the tax code and
         will be subject to the terms of the Company's 1997 Stock Plan and
         execution of an applicable Stock Option Agreement to be entered into
         between you and the Company.

     3.  Sign-on Bonus. Within thirty (30) days of your commencement of
         employment with the Company you will receive a one time sign-on bonus
         of $25,000 (subject to applicable withholding taxes as required by
         law). In the event that you voluntarily terminate your employment with
         the Company before the one (1) year anniversary of receipt of the
         bonus, you agree to repay the Company 100% of the applicable sign-on
         bonus. Upon such termination, should you not take appropriate action to
         fully repay the sign-on bonus, you hereby authorize the company to
         withhold amounts equal to such bonus from any cash compensation owed by
         the company to you, including, but not limited to, base salary, accrued
         vacation, or earned bonuses.

     4.  Start Date. Subject to fulfillment of any conditions imposed by this
         letter agreement, you will commence your new position with the Company
         on October, 1 2002.

                                       1

<PAGE>

     5.  General Duties. During the term of your employment, you agree that at
         all times and to the best of your ability you will loyally and
         conscientiously perform all of the duties and obligations required of
         you in your job and by the Company. You further agree that you will not
         render commercial or professional services of any nature to any person
         or organization, whether or not for compensation, without the prior
         written consent of the Company, and that you will not directly or
         indirectly engage in or participate in any business that is competitive
         in any manner with the business of the Company. You also agree to
         comply with any and all policies of the Company as in effect from time
         to time.

     6.  Relocation Expenses: In connection with your relocation to San Jose,
         California the Company will cover the following customary and
         reasonable expenses: Realtor fees and closing costs in connection with
         the sale of your home in Massachusetts; two (2) house-hunting trips for
         your spouse; relocation of household goods and two (2) vehicles; and
         customary buyer's closing costs on a primary residence in the San Jose
         area. These payments will be grossed up to cover required taxes and
         withholdings. In the event that you voluntarily terminate your
         employment with the Company before the one (1) year anniversary of your
         Start Date, you agree to repay the Company 100% of the relocation
         expenses provided for you. Upon such termination, should you not take
         appropriate action to fully repay the relocation expenses, you hereby
         authorize the Company to withhold amounts equal to such costs from any
         cash compensation owed by the Company to you, including, but not
         limited to, base salary, accrued vacation, or earned bonuses.

     7.  Temporary Living Expenses. The Company will provide up to twelve (12)
         months of temporary living expenses during your first twelve (12)
         months as an employee of PDF. This will include an executive apartment
         and car rental when you are in San Jose. The Company will pay for
         return trips to your home in Massachusetts every two weeks until your
         move is complete, or up to twelve months, whichever occurs first.

     8.  Proof of Right to Work. In compliance with federal immigration laws,
         you will be required to provide to the Company documentary evidence of
         your identity and eligibility for employment in the United States. Such
         documentation must be provided within three (3) business days of your
         date of hire. Your failure to meet this condition could result in
         termination of your employment with the Company.

     9.  Bonus. You shall be eligible to participate in Company sponsored
         incentive bonus plans that may (from time to time and at the sole
         discretion and option of the Company) be made available to PDF
         employees on a company wide basis. At the time of this offer, the
         Company sponsored incentive bonus plan target bonus for your position
         is 40% of annual salary. The structure of such plans and the amount of
         any bonus awarded under such plans shall be in alignment with the
         objectives of the official Company annual business plan for any year in
         question. Any bonus awarded under such incentive plans during your
         first year of employment with the Company shall be prorated for your
         length of service.

     10. Benefits. Effective on your Start Date, the Company will make available
         to you the regular health insurance program and other benefits as
         established by the Company for its employees from time to time. A
         summary of those benefits, including Paid Time Off and Sabbatical is
         attached. Also, you will be eligible for upgradable tickets when
         traveling on Company business.

                                       2

<PAGE>

     11. Change of Control. The Company's agreement with you, should there be a
         change of control within five years of the commencement with the
         Company, is set forth in the Company's Change of Control Agreement, a
         copy of which is enclosed for your review. An executed copy of the
         Change of Control Agreement must be delivered to the PDF Human
         Resources Department on or before your Start Date.

     12. Confidential Information and Invention Assignment Agreement. Your
         acceptance of this offer and commencement of employment with the
         Company is contingent upon your execution of the Company's Confidential
         Information and Invention Assignment Agreement (the "Confidentiality
         Agreement"), a copy of which is enclosed for your review. An executed
         copy of the Confidentiality Agreement must be delivered to the PDF
         Human Resources Department on or before your Start Date. The
         Confidentiality Agreement relates to confidential information received
         in regards to the Company's business, technology, and intellectual
         property, as well as information about the Company's customers. The
         Confidentiality Agreement also addresses the Company's ownership of
         intellectual property generated during your employment at the Company.
         You are required, to the best of your ability, to hold such information
         as confidential even after an event terminating your employment with
         the Company.

     13. Confidentiality of Terms. You agree to follow the Company's strict
         policy that employees must not disclose, either directly or indirectly,
         any information, including any of the terms of this agreement,
         regarding salary, bonuses, or stock purchase or option allocations to
         any person, including other employees of the Company; provided,
         however, that you may discuss such terms with members of your immediate
         family and any legal, tax or accounting specialists who provide you
         with individual legal, tax or accounting advice.

         We are all delighted to be able to extend you this offer and look
forward to working with you. To indicate your acceptance of this offer, please
sign and date this letter in the space provided below and return it Becky
Baybrook, Vice President, Human Resources, along with a signed and dated copy of
the Confidentiality Agreement and Change of Control Agreement.

THIS OFFER EXPIRES ON AUGUST 26, 2002

                                Very truly yours,

                                PDF SOLUTIONS, INC.

                                By /s/ John Kibarian
                                   -----------------
                                John Kibarian
                                Chief Executive Officer

                          ACKNOWLEDGMENTS & ACCEPTANCE

I accept this employment offer with the understanding that it is not a contract
for a fixed term or specified period of time. I understand that my employment is
voluntary, ("At Will"), and can be terminated either by me or by the company at
any time, with or without notice and with or without cause. The provisions
stated

                                       3

<PAGE>

above supersede all prior representations or agreements, whether written or
oral. This offer letter may not be modified or amended except by a written
agreement, signed by the company and me.

THE FOREGOING TERMS AND CONDITIONS ARE HEREBY AGREED TO AND ACCEPTED:

Signed: /s/ Douglas M. Raymond
        ----------------------

Print Name: Douglas M. Raymond

Date: 8/27/2002

                                       4