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enter image description here

Here the poly ends exactly at the diffusion without clearing it, why is this a "catastrophic error" ? I understand that the transistor would never turn off if the poly only partially occluded the diffusion strip but what's the problem in this case?

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The problem is that these structures never end up being exactly the way you draw them. Even if you draw the end of the poly coincident with the edge of the diffusion the manufactured device may have some diffusion extending out past the end of the gate.

Remember that there can be small errors in alignment when the different structures are created. We rely on the edges of the poly to define the source and drain regions so the alignment and lithography for the implants doesn't have to be exact. If you try to draw a structure that requires exact alignment you will be disappointed.

Furthermore, the impurities in the source and drain will diffuse a bit after the implants. So even if you managed to perfectly align the implant you would still have some diffusion beyond the end of the gate.

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