sept 07 update

The Dubai Silicon Oasis Authority (DSOA), the region's innovation hub for high-technology industries, has chosen Synopsys Inc.'s Professional Services and Pilot Design Environment to establish the Dubai Circuit Design (DCD) centre. This centre is the region's first chip design centre for physical implementation of advanced ICs.

Synopsys supported DCD with guidance in hiring staff and by providing management and technical expertise. The DCD office is now operational and engineers are fully trained on the latest Synopsys tools and technologies. DCD customers are creating multi-million gate, multi-voltage designs in 90nm and below process technologies by using the Synopsys' Pilot Design Environment and Professional Services.

The DCD will focus on delivering physical design services for U.S., European and Asian customers with a worldwide sales force. The centre aims to become the leading regional force in chip design innovation using Synopsys tools, flows, and methodologies to implement complex silicon designs.

SMIC Delays Wuhan Fab

Chinese silicon foundry provider Semiconductor Manufacturing International Corp. (SMIC) has delayed the ramp of its 300-mm wafer fab in Wuhan, China.

Meanwhile, as reported, SMIC (Shanghai) last year began construction of a 300-mm wafer fab in Wuhan East Lake New Technology Development Zone, Hubei Province, China -- but not for itself. This fab is being paid for by the local authorities with SMIC being asked to manage the facility.

Wuhan Xinxin Semiconductor Manufacturing Corp. will own the facility and has engaged SMIC to manage the facility. The fab is scheduled to be completed by the end of 2007, and commercial production is scheduled to start in the first half of 2008. The manufacturing capacity is estimated to be 12,500 wafer starts per month initially with the ability to increase progressively up to 20,000 wafers per month or 25,000 wafers per month in 2009.

FormFactor to Expand Manufacturing in Singapore

Silicon chip test maker FormFactor Inc. plans to spend $200 million expanding its Tampines, Singapore manufacturing operations, the first time it is expanding operations out of its US home base.

It expects to eventually employ approximately 1,000 people at the new facility.

Livermore FormFactor said it will build an approximately 300,000-square-foot manufacturing facility to expand its wafer probe card manufacturing capacity and to improve its customer service and support infrastructure in Taiwan, Korea and Japan. The new plant is expected to be completed by 2009.

Freescale Expands in Brazil

Freescale Semiconductor is consolidating its Brazilian semiconductor design operations located in Jaguariuna, Sao Paulo, and a sales office near Sao Paulo into a new 41,100 sq.ft. facility in Campinas City, Sao Paulo.

Altis Semiconductor Has New Owners

IBM Corp. and Infineon Technologies AG, are divesting their shares in Altis Semiconductor SA with its manufacturing site in Corbeil-Essonnes, France, via a sale to Advanced Electronic Systems AG (Zurich, Switzerland. While many integrated device manufacturers (IDMs) are adopting a fab-lite business model and are selling or closing manufacturing facilities in Europe, Russia and its chipmakers are on the look-out for access to 130-nm, 90-nm and eventually 65-nm and more advanced semiconductor process technologies.

Now Swiss holding company Advanced Electronic Systems (AES) is set to acquire Altis, with the declared intention of producing European and Russian designed products at the 200-mm wafer fab. AES is a Swiss affiliate of Global Information Services (GIS), a Russia-based holding company with offices in Moscow and Miami. GIS is essentially an arm of the Russian state. It was founded by the Russian Chamber of Commerce and Industry and by the Russian Academy of Science with backing from the Russian bank of development Vnesheconombank and the Russian government.

Recent sell offs and closures across Europe are numerous. STMicroelectronics NV (Geneva, Switzerland) withdrew from the 6-inch fab in Rennes, France, in 2004; Atmel Corp (San Jose, California) sold its 6-inch wafer fab in Nantes, France, to XbyBus, and its wafer fab in Grenoble, France, to e2v technologies plc, respectively in 2005 and 2006. Freescale Semiconductor Inc. (Austin, Texas) is looking to sell its East Kilbride, Scotland wafer fab.

Russia is awakening after ten to fifteen years of stagnation of its technical capability. But with its history of academic research into semiconductor physics and production of military and aerospace electronics systems, Russia is, in many ways, better placed to foster semiconductor manufacturing than, say, India. The Russian economy is booming. The gross domestic product rose by 6 percent in 2006, and expectations are similar or higher for 2007. The percentage growth of foreign direct investment has eclipsed the other so-called BRIC (Brazil, Russia, India and China) nations.

Similarly, the Russian semiconductor industry is emerging with Russian government involvement and support. At a conference organized by the Semiconductor Equipment and Materials International industry trade organization in Moscow, Alexander Kalinin, deputy chairman of the Russian Federal Fund for Electronics, announced that $3 billion would be invested in electronics from 2007 to 2011. That $3 billion includes some big ticket items, such as $700 million in support of a proposed 300-mm wafer fab in Nizhny Novgorod and $500 million to help move JSC Mikron (Zelenograd, Russia) down to 90-nm manufacturing over the next three years. Russian semiconductor companies are hoping to gain access to semiconductor process technologies. The value put on Altis for the purpose of the sell-off has not been revealed, but reports have placed it at hundreds of millions of euros.

The indications that the Russian bear is stirring have multiplied over the last few months. Air Liquide SA (Paris, France) has concluded two agreements with JSC Mikron. One is related to a long-term contract of carrier gases. The other covers the sale of equipment and turnkey installation of electronic specialty gases. In parallel, STMicroelectronics NV has cut a deal with Mikron and Sitronics to provide a 0.18-micron CMOS EEPROM process, the starting point for Mikron's roadmap down to 90 nm. JSC Angstrem has teamed with Advanced Micro Devices Inc. (Sunnyvale, Calif.) to implement a 130-nm CMOS process.

Altis is part of this line of technology transfer, although AES went one step further by acquiring a company and its manufacturing site. Malcolm Penn, chief executive of market analysis company Future Horizons (Sevenoaks, England), observed: "Altis is taking a more practical and significant part in the on-going technological transfer. Its fab is up and running. Its management structure is in place. It has a modern facility with valuable assets. Instead, AMD and ST have simply transferred their process technologies."

Altis has been used by Infineon and IBM to perform production of electronic components using 0.25-micron aluminum technology to 0.13-micron copper technology mainly for communications, automotive and security applications.

The French company claims to deliver world-class wafer manufacturing services using advanced CMOS processes for logic, RF, mixed signal, embedded memory, and system-on-chip designs. Altis' 55 hectare-manufacturing site in Corbeil-Essonnes, in the south of Paris, hosts a 25.000 square-meter clean room. "Altis' new shareholders have expressed their intention to open a semiconductor design center on Altis' location and to move towards finer semiconductor technologies in the near future," noted Franck Bermond, communication director at Altis. As part of the deal, IBM is expected to provide a 90-nm CMOS (supposedly 9SF) to AES-Altis.

Altis' current output is about 30,000 wafer starts per month (1,015 wafers per day). "Once the transaction is finalized, we can expect a 20 to 30 percent production growth within the next three to four years," Bermond specified.

Companies Accept India’s Fab Guidelines and Invest in Plants

With the Centre issuing the guidelines of the new semiconductor policy, companies are firming up their investment plans in India to set up plants. Companies planning fab plants (factories to produce raw silicon wafers with chips) for the electronics industry and solar photovoltaics (for solar energy generation) projects can now formally apply for concessions under the policy.

Moser Baer, which announced a Rs 2,000-crore solar photovoltaic plant in Chennai yesterday, has already applied for the concessions. The Centre or its agencies will provide 20 per cent of the capital expenditure as incentive during the first 10 years of operations of such plants in SEZs, and 25 per cent of the capital expenditure for non-SEZ units. Non-SEZ units would also be exempted from the countervailing duty (CVD).

SemIndia (promoted by a group of NRIs), which is planning a $3 billion semiconductor facility at Fab City near Hyderabad, hailed the announcement. “We have gone through the guidelines. We are preparing the details of the project as per the requirements made out in the guidelines. We are going ahead with the investments,” SemIndia Systems Managing Director B V Naidu told Business Standard. According to him, the new policy will attract more investments. “Companies were waiting for the detailed guidelines. We can expect more announcements of investments from many players,” he added. California-based Signet Solar, which is planning a $2 billion investment to produce solar photovoltaic modules in India, has termed the development as positive.

Sony May Sell Semiconductor Facility

Sony may sell its advanced semiconductor production facilities, located within Sony Semiconductor's Nagasaki plant, toToshiba come spring for 100 billion Yen ($870 million, €625 million). The deal, which is expected to be finalized over the next two months, encompasses such things as image processing LSI used in video cameras and games consoles, as well as Cell, a joint development by IBM, Sony and Toshiba, which is amongst other things currently also used in Sony's new console, PlayStation 3. Toshiba will have full ownership of the equipment, while a new joint venture of both companies, with Toshiba holding the majority stake, will run these production lines.

Consequently, Sony will withdraw from advanced semiconductor production and concentrate on audio and visual technology, etc, while Toshiba will in turn become a major supplier to Sony, thus increasing its worldwide market share in that field. Nikkei expects that the move will boost international competitiveness, because both Sony and Toshiba will concentrate on their core business.

Semiconductor Company Xilinx Opens US$40 Million Facility in Singapore

Chipmaker Xilinx has expanded its operations in Singapore with a new US$40 million facility at Changi Business Park. It also plans to pump in US$20 million over the next few years in research and development for the next generation chips.

It will be the first time that such R&D is taking place in South-east Asia and this comes as a boost for the Singapore semiconductor industry which experienced a slowdown last year.

Besides the current investment, the company has also set up a research centre at Republic Polytechnic - costing US$100,000 - which will train more than 150 students a year.

Singapore started growing its semiconductor industry 30 years ago and right now it is a significant player, with 10 per cent of the world's foundry wafer output being produced here.

Vietnam Vets Set Up Fabless Start-Up GraSen

Based in San Jose, California, GraSen Technology will provide GaAs HBTs, HFETs and MMICs for a variety of commercial and military applications.

Two veterans of both the Vietnam War and the semiconductor industry have set up a new company to provide GaAs-based components for RF applications.

GraSen Technology is using three different foundries to manufacture InGaP/GaAs HBTs, GaAs-based HFETs and monolithic microwave ICs.

Grasen's founders - CEO Brad Senge and CTO Stan Gray – have more than 63 years of semiconductor product design and manufacturing expertise between them.

GraSen has manufacturing agreements with two Taiwanese GaAs foundries and a third in southern California to manufacture the semiconductor wafers, while packaging takes place at a facility in the Philippines.

Initial wafer runs are now in hand, and the company says that it will offer devices for sale in bare die form, as well as packaged.

Equipment Makers in Taiwan and China

Since the Internet bubble burst in 2000, the semiconductor industry has not seen any staggering growth. But the industry continues growing, though at a much slower pace. According to estimates by various research firms, the semiconductor industry is expected to see continued growth from 2001 through 2008. If the predictions are correct, it will have been the longest period of growth for the semiconductor industry since 1980. The continued growth has prompted players in the industry to keep expanding their capacities while the worldwide semiconductor industry has grown 60 percent since 2001.

The semiconductor industry used to be concentrated in the US, Japan and Europe. But with the increasing trend in fab-lite, and a growth in collaboration between IDMs and foundries, the manufacturing center started moving to the Asia Pacific area. Taiwan, Korea and Singapore were the first to benefit from the shift, with China now catching up fast.

While older-generation capacity is being phased out and next-generation capacity is growing slowly in the US, Japan and Europe, the Asia Pacific region now houses the world's number-one pure-play foundry and a strong memory-manufacturing sector. Capacity has been growing fast in the region. First-tier foundries and memory makers are in a race to build more 12-inch fabs, while lesser players are taking over second-hand equipment from US, European and Japanese makers for the construction of mature-process fabs in the Asia Pacific region.

China's Equipment Suppliers

Under its 10th five-year plan, China offered incentives, such as free use of land and factory space, plus preferential taxes to attract foreign investors. At the same time, it lent support to domestic industries and encouraged overseas Chinese to return to take part in the development of the country's economy. The semiconductor industry in China seemed to take off quickly with the construction of a number of foundries and packaging and testing houses. But the relatively small investments and mature-levels of process technology at these fabs caused them to seek out second-hand equipment to outfit their operations.

Despite the low price tag, second-hand equipment has its risks. The equipment has to be taken apart at the original fab, shipped to the new fab where all the parts are reassembled. The reassembled equipment sometimes may not work well. If neither the purchaser nor the seller has sufficient maintenance capabilities, the equipment can well be considered scrap.

The need for frequent maintenance and replacement of components may be another major problem using second-hand equipment, which is usually five years old or more when resold. That means, the costs of purchase may be low, but the maintenance costs may remain high after the equipment starts running. It would be lucky for the fabs to have component supply for maintenance, because chances are some of the components may have been discontinued. In short, the maintenance costs for second-hand equipment are higher than those for new equipment. In terms of return on investment (ROI), second-hand equipment may not have any advantage over new equipment.

Therefore, China's equipment suppliers are now trying to take advantage of the huge gap between the purchase cost of new and second-hand equipment. They try to offer new equipment priced at 50-70% lower than competition from foreign suppliers, and 10-20% higher than second-hand alternatives. The Chinese government is playing an active role encouraging the semiconductor industry to adopt local equipment. There are R&D tax rebates, and expenses for equipment purchases are tax-free. It has worked to some extent. Last September, SMIC signed separate contracts with two local equipment suppliers – North Microelectronics for 200mm plasma etchers, and Beijing Zhongkexin Electronics Equipment for 200nm ion implanters. The contracts marked the first sales of China-made 200mm front-end equipment.

These achievements should be credited not only to the suppliers' efforts, but also to SMIC as an experiment platform. After all, low prices alone cannot be enough to attract clients. Semiconductor materials are expensive, and any defects during the process could cause the fab to incur huge losses. Therefore, the reliability of the equipment is essential. If there is no platform for long-term experiments to pinpoint the problems of equipment, the equipment will be hardly acceptable to the market.

Major Equipment Suppliers in Taiwan and China

Hermes Microvision (HMI), an affiliate of the Taiwan-based Hermes Epitek, was established in the US (Silicon Valley) in 1998. HMI is an e-beam technology provider for semiconductor yield enhancement solutions. It develops, manufactures and markets advanced e-beam systems for 45nm production. Its first major achievement was the launch of its eScan300, which marked a huge leap for Hermes Epitek from equipment distribution into its own developed products. In June 2005, HMI launched its eProfile series, a newly developed e-beam process monitoring system designed for high throughput monitoring of systematic process issues in wafer processing.

Another Hermes Epitek affiliate, Advanced Ion Beam Technology (AIBT), was founded in 1999, also in Silicon Valley. It is engaged in the research, development, and manufacture of ion implant systems for the semiconductor industry. Its first product was a low energy and high current ion implanter iStar. The company has recruited some of the best talent for doing ion implanter R&D.

Japan-based Kanto Chemical Investing more than S$20 Million in New Plant in Singapore.

The complex at Jurong Industrial Estate will be its first in Southeast Asia and its 8th in the world. The new facility, called Kanto Kagaku Singapore, will boast a leading edge laboratory that can perform chemical analysis. It will also be able to produce highly functional chemicals for the semiconductor, hard disk drive and solar panel industries.

It will have an annual capacity of 6,000 tonnes. Kanto manufactures purified chemicals for semiconductor production processes. The new plant is seen as a boost for the chemicals sector in Singapore.

Julian Ho, Executive Director - Energy, Chemicals and Engrg, EDB, says: "The chemicals cluster, which constitutes the petroleum, petrochemical and specialty chemical sectors, recorded S$75 billion in manufacturing output, almost a third of the total manufacturing pie, making it the largest contributor to Singapore's manufacturing output. Within this, specialty chemicals contributed about 9 percent. But when you look at the value add, the specialty chemicals sector contributed a disproportionately larger share of about 30 percent."

Intel Fab 68 300mm Wafer China

Intel broke ground on, Fab 68, its first 300mm wafer fabrication facility in Asia. Intel Chairman, Craig Barrett, attended the ground-breaking ceremony of the plant, which is located in the Dalian Economic and Technological Development Zone in northeast China The city government of Dalian estimates the plant can provide about 1,700 jobs.

The new factory, dubbed "Fab 68", will use 90-nanometer technology, an advanced chip-making method that measures its work 90 billionths of a meter.

The new factory will extend Intel's manufacturing leadership, while helping cultivate engineering talent, accelerate the growth of China's information technology (IT) ecosystem, and bring Intel's culture of environmental leadership to China. The $2.5 billion project is set to begin construction immediately and be operational in 2010. Fab 68 will cover 163,000 square meters (1,753,880 sq. ft.)of factory space and host a 15,000 square meter (161,400 sq. ft.) clean room.

Intel investment in Fab 68 sets its total investment in China to close to US$ 4 billion.

Fab 68 will be designed and built to minimize impact on the environment. "The design standards for Fab 68 meet Intel's high standards for environmental performance in all areas including water, energy and chemical waste management."

Intel investment in Fab 68 sets its total investment in China to close to US$ 4 billion. Intel has established two assembly and test plants in Shanghai and Chengdu, along with R&D centers and labs in Beijing, Shanghai and elsewhere in China.

65nm Manufacturing Facility in Ireland

Demonstrating the speed of its 65nm volume ramp, Intel has achieved an important manufacturing milestone with its three 65nm factories. Known as manufacturing “cross-over,” it means that Intel is currently producing more than half its PC and server microprocessors using this industry-leading process technology. During a ceremony to officially open the Ireland factory, Otellini said that the 300mm wafers that began running through the new facility three months ago helped the company reach this milestone.

Fab 28 in Israel Manufacturing with 300mm wafers (about 12 inches in diameter) dramatically increases the ability to produce semiconductors at a lower cost compared with more commonly used 200mm (eight-inch) wafers. The bigger wafers lower production cost per chip while diminishing overall use of resources. Using 300mm manufacturing technology consumes 40 percent less energy and water per chip than a 200mm wafer factory.

Two Intel Manufacturing Sites

The company also announced that after an extensive search for a suitable location it has signed an agreement to purchase office property in Ft. Collins, Colo. to be used as a design center to house a portion of the company's Itanium^® processor design team.

New 300 mm Wafer Factory Manufacturing with 300-mm wafers (about 12 inches in diameter) dramatically increases the ability to produce semiconductors at a lower cost compared with more widely used 200-mm (eight-inch) wafers. The total silicon surface area of a 300-mm wafer is 225 percent, or more than twice that of a 200-mm wafer, and the number of printed die (individual computer chips) is increased to 240 percent. The bigger wafers lower the production cost per chip while diminishing overall use of resources. Three-hundred-mm wafer manufacturing will use 40 percent less energy and water per chip than a 200-mm wafer factory.

Toshiba and SanDisk Inaugurate New 300mm Wafer Fab 4 for NAND Flash Memory at Yokkaichi Operations

Toshiba Corporation and SanDisk Corporation celebrated the opening of Fab 4, the latest 300mm wafer fabrication facility at Toshiba's Yokkaichi Operations, in Mie Prefecture, Japan.

Responding to continuous rising demand for NAND flash memory used in a wide range of digital applications, including digital media players, mobile phones, PCs and memory cards, Toshiba started construction of Fab 4 in August 2006.

Fab 4 is expected to start mass production in December 2007 and reach a production capacity of 80,000 wafers a month in the second half of CY2008. The fab still has space to expand capacity, and further investment could take output to 210,000 wafers per month, in response to the projected increase in future market demand. Fab 4 will employ cutting-edge 56-nanometer (nm) process technology at start-up, and plans call for a gradual transition to 43 nm technology, starting from March 2008.

Fab 4 is designed to minimize any impact on operations from natural disasters. The building was constructed using the latest earthquake-absorbing structure, which is designed to dampen temblor force by up to two-thirds, and deploys multiple power compensation (MPC) that is triggered instantaneously by any sudden, momentary loss of power supply, from a lightning strike, for example.

Toshiba funded construction of the Fab 4 building, and Flash Alliance, Ltd., a Toshiba-SanDisk venture established in July 2006, 50.1% owned by Toshiba and 49.9% by SanDisk, is funding the advanced manufacturing equipment now being installed in the fab.

The new fab will allow Toshiba and SanDisk to deploy the latest advances in process technology and multi-level cell technology and support the companies in further enhancing competitiveness and securing continued leadership in the NAND flash memory market.

Note: 1 nanometer = one billionth of a meter

OutlineOutline of Fab 4 at Yokkaichi Operations- Structure of Building: Steel frame concrete, five stories (two clean room stories)- Building Area: approx. 35,500m2 (approx. 382,000 in square feet)- Floor Area: approx. 181,000m2 (approx. 1,948,000 in square feet)- Start Construction: August 2006- Completion of Building: July 2007- Start Mass Production: December 2007 (plan)Outline of Yokkaichi Operations- Location: 800 Yamanoisshiki-cho, Yokkaichi-shi, Mie Prefecture, Japan- Established: 1992- General Manager: Noriyoshi Tozawa- Employees: Approx. 3,200- Total Site Area: Approx. 312,300m2 (approx. 3,362,000 in square feet)- Total Floor Area: Approx. 460,000m2 (approx. 4,951,000 in square feet) (including Fab 4)Outline of Flash Alliance, Ltd.- Location: 800 Yamanoisshiki-cho, Yokkaichi-shi, Mie Prefecture, Japan- Established: July 2006- Capitalization: 3 million yen- Holding: Toshiba: 50.1%, SanDisk: 49.9%

Freescale Seek New Owner for Production Base

Freescale Semiconductor has employed a real estate company to find a buyer for its East Kilbride production plant. The firm confirmed it had engaged the services of Colliers International with a view to selling the facility.

Workers were told in July the American-owned plant was looking to sell the plant as a going concern — at the same time they were told 900 of the production staff could face redundancy as the company planned to move its East Kilbride production to the USA.

The news that it has employed the real estate company will give the workers some hope that their jobs could be saved, if it is successful in finding a buyer.

Taiwan, India Semiconductor Associations Ink Pact

The India Semiconductor Association (ISA) has signed a memorandum of understanding in Taipei with the Taiwan Semiconductor Industry Association (TSIA). The pact, signed by ISA chairman S. Janakiraman and TSIA chairman Frank C. Huang, is aimed at improving business links between semiconductor companies in the two nations.

There have been previous visits by both industry groups to the other's country in search of potential partnerships. Taiwan hardware and semiconductor companies look to use Indian hardware and chip-design skills, while Indian firms have often said they would try to scale up the value chain by providing designs to Taiwan's well-known hardware manufacturers.

The TSIA has 150 members, including companies engaged in semiconductor R&D, design, manufacturing, packaging, testing, equipment and materials, while the ISA membership is dominated by design services companies.

Switzerland: Advanced Electronic Systems to Acquire Altis Semiconductor

Zurich-based Advanced Electronic Systems (AES) plans to acquire Altis Semiconductor. Subject to government and regulatory approval, the transaction is expected to close by the end of 2007.

No India Manufacturing Plans Now for Intel

Intel Corporation has decided to set up its manufacturing plants in China and Vietnam following delays in India announcing its semiconductor policy, according to Craig R. Barrett, Chairman of the Board, Intel Corporation.

Chandler's Intel Plant Nears Completion

Intel Corp.’s $3 billion factory in south Chandler designed to produce the company’s latest microprocessors is about ready for prime time.

After more than two years of construction, the company is planning an official grand opening this fall, although an exact date has not been set. Commercial production of microprocessors — complex chips that run servers and personal computers — is expected to begin by the end of the year.

Construction has been completed on the exterior of the building, and crews are in the process of installing chip-production equipment and finishing up interior work, said construction manager Preston McDaniel.

Designated as Fab 32, the 1-million-square-foot factory will be a key for Intel’s production of its next-generation line of microprocessors, code-named “Penryn,” which have transistors 45 nanometers in size. The factory is the first commercial fab built by Intel that can produce transistors that small.

Intel, locked in fierce competition with Advanced Micro Devices for technological leadership in microprocessors, has not released detailed information about the materials, saying they are proprietary secrets. Also the company is strictly limiting access to its new fab and has not released any photographs of its interior.

Panasonic Starts Manufacture of Semiconductors

Panasonic has started the manufacturing operation of the new plant in China for the assembling of semiconductors.

Transitioning from a "Wafer-Printing Fab": Q&A with Silterra CEO Eg Kah Yee, Part II

Silterra is relatively small in terms of business scale in comparison to well-known big names in the pure-play foundry business. But the Malaysia-based foundry has drawn attention these days from a series of management reshuffles over the past six months.

Eg Kah Yee was appointed as the new chief executive officer (CEO) after spending years in the electronic design automation (EDA) industry. Yit-Loong Lai, the new sales vice president, takes his position at Silterra after performing as Intel China country manager and Nvidia Southeast Asia vice president. Tzu-Yin Chiu, who has worked at Hua Hong NEC (HHNEC), Taiwan Semiconductor Manufacturing Company (TSMC) and Semiconductor Manufacturing International Corporation (SMIC), has also joined Silterra as the new chief operation officer (COO).

Backed by these well-known experts in the industry, as well as backup by its largest shareholder, the Malaysian government, Silterra is ready for expansion in a fundamental way.

Digitimes recently had the opportunity to interview company CEO Eg Kah Yee when he shared his views over the transition of Silterra.

This is part two of a two-part interview. Part I was published on August 27.

Q: Will Silterra offer any discounts to increase customers while expanding capacity?

A: If customers just bring along their graphic display streamer (GDS) and ask us to "print" it out, Silterra will have to compete in price forever since there is no added value we can offer. But if we can provide value that others can't, here comes the difference. When the value that we offer is unique, price is not necessarily a key factor for customers when selecting their manufacturing partner and we can reflect these values in our sales also.

Silterra tries not to offer "me too" services. But practically every fab has its natural constraints and capacity and orders do not necessarily coincide. For example, when we have idle capacity, customers may have their wafer-starts next week. During this "gap", we have to get some other products to fill up the gap. How can services which are not "me too" fill up these gaps?

Every fab has so-called "me too" products, such as memory, but we try not to do much of this sort of production. We have about 10% of our production as "me too" and the remainder as non-"me too".

Q: Can you detail Silterra's upcoming expansion plan?

A: Silterra will expand in three stages. First, we will adjust the production of existing fabs, which includes adding extra equipment and optimizing production to reduce per wafer production cost.

Also, we are assessing whether to buy old 8-inch fabs. Constructing one 8-inch fab that houses a capacity of 30,000-40,000 wafers costs about US$1.5 billion and buying an 8-inch fab costs only US$150-250 million. The difference in cost tells us that it is still worth investing.

Also, there are no more new 8-inch wafer fabrication facilities that can be purchased now, meaning that expansion on 8-inch wafer capacity requires the buying of old fabs. Over the past year, there were many IDMs releasing their old 8-inch fabs but these opportunities may not exist anymore after a year. So this means that Silterra still has the opportunity to buy an old 8-inch fab right now, but it is hard to tell in the future. Up until this date, those who have approached us have all been IDMs.

We are making an internal assessment about these available 8-inch fabs and have listed out all potential sellers worldwide. With more US-based IDMs heading for 45nm CPU production, they have to gradually sell their 8-inch fabs. Candidates include IBM, Intel and STMicroelectronics. Since the number of sellers is more than those of buyers, a deal will depend on whether a particular fab is suitable for us.

Those who are also going to sell 8-inch fabs will be Japan-based IDMs, such as Fujitsu, NEC and OKI, though their pace of selling fabs is relatively slow.

Sometimes transactions involve political issues and production facilities cannot be moved elsewhere and are limited to operating domestically. For fabs in which we may relocate production facilities, it depends on price and other related support such as supply of materials, components and chemicals.

In addition to the production base that we have in Malaysia, Silterra does not rule out the possibility of constructing fabs in China or Taiwan. I believe the longer you wait for an 8-inch fab, the cheaper the price you can get as the fab fully depreciates. Sellers can price their fabs in any price range they like.

For the third-phase of expansion, I think this still requires some time. There is more integration required for 90nm and 65nm. Currently, TSMC is leading in terms of the IP environment it offers while others are still in the start-up stage.

Q: Does Silterra plan for further fund raising for the planned expansion? Is there an initial public offering (IPO) planned in the future?

A: Definitely. Currently, the Malaysian government holds a 90% stake in Silterra and the government is open to releasing its shares to the public to dilute its stake in Silterra. The management team of the company will also prepare a fund raising for the next stage. And investors only have to judge whether their investment in Silterra is profitable or not.

We do have a plan for an IPO, but this is based on a very solid future growth projection. Although authorities only examine the past sales performance of a company in preparation for an IPO, we have to look into the future. If the company does not perform well, it will be hard for it to raise funds from the public in the future.

If we just go IPO because we want to have an IPO, how are we suppose to release shares if the price slumps? Investors will be sacrificed if the company does not perform well. We do see many wafer fabs encountering this similar situation.

Q: What do you think about mergers/acquisitions, such as 1st Silicon (1Si) and X-Fab's consolidation?

A: One was purchased but Silterra plans to make a purchase, but whether buying or selling, both very much depend on the price. From the perspective of an investor, if investing US$1 can make a profit of US$2, why not? But for Silterra, it was initially established by the Malaysian government in an attempt to help grow the nation's semiconductor industry, meaning that completely selling out Silterra is impossible.

But if we sell Silterra for US$2 billion and use this amount to construct a 12-inch fab and continue to have the involvement of the Malaysian government, I think the government will find that acceptable.

Q: How about the company's sales guidance for 2007?

A: We will have our sales grow by about 20-30% on year in 2007. Sales growth is always constrained by capacity. We have our utilization rate maintained at 70%, which is similar to that of Chartered Semiconductor Manufacturing and Semiconductor Manufacturing International Corporation (SMIC), while TSMC averaged 85%.

Since Silterra only has one fab, we saw our utilization rate peak in the second quarter along with an industry rebound and this full utilization rate will be maintained in the third quarter also. We are already profitable over the past two to three quarters and we are sure that our performance in 2007 will outgrow that in 2006.

In light of the capacity growth over the coming four to five years, capacity expansion will come along with multiple growth in sales in every two years we believe.

A: Big things. UAlbany's College of Nanoscale Science and Engineering is building a $100 million, 250,000-square-foot building at Albany NanoTech that will become the headquarters for International Sematech, a consortium of computer chip manufacturers that does leading-edge research and development.

The new building, which has private financing, is called NanoFab 300 East, and it is the fourth major building at Albany NanoTech.

The college also is spending $50 million to expand its cleanroom space, where it does computer chip manufacturing research and development on 300-millimeter silicon wafers. The cleanroom will grow to 80,000 square feet from 65,000 square feet currently.

Q: OK. So why is this important?

A: Albany NanoTech employs 1,800 people, and its assets, including its buildings, high-tech equipment and intellectual property now top $4 billion, making it a huge economic development engine in the Capital Region and throughout New York state.

International Sematech is an outgrowth of Sematech, which helped Austin, Texas, become a major center for semiconductor research and manufacturing.

New York State also is giving the college $300 million to establish International Sematech headquarters here. Because of this expansion and other initiatives, the complex is expected to have 2,500 employees by the end of 2009. A job fair to hire 70 new people was held Thursday.

Q: Who is doing the work?

A: M+W Zander, the world's best-known semiconductor manufacturing and cleanroom construction company, is the general contractor on the project, which employs 200 workers.

Q: Who will work in the new building?

A: The new building will house 550 scientists, engineers, researchers and others who work for the college, International Sematech and companies like IBM, Sony and Advanced Micro Devices Inc. The building will also be used to house the Institute for Nanoelectronics Discovery and Exploration, a $435 million initiative to develop the next generation of computer chip transistor technologies.

Q: Anything else interesting?

A: In addition to housing support operations for Albany NanoTech, the new building will have banking and food services.

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