march 09 update

Fairchild, the maker of wafers – the basic component in computer chips – primarily for the automotive market, is the second company this week to announce layoffs. HPG International, a plastics manufacturer, laid off 170 when it closed. Patti Olson, a spokeswoman for Fairchild, said the company set a target closing date of June 2010.

“It is absolutely the general economic conditions,” Olson said, to explain the closure.

The company fabricates wafers used in a variety of products such as cell phones, automobiles and refrigerators, but people are not buying as much because of the tough economic conditions around the world, Olson said. “We have weak demand and our fabs are under-utilized.”

A second wafer fabrication plant in Bucheon, South Korea, also will close. The company will save between $20 million and $25 million a year as a result of the shutdowns. The majority of the savings will come from the Mountain Top, PA plant.

Olson said the company was unable to find a buyer for the plant. “We’ve actually been trying to sell it.” The equipment in the plant will be removed and the property put up for sale.

Fairchild, headquartered in South Portland, Maine, had slowed production from time to time as inventory built up and demand diminished. The plant closed during the Thanksgiving and Christmas holidays last year and workers took vacation time.

In a press release, Mark Thompson, president, chief executive officer and chairman of the publicly traded company, said Fairchild is reducing the number of fabrication plants to four from six and front-end manufacturing plants to three from four.

“Sizing our manufacturing footprint and keeping our cost structure competitive are requirements for the long-term health of our company and drive this production consolidation,” he said.

Most of the products made locally will be transferred to other company sites. Fairchild will maintain a small office for technology and product-line function somewhere in the Mountain Top area, Olson said.

The local operation employs between 200 and 250 people, about half of them members of the Communications Workers of America/International Union of Electronic, Electrical, Salaried Machine and Furniture Workers, AFL-CIO Local 88177. The union was notified Wednesday and the employees the following day.

Severance packages will be provided and the company will work with the employees with outplacement services as operations wind down.

The first layoffs will start in about a month with a “small reduction,” she said.

The plant opened in 1960 by RCA. General Electric purchased the facility and sold it to Harris Corp. in 1999. Harris spun off its semiconductor division, which was sold to Intersil. Fairchild bought the facility for $338 million in 2001, according to Times Leader records.

Tundra to be Bought for $86 Million

The local tech industry is on the verge of losing another stalwart, with the announcement of Gennum Corp. (TSX:GND)'s $86-million bid to buy Tundra Semiconductor Corp.

Ottawa-based Tundra (TSX:TUN), whose present guise was founded in 1995 but whose roots date back as far as the 1980s, announced that it had signed a definitive agreement to be acquired by its Burlington competitor.

"We believe that the acquisition of Tundra will create a much stronger combined company, capable of expanding the served markets and applications for our products," said Tundra CEO Daniel Hoste in a statement. "Combined, we believe we will create a formidable competitor that is well-positioned in high-speed interconnect markets that require signal integrity."

Gennum said it would pay $4.43 in cash or 1.1575 of its common shares on a pro-rata basis for each Tundra share, valuing the latter at a 48-per-cent premium to its volume-weighted average share price on the Toronto Stock Exchange over the five days leading up to the announcement. The companies said a maximum of eight million Gennum shares and $55 million in cash would be paid out to Tundra's stakeholders.

Tundra's shares closed at $3.07 on Thursday evening, while Gennum's stock had a closing price of $3.52, roughly 6.63 per cent lower than the day before.

Gennum said the acquisition would add new digital switch and bridge products to its portfolio and give the company a broader sales and distribution network in Asia. As well, it indicated it would see cash savings of US$10 million, although it did not disclose how many, if any, jobs would be lost.

Tundra employed roughly 180 local people as of the end of last year, while Gennum, which has a Kanata design facility, had 41 Ottawa staff.

"Through the acquisition of Tundra, Gennum is positioned to achieve its strategic and financial objectives more quickly and accelerate the development of highly differentiated, high-speed interconnect and signal integrity products," stated Gennum CEO Franz Fink, emphasizing Tundra's strong relationship with the telecommunications market as a key factor for the proposed purchase.

The deal, which is expected to close on or around June 1, has already been unanimously approved by the boards of both companies.

Tundra, whose technology transports data between the different components of a computer system, was spun off from Terry Matthews's Newbridge Networks in 1995 and went public in 1999, but its origins go back to 1983 when former MOSAID employee John Roberts founded Calmos Semiconductor. Calmos was bought by Newbridge for an undisclosed sum in 1989.

Tundra recently reported a sharp reduction in design services revenues for its third quarter due to the cancellation of a large project during the period, leading to flat overall revenues of $14.6 million, although it did also significantly tighten up its net loss to $1.1 million or six cents per share, from $54 million or $2.73 per share a year earlier.

GLOBALFOUNDRIES Is a Leading-Edge Semiconductor Manufacturing Company

GLOBALFOUNDRIES is the world's first truly global leading-edge semiconductor manufacturing company. Launched in March 2009 through a partnership between AMD and the Advanced Technology Investment Company, GLOBALFOUNDRIES provides a unique combination of leading-edge technology, manufacturing excellence and global operations. GLOBALFOUNDRIES is headquartered in Silicon Valley with facilities in Austin, Dresden and New York.

New Plant Will Bring High Paying Jobs to Clarksville, Tennessee

Hundreds of high paying jobs will be coming to Clarksville thanks to a new semiconductor plant. Groundbreaking on the Hemlock semiconductor plant has been set for Thursday at 10 a.m. The plant is expected to give the entire Clarksville area a financial boost.

The plant will bring more than 500 jobs. It will also bring millions in economic development into the area, before the facility's completion in the next few years.

Officials said contract workers were needed to clear the site, install water and gas lines and construct buildings. At the same time, officials also said it's too early to know just where to apply for one of the nearly 1,000 construction jobs, but the bidding for the work will happen in the next couple of months. Those jobs should be filled by summer.

The company is the world's largest maker of polycrystalline silicon for solar panels and semiconductor chips. The new plant carries an initial investment of about $1.2 billion dollars, but Tennessee officials have said in the past the total cost could reach as high as $2.5 billion.

National Semiconductor cuts 1,725 jobs

National Semiconductor has announced plans to cut approximately 1,725 jobs in response to the global economic downturn with a reduction of overall expenses and a shift of R&D operations to new and emerging markets.

The company plans to lay off approximately 850 jobs worldwide in product lines, sales and marketing, manufacturing, and support functions. It also plans to cut 875 jobs as part of the manufacturing consolidation plan. It will close its assembly and test plant in Suzhou, China and wafer fabrication plant in Arlington, Texas. After the consolidation, it will have three manufacturing facilities: wafer fabrication plants in South Portland, Maine, and Greenock, Scotland, and an assembly and test facility in Melaka, Malaysia.

The company expects to incur charges between $160m and $180m related to severances, asset impairments, and other related costs, of which $130m to $145m will be recorded in the fourth quarter 2009 and the remainder in subsequent quarters.

Brian L Halla, chairman and chief executive at NatSemi, said: "The worldwide recession has impacted National's business as demand has fallen considerably. However, the actions we announced will help us remain competitive as we continue to focus on growing markets that can benefit from our new energy-efficiency initiatives."

The company recently reported a 71% decline in third-quarter net income to $21.1m compared to $72.9m in the year-ago quarter, on revenue down 31% at $292.4m.

Siltronic Raises Prospect of New Industrial Development

With Siltronic's aging Portland factory weathering one of the steepest downturns in its history, the German silicon wafer manufacturer is raising the prospect of renewal to city officials.

Siltronic has been furloughing its 850 Portland employees intermittently since December amid a steep decline in demand for computer chips. The facility dates to the 1970s and is flirting with obsolescence as the semiconductor industry moves to larger, more efficient wafers.

Its fortunes could soon change, according to an internal city e-mail obtained by The Oregonian. Siltronic and an unnamed European partner are contemplating a $1.1 billion investment in a new factory on Siltronic's 84-acre riverfront property in Northwest Portland, according to the e-mail, potentially employing as many as 2,000 people.

Twice this decade, Siltronic has held out the possibility of a major new investment to city leaders, who responded with incentive packages and other inducements. But both times, Siltronic passed over Portland and chose instead to build overseas.

This time, Portland is among three or four finalists for the project, according to the January e-mail, obtained through a public records request. In the memo, a Portland Development Commission staffer warns officials in Mayor Sam Adams' office that environmental protections proposed for the Northwest riverfront could complicate any deal.

"There is a recruitment ongoing," development commission spokesman Shawn Uhlman confirmed, adding that a decision could come within months.

Though Siltronic and city officials declined to discuss the new investment specifically, it has all the hallmarks of solar manufacturing, which uses silicon as the basis for photovoltaic cells.

Even as it recruits that new investment, Portland is considering new environmental protections for its riverfront.

Known as The River Plan and overseen by Portland's Bureau of Planning and Sustainability, that proposal would modify the industrial zoning of Siltronic's site and impose new restrictions or fees that could threaten the Siltronic deal.

"The River Plan is considering reserving 35 acres of Siltronic industrial property for use as an environmental sanctuary," development commission staffer Kevin Johnson wrote in the e-mail to Adams' staff. "Frankly, this would eliminate Portland from contention."

City planners are continuing to hold public hearings on the River Plan, and discussions are slated to proceed through 2009. Planning officials did not return repeated calls seeking comment.

Both Siltronic and the Northwest Industrial Neighborhood Association say the plan's current incarnation is too restrictive and would hinder new investment.

"What we're trying to do is preserve our industrial zoning for all possible uses," said Tom Fahey, Siltronic's spokesman and human resources director.

Any big new manufacturer could be a huge coup for Portland and for Oregon, which is suffering one of the nation's highest jobless rates, at 10.8 percent.

The city e-mail noted that other cities are willing to offer millions to attract the manufacturer, but made no mention of possible subsidies from Portland. The property is in an urban renewal area, created five years ago when Siltronic was considering a prior expansion. That designation that gives the city more flexibility in using property tax revenues to attract businesses.

Oregon has an assortment of other tax breaks and incentives at its disposal, should it choose to use them in sealing a deal with Siltronic and its unnamed partner.

Siltronic -- formerly known as Wacker Siltronic -- dates its Portland roots to the 1970s. Former Mayor Neil Goldschmidt recruited the manufacturer, selling it city-owned land on the Willamette River's industrial waterfront.

The company has provided high-tech manufacturing jobs for three decades, but prior upgrade plans have come to naught. Most recently, Siltronic passed over Portland for a $1 billion upgrade in 2006, choosing instead to build in Singapore.

As the chip industry's fortunes have faded, Siltronic has become more active in the solar business. In 2007, Siltronic's corporate parent, Wacker Chemie AG, launched a joint venture with another German company, Schott Solar, to make solar wafers.

Oregon once wooed Schott Solar in hopes of landing a solar facility in Hillsboro, but in 2007 the company decided to build in New Mexico instead.

The state has had success attracting other foreign solar manufacturers. SolarWorld, a German company, opened a Hillsboro production facility last fall; Sanyo, from Japan, is building its own factory in Salem.

Oregon is particularly attractive, because of its location in the western U.S., its relatively low electricity prices, the potential for state tax breaks, and a skilled work force trained during the chip industry's heyday.

High-Tech Firm to Locate Plant at Site in Malta

The C9 Corporation, a semiconductor and high technology business, will locate a headquarters and plant in the Saratoga Technology and Energy Park in Malta, the New York State Energy Research and Development Authority announced

The company will start out by bringing five employees to the technology and energy park’s 107,000-square-foot facility. The company will occupy 8,500 square feet in the building by summer and expects to have 30 people working there by 2012, according to a NYSERDA statement.

The company was incorporated in 2005 by general partners C.G. Wang, chief executive officer of Nanodynamics-88, and Kevin Donegan, CEO of Amtrade.

The company has several ongoing contracts with defense contractors and military agencies and has commercial agreements under way to provide advanced semiconductor materials and devices, according to the company.

“This is a perfect example of STEP’s vital role in helping to create jobs in New York State, especially those focused on technologies such as C9’s energy saving power processing power semiconductors,” said Francis J. Murray Jr., NYSERDA’s president and CEO.

C9’s focus is to develop dual-use energy-efficient semiconductor products and systems that serve governmental uses but are based in commercial off-the-shelf products designed for high-volume commercial power-processing applications, says the NYSERDA statement.

Fabs, in Berkeley? Yes, With Help from Marvell Founders

A dairy in the San Francisco Bay area once used the slogan, “Farms? In Berkeley?” Despite the name of that company–Berkeley Farms–one sees little agriculture or cow-milking around the city. But another surprising activity, semiconductor fabrication, is planting deeper roots at the University of California at Berkeley.

Aided by donations of more than $20 million from the founders of Marvell Technology Group Ltd., a new building on the UC Berkeley campus will soon have two ultra-clean rooms full of equipment that can turn silicon wafers into computer chips. Though not commercial “fabs,” as chip factories are called, the facilities are expected to allow students and faculty to make prototype electronic devices.

Inside UC Berkeley’s New Cleanrooms

What the university has dubbed the Marvell Nanofabrication Laboratory reflects a series of family connections. Sehat and Pantas Sutardja, two brothers from Indonesia, came to Berkeley’s engineering school to study in the early 1980s. There they met Weili Dai, a native of Shanghai who ended up marrying Sehat Sutardja. Now the couple’s two children are attending UC Berkeley.

“I look at what we are facing in this country, all of these challenges, everybody is down,” says Dai. America needs to go back to the fundamentals, she says, and that means helping schools and universities. “Education is my top priority,” she says.

Sutardja Dai Hall, as the 141,000-square-foot building has been named, also will be the home of a program called CITRIS, for the Center for Information Technology Research in the Interest of Society. The center, one of four established in 2001, is expected to allow students and faculty from four UC campuses to work with corporate partners on an array of multi-disciplinary projects.

A CITRIS project called CellScope, for example, is designed to turn conventional cellphones into handheld microscopes that can be used to capture and wirelessly transmit images that can be used for medical analysis, the university says. Another immigrant to Silicon Valley who prospered in the chip business–Dado Banatao, who hails from the Philippines–has also funded an institute at CITRIS.

Hands-on work with semiconductors has been going on at UC Berkeley since 1962, says Ming Wu, a Berkeley professor of electrical engineering and computer sciences who is faculty director of the Marvell Nanofabrication Laboratory. The new chip facilities, however, represent a major advance in technology and a rarity for a university campus; they include two cleanrooms for protecting chips from contamination, and can process eight-inch silicon wafers–only one generation behind the latest high-capacity production process. The new equipment includes an electron-beam lithography system, Wu says, which can trace finer lines of circuitry than are created in most commercial fabs.

Chip-making can involve some rather nasty substances, and reassuring eco-conscious Berkeley about how they will be handled is one reason it has taken since 1999 to plan, fund and construct the building. “Every chemical has been scrutinized and all the toxic gases,” Wu says. “Safety is the most important thing at the university.

Rohm and Haas Hsinchu Manufacturing Facility Receives First Volume Order for 100 Percent Hsinchu-Manufactured Pads

Rohm and Haas Electronic Materials (NYSE:ROH), a leader and innovator in chemical mechanical planarization (CMP) technology for the global semiconductor industry, announced that it has received a volume order for its IC 1000™ line of CMP pads from a leading memory manufacturer, that will be produced entirely at the Rohm and Haas CMP Technologies Asia Pacific Manufacturing and Technical Center (Hsinchu Site). The memory manufacturer will use the IC 1000 pads in its advanced process technologies at several Asian sites.

The order represents an important milestone for the Rohm and Haas facility in Hsinchu, which became fully certified and operational in its “front end” polymerization process in December 2008. Rohm and Haas’s IC1000 and IC1000 AT pads and VISIONPADS™ have been sampling from the Hsinchu facility since then, and are in the qualification stage with numerous manufacturers in the region.

The Hsinchu Site was completed in phases to meet increasing demand for 200 mm and 300 mm CMP pad requirements in Asia. The first phase consisted of pad finishing operations which became fully functional in March of 2007. The facility has received ISO 9001 and 14001 certification and is the only company within the semiconductor industry in Taiwan to earn the Green Building Award from the Taiwanese government, recognizing it for daily energy saving, CO2 emission and waste reduction, and water resource conservation. The Hsinchu facility has since been qualified by major logic and memory semiconductor customers in the region.

“This order highlights the value that Rohm and Haas’s new facility brings to its customers in the Asia Pacific region,” stated Sam Shoemaker, vice president and business unit director for Rohm and Haas Electronic Materials CMP Technologies. “We have always offered industry leading products and service, but our new regional ability to take customers through process development and enhancement, qualification and complete pad production from polymerization to finishing takes us to an entirely new level that is unmatched in the industry. We have significantly improved response and turnaround times for our Asian customers, and the Hsinchu facility has the capacity to supply all of Asia's pad demands.”

The pad finishing operations have been fully functional for two years and Rohm and Haas has multiple existing customers for this capability. The facility also maintains a local inventory of finished pads to support customers in the region and the plant has an assured supply chain, with contingency back-up supplies available from Delaware (USA), and Mie, Japan.

The Hsinchu Manufacturing Plant’s operations are identically matched to the company’s processes of record at its Newark, Delaware (USA) facility. Product properties are validated against the Delaware plant’s standards, and both facilities employ the same quality systems.

The Hsinchu Manufacturing and Technical Center was created to support the growing Asia region and includes pad manufacturing as well as an applications lab, and delivers local technical service and sales support. It provides faster response and quick turnaround for customers in Asia to ensure the highest level of customer satisfaction. The facility will support sales and customer service centers in China, Singapore, Malaysia, Korea, Taiwan and Japan.

Intel China Fab Plan is on Track

Intel Corp. is denying rumors within the semiconductor equipment community that it has pushed out plans for a 300mm fab in China, saying it remains on schedule to have the facility in production next year.

The chip giant announced two years ago its intention to invest $2.5 billion to build a 300mm fab in the northern Chinese city of Dalian. The fab, which will be Intel's first in China, was initially slated to use 90nm technology to make chipsets.

Intel spokesman Chuck Mulloy said via email March 12 that there has been no change in plans for Dalian. The company still plans to make chipsets there, starting at 90nm, he said. But he noted that Intel has a license for 65nm and said the company would make a final decision on the technology node later.

The company will begin equipment installation later this year and expects production to begin in 2010, most likely late in the year, Mulloy said.

Sources within the equipment community, who asked not to be identified, told EE Times that the schedule for the fab had been pushed out by at least three to six months. These sources say there has been some question within the equipment community about whether the project will go forward at all.

"Keep in mind that this is our first new fab at a new site in about 20 years," Mulloy said. "We are being very deliberate as we bring it online."

Risto Puhakka, president of semiconductor industry research firm VLSI Research Inc., said he has not heard anything about a delay at Dalian and does not buy speculation that the project could be cancelled.

Others believe there are growing signs of a fab delay. One source said Intel recently cancelled a scheduled planning conference with suppliers about the Dalian fab, blaming supplier travel budget restrictions. Tool move in dates for the fab have been pushed out by about six months, the source said.

Speculating, Puhakka said it would not surprise him if there have been adjustments to the schedule, particularly in light of the downturn and lower capacity utilization. Intel may also be finding more used equipment, he said, which would impact suppliers.

One analyst who tracks the market said Intel's proposed fab in China "is delayed to my understanding." The analyst, who asked not to be identified, said Intel must walk a fine line in China and not upset Beijing. Like most chipmakers, Intel has good reason to be politically correct in China: It sees the country as one of its fastest growing markets.

Rumors about a slipping schedule at Dalian come at a time when the success of China's chip industry has been called into question. Once thought to be an inevitable dominant power in the semiconductor industry with its abundance of engineering graduates and comparatively inexpensive labor pool, China's chip building experience has thus far yielded mixed results. The delay or loss of a marquee project by the world's top chipmaker would be seen as a blow to the Chinese government's stated goal of making the country a chip manufacturing power.

Intel "has to say the fab is not delayed to keep the government happy," according to the analyst. Mulloy's statement leaves open the possibility that production won't start until the final day of December, 2010, he noted. "If you will go to get the standard time from groundbreaking to equip to first revenue wafer, you can see that is far from the 'normal' schedule, which is about 12 months."

Intel in January said it would close two fabs and three IC-assembly factories. These actions, at four separate sites, are expected to affect between 5,000-to-6,000 employees worldwide. Intel last month said it would close its IC-packaging plant in Shanghai.

Taiwan-based LED chipmaker Formosa Epitaxy will invest US$1.5 million to establish a subsidiary in Shandong province, China, with centers for R&D, testing, and the production of new lighting materials, according to the company.

The subsidiary's production will initially focus on blue/green GaN LEDs, Formosa Epitaxy said.

Formosa is also eyeing the the LED streetlamp market in China and the company is currently working with China packaging houses to ship to the China market, it noted.

Revenues from general lighting-use LED chips accounted for 10-15% of total revenues in 2008, Formosa indicated, adding that revenue share will go up to 20% this year as the varieties of LED lighting applications continue to expand.

Formosa has reported its February revenues of NT$70.11 million (US$2.03 million), up 32.38% from NT$52.96 million for January, but down 39.1% from NT$115.12 million for February of 2008, according to data from the Taiwan Stock Exchange (TSE).

FOREPI: February 2008 - February 2009 revenues (NT$m)
Month	Sales	M/M	Y/Y	YTD	Y/Y
Feb-09	70	32.4%	(39.1%)	123	(51.9%)
Jan-09	53	28.5%	(62.4%)	53	(62.4%)
Dec-08	41	(40.2%)	(65.7%)	1,468	2.6%
Nov-08	69	(25.9%)	(53.3%)	1,427	8.9%
Oct-08	93	(26.5%)	(38.3%)	1,358	16.8%
Sep-08	127	(9.6%)	(12.6%)	1,265	25%
Aug-08	140	2.5%	(0.9%)	1,138	31.3%
Jul-08	137	10.5%	0.5%	998	37.5%
Jun-08	124	(23.6%)	(1.3%)	861	46.1%
May-08	162	0.1%	35%	738	58.8%
Apr-08	162	2.5%	47.2%	576	67.2%
Mar-08	158	37.2%	57.1%	414	76.5%
Feb-08	115	(18.2%)	81.8%	256	91%

*Figures are not consolidated
Source: TSE, compiled by Digitimes, March 2009

Semiconductor Woes

Top semiconductor suppliers suffer revenue declines in 2008. Shakespeare's adage, "Uneasy lies the head that wears a crown," was certainly true for the kings of the semiconductor industry in 2008, with eight out of the Top-10 suppliers suffering revenue declines for the year, according to iSuppli Corp.

Final ranking of semiconductor suppliers in 2008 reveals that the majority of the industry's leading companies not only saw sales declines - they also underperformed the overall chip industry for the year.

"It's not always good to be the king, as shown by the results of most of the top semiconductor suppliers in 2008," said Dale Ford, senior vice president, market intelligence services, for iSuppli. "Many of these suppliers are focused on semiconductor segments that performed poorly during the year, including memory, Digital Signal Processors (DSPs), analog Integrated Circuits (ICs) and standard logic. This caused 80 percent of the Top-10 and 60 percent of the Top-25 semiconductor suppliers to experience declining revenues compared to 2007."

Among the nearly 300 companies covered in iSuppli's global semiconductor rankings, 43 percent were able to achieve flat to positive growth during 2008, showing that the Top-10 suppliers significantly underperformed their smaller rivals.

Among the Top-25 suppliers, the companies managing to expand their revenue were No-5 ranked STMicroelectronics, No.-8 Qualcomm Inc., No.-11 NEC Electronics Corp., No.-14 Broadcom Corp., No.-15 Panasonic Corp., No.-18 Sharp Electronics Corp., No.-20 Rohm, No. 22 Marvell Technology Group Ltd., No.-23 MediaTek Inc. and No.-24 Fujitsu Microelectronics Ltd.

Even among those 10 suppliers, their growth in 2008 wasn't necessarily all it was cracked up to be - with only six actually increasing their sales organically.

"The growth achieved by STMicroelectronics, Broadcom, Rohm and MediaTek in 2008 was enabled or enhanced by major acquisitions during the year, rather than by increasing sales in their existing product lines," Ford observed. "The remaining six - Qualcomm, NEC, Panasonic, Sharp, Marvell and Fujitsu - expanded their revenues by between 1.5 percent and 15.3 percent in 2008 based only on organic growth. However, for the four Japanese suppliers, NEC, Panasonic, Sharp and Fujitsu Microelectronics, this growth was less about rising sales and more about a significantly more favorable exchange rate between the Japanese yen and the U.S. dollar."

Beyond seeing their revenue growth lopped off, six of the Top-10 suppliers underperformed the overall semiconductor industry in 2008: No.-2 Samsung Electronics Co. Ltd., No.-3 Toshiba Corp., No.-4 Texas Instruments Inc., No.-6 Renesas Technology, No.-7 Sony Corp. and No.-9 Hynix Semiconductor Inc.

All of these companies experienced revenue declines greater than the 5.2 percent for the overall semiconductor market.

Hynix posted the largest revenue decline among the Top-10 and Top-25, at 33.4 percent.

"The sharp decline in memory sales in 2008 resulted in Hynix's precipitous revenue plunge - and its fall to the No.-9 ranking, down from sixth-place in 2007," Ford said.

The next biggest decline was posted by NXP Semiconductors, at 29.4 percent, due to the spin off of its wireless chip business.

iSuppli's final estimate of a 5.2 percent decline in 2008 semiconductor revenue represented a significant widening from the 2 percent decrease it projected in November. The performances of many semiconductor suppliers also came in below expectations.

"In iSuppli's November estimate, fourth-quarter semiconductor revenue was projected to decline by 8.8 percent compared to the third quarter based on guidance provided by semiconductor suppliers in reporting their quarterly financial results," Ford noted. "However, the final results show that the market experienced a significant and broad-based decline of 21.5 percent in the fourth quarter. While memory IC revenues struggled with negative growth for an extended period, the market decline in the fourth quarter impacted every semiconductor segment - without exception."

The semiconductor segments suffering the deepest declines in the fourth quarter were Digital Signal Processors (DSPs), NOR flash memory and application-specific analog ICs. These areas saw their revenues fall by between 25 to 28 percent in the fourth quarter. The products in these areas, along with DRAM, NAND Flash, Display Drivers and Standard Logic ICs, also suffered the largest percentage revenue declines for the full year of 2008 of all semiconductor segments.

Amid the carnage, four of the suppliers that managed to expand their revenue in 2008 improved their market-share rankings significantly for the year.

Qualcomm moved into the Top-10 rankings, rising to eighth place in 2008, up from 13th in 2007. Broadcom jumped to No.-14, up from No.-19. Rohm and MediaTek also moved up to the 20th and 23rd rankings respectively.

Results for the full year 2008 show that optical components, standard linear ICs, programmable logic devices, microprocessors and sensors/actuators were the only major semiconductor market segments to achieve growth, with their revenues increasing between 1 and 6 percent. Wired communications and industrial electronics were the only end-market segments to see increased revenues for 2008 with growth between 2 and 3 percent for the full year.

Once again, fabless semiconductor suppliers outperformed the overall semiconductor market and led the growth among the Top-25 semiconductor suppliers in 2008. Fabless suppliers as a group achieved revenue growth of 1.4 percent in 2008.

Qualcomm, Broadcom, Marvell Technology and MediaTek each grew their revenues in a range between 10.2 percent and 23.9 percent in 2008. Out of the five fabless companies in the Top-25 rankings, only nVidia saw its revenues decline in 2008.

Amid Economic Gloom, Semi Execs Chart Encouraging Future

Against a backdrop of a deepening recession, electronics industry executives plotted emerging changes in mindset, markets, and technology they said will propel future growth and boost the global economy.

At a surprisingly and remarkably upbeat Semico Summit conference in Arizona, executives said lessons of previous downturns, particularly 2001, have laid the foundation for more nimble thinking, even as the recession radically alters the industry’s landscape.

Already, more than 70 companies have shuttered since the financial meltdown began in October, and the cash or investment funds for dozens of other may not last long enough for them to stay viable through a protracted downturn, according to data from the Global Semiconductor Association.

“I’ve never seen anything like what we’re going through today,” said former AMD Chairman Hector Ruiz, who is now chairman of GlobalFoundries, a spinout of AMD’s manufacturing operations. “It’s my eternal optimism that makes me get through this.”

The changes are forced by confluence of factors. As electronics systems become more ubiquitous, they solve more problems but in markets where cost is extremely sensitive. At the same time, manufacturing and design costs escalate unabated.

The semiconductor industry, for example, grew 16% from 1983 to 2008, but fab costs soared 25% in the same period, according to Hans-Jurgen Straub, CEO of X-Fab Silicon Foundries, which provides mixed-signal manufacturing. Additionally, there has been a 15x increase in costs over five process nodes, from 350 nm to 65 nm. The cost per manufacturing company to develop a process at the 65-nm node is estimated at a half-billion dollars, he added.

“There’s an increasing pressure to consolidate,” Straub said. “In the digital arena, only a few companies will continue to invest in wafer-manufacturing facilities. Even large IDMs will go fabless. In analog products, it’s the same idea—it’s better to go with a foundry.”

The downturn’s impact is leaving no type of company unscathed as a form of Darwinism takes hold, according to Moshe Gavrielov, CEO of FPGA market leader Xilinx. Tier-one semiconductor vendors are quickly moving from fabbed, to fab-lite, to fabless and rationalizing their operations accordingly. Second-tier companies that had banked their money on application-specific standard products are finding fewer markets to support their business models. Those models have required $100 million investments in products on the hope that they would generate good margins in billion-dollar markets, but there are few billion-dollar markets left today, he said.

The most challenging environment may be for the start-ups, which are the industry’s life blood of innovation — engineers going out on their own from established companies that wouldn’t fund their great ideas. Venture capital has slowed to a trickle, with series A funding falling 82% from 2000-2007, noted Gavrielov (pictured, left). Through Q3 2008, just two chip companies received funding, totaling just $12 million. And it’s unlikely venture capitalists will change their outlook on ROI (return on investment) or their model—from investing a large amount in a couple of companies to investing smaller chunks in a dozen companies. That scale becomes unmanageable, he said.

At the same time, chip customers are pouring over their supplier lists to try to predict which companies might not survive, just as chip vendors and doing the same to their tools, IP, and services providers.

“Capital drought is changing the entire landscape. It’s accelerating a forced rationalization,” Gavrielov said.

R&D is a challenge, as well. At a basic level, a gap is widening between the amount of money spent on research and what the industry needs to spend to help tackle its problems. That gap, estimated at $2.3 billion, is twice what it was just five years ago, said Larry Sumney, president and CEO of Semiconductor Research Corp (SRC).

So against this seemingly dire backdrop, what’s a 50-year-old industry to do? Forge ahead, executives agreed.

Markets continue to evolve as they begin to or continue to exploit electronics technology to bring new functionality or lower costs to customers. The medical-device industry is embracing new forms of remote medicine that electronics enables; the smart grid, to which Congress has targeted $11 billion in stimulus money, is sorely in need of a makeover after 100 years; increasing connectivity and the social Web are driving greater use of high-bandwidth media, such as video.

In January alone, 15 million new subscribers got mobile phones in India, Gavrielov noted, and for the first time in history, according to The Economist magazine, half the world’s population is considered middle class, with fresh new disposal incomes.

Green engineering is clearly an emerging area of interest, and Semico devoted a panel session to it for the first time at the summit. Mike Noonen, senior VP of global sales and marketing at NXP, pointed out that improving the design in 2D color dimming in an LCD backlight could save 39 terawatt-hours a year and that only 10% of TVs now have this function. In addition, 85% of a car’s energy is wasted as heat, while only 15% goes to performance, he noted.

Put more bluntly, SiGe Semiconductor CTO Peter Gammel, said, “If there’s something our engineers can do to improve energy efficiency, it’s immoral not to.”

Mark Pinto, longtime research guru at Bell Labs, Lucent, and Agere, served as an emblem of changing industry mindset, appearing in his current role as Applied Materials’ CTO and general manager of the equipment company’s energy and environmental solutions.

Semiconductor learning-curve economics is beginning to drive cost the costs of solar PV (photovoltaic) devices and thereby expand market opportunity, especially as consumers become more aware of volatile energy prices. In 1980, costs averaged more than $1 per kilowatt-hour, but today, the learning curve has driven that down to $1 per 100 gigawatt-hours on the manufacturing side, Pinto said.

The PV module price has been falling at 20% per year. In 1980 the biggest solar farm provided 1 megawatt production per year. It took 20 years to get to 10 megawatts per year, but only and five years to jump to 100 megawatts a year. Gigawatt farms are just a few years away, said Pinto.

At retail, prices are down to $4 a watt (including installation costs), and that's helping the market is growing 30 percent per year, noted Pinto.

“As you bring scale and gain learning from building more units you can reduce costs,” he said.

Jobs creation is estimated at two per megawatt on the manufacturing side and up to 10 jobs per megawatt when considering the entire food chain, from manufacturing to installation, he added.

The consumer markets could continue to afford enormous opportunities, even in challenging times, according to Behrooz Abdi, president and CEO of processor vendor RMI (formerly Raza Microelectronics Inc).

Content is king and people are consuming more of it in the home, in their cars and on mobile devices than ever before. The amount of data coursing through the network doubles every 18 months, and bandwidth-hogging video is 35% of that content, moving to 50% in the coming years, he noted.

The automobile is maturing as its own electronics platform; the home Internet/media gateway architecture is starting to find its sea legs; cell phone sales, even in recession, are expected to grow by as much as 15% this year and the devices themselves get more complex as users demand functionality, such as mobile video and GPS. This will disrupt products that have come to market based on those features but which likely will get integrated into increasingly sophisticated mobile products.

Unleashing a blizzard of optimistic data, Abdi (pictured, right) noted that 11 million people watched mobile video in Q4 2008; 30 million touchscreen devices were sold in 2007 and that market is expected to soar to 230 million by 2012; and that there will be 1.8 billion Internet users next year and, by 2012, almost a third of them will be broadband subscribers.

“A lot of people [in] this business seem to be mourning the death of the consumer. I’m convinced it will come back,” he said.

As the markets may prove hopeful, technological innovation continues unabated, based on presentations at the Semico Summit. While arguments may continue about whether Moore’s Law is grinding to an economic halt, advancements in feature sizes, packaging, power optimization, battery life, and cost continue.

Quantum Sphere, a Santa Ana, Calif.-based start-up, is attacking issue in the $71 billion battery market on a nano scale. The company sells spherical nano catalysts, in the 2- to 5-nm range—iron, manganese, copper, nickel, and cobalt among them—that help double battery capacity, so battery vendors, in turn, can better serve existing and go after new markets.

“There is no clear winner on the horizon in the race for rechargeable batteries,” said Kevin Maloney, CEO and co-founder of Quantum Sphere.

As wireless solutions and networks like femto cells proliferate, the pressure increases to move to more cost-effective technologies to support new designs. SiGe Semiconductor, a company that has evolved from materials supplier to RF front end vendor, is trying to drive the move to all-silicon, system-in-package solutions for RF but do it with a fabless model, unusual for RF vendors.

“RF has traditionally been indium phosphide [InP] or gallium arsenide [GaAs] solution,” said SiGe's Gammel. “This year will be the first year where we can do it in an all-silicon solution. Between 100 Mhz and 10 Ghz and 300 mW and 2 to 3 W, we can do all of that in silicon germanium and silicon SOI.”

Mark Melliar-Smith, CEO of Molecular Imprints, noted that engineers in the storage sector continue to reduce size and tackle other issues to make affordable, denser memories.

Companies with solid-state solutions are looking at everything from phase change memory and programmable resistors to vertical cell stacking. And magnetic memory makers “aren’t standing still,” he noted. They’re driving a real density up to several gigabits per square inch through smaller memory elements, tinier read-write heads, and perpendicular recording as they battle super paramagnetic effects the deeper they dive.

Molecular Imprints attacks the problem by using a nano-printing system that begins with an imprint mask, coats the wafer surface with a low-viscosity monomer and lowers the mask into the liquid. The liquid fills in the features using capillary action—the smaller the features, the better the action, he said. The system illuminates everything to make it solid, and the mask is removed. The process can be done as whole wafer or as step-and-repeat, he added.

Other executives inevitably turned to their own technology as a salve for industry woes. Dan Mahoney, president and CEO of Renesas Technology America, said his company’s approach to embed MRAM with microcontrollers improves performance and eliminates standby power.

Gavrielov touted the benefits of “targeted design platforms,” such as FPGAs that are flexible enough to adapt to a multiplicity of applications and offer fast time to market, performance, and potentially lower overall costs.

SRC's Sumney (pictured, right) noted the biggest challenge to innovation though comes in research because companies for more than a decade have been squeezing R&D as a percentage of revenues and the federal government has cut back support for basic research.

“We must invest now [in research], otherwise we will become stagnant as an industry,” said Sumney, who called for better cooperation between industry, government, and universities to fund and drive innovation from the ground up.

“Has the industry turned mature? I don’t think anybody can claim it has. No, there’s plenty of road ahead if we share the wheel and reduce the costs,” he said.

It was Ruiz, kicking off the conference, who illuminated the need for a change in thinking. He related a story of the turkey, which is born and fed a regular diet at regular intervals each day. This enables it to grow day after day, remarkably consistently, until one day just before Thanksgiving when it all ends abruptly.

His point: “If you only extrapolate the future based on what happened prior to this downturn, you’re going to be very disappointed,” he said.

Chi-Foon Chan, president and COO at EDA vendor Synopsys, punctuated the tone o the conference with a warning: “There’s no success in just trying to be secure,” he said. “Successful companies have their own time. Successful companies, like people, don’t live forever.”

New Semiconductor Joint Venture to Build Facility in New York

A new semiconductor foundry will be built in upstate New York as part of a newly formed joint venture between Advanced Micro Devices Inc. (AMD) and the Advanced Technology Investment Co. The new company will operate under the name Globalfoundries.

The company will begin construction on a new state-of-the-art, 32nm and smaller features, $4.2 billion manufacturing facility at the Luther Forest Technology Campus in Saratoga County, N.Y. Construction on the new facility, to be called Fab 2, will begin later this year. It is expected to create about 1,400 direct jobs and more than 5,000 indirect jobs for the region.

Once operational, Fab 2 will be the only independently managed, advanced semiconductor manufacturing foundry in the United States, bucking the trend of manufacturing industries leaving the country.

In addition, Globalfoundries will expand its Dresden, Germany, manufacturing lines by bringing a second 300mm manufacturing facility with bulk silicon capabilities online later this year.

The Dresden cluster will be re-named Fab 1 with Module 1 initially focused on production of high-performance 45nm Silicon-on-Insulator (SOI) technology, and Module 2 transitioning to 32nm bulk silicon capabilities.

“Despite the current economic climate, this is an industry with tremendous opportunities for long-term growth and innovation,” said Waleed Al Mokarrab, chairman of Advanced Technology. “Through its global footprint, world-class technology know-how and access to state-of-the-art research and development, we believe Globalfoundries is well-positioned to challenge for market leadership in this competitive industry.”

The new company will serve as a supplier for AMD and service third-party customers.

Skyworks Slows 6-inch Wafer Conversion

Cost cutting and production ramps for energy management and smartphones help the radio-frequency chipmaker to profit.

Skyworks Solutions' plan to begin manufacturing its GaAs products on 6-inch wafers has taken a knock as it looks to rein in costs.

The wireless component maker comfortably held on to profitability in the last quarter of 2008, thanks in part due to its close control over expenses. Now it is executing a cost reduction plan that will delay the upgrade from 4-inch systems at its Woburn, Massachusetts operation originally slated for completion this year.

“We have definitely slowed down that investment,” Skyworks’ chief financial officer Don Palette told financial analysts. “Right now our expectation is that we're going to go live with 6-inch early in 2010,” he said in the conference call announcing the company’s financial results.

The plan also saw Skyworks lose 150 employees – 4 percent of its overall headcount – primarily from its transceiver development group in January. The company expects that the resulting savings should amount to $20 million annually.

Palette said that in the first three months of each calendar year he would normally expect Skyworks' revenues to fall 15 percent from the previous quarter. This year he expects that figure will be nearer to 20 percent, hence the need for further cost cuts.

That comes after the company's revenues at the end of 2008 – traditionally the strongest period of the year – fell nearly 10 percent from the previous quarter.

Regardless of this Skyworks still delivered $22 million profit, down from $35.3 million sequentially but ahead of the $19 million it delivered in the same period in 2007.

It was able to offset the drop seen by other wireless semiconductor companies, thanks to demand from the latest smartphones and energy management systems.

Sales of wireless metering products to vendors like Itron, Sensus and Landis and Gyr increased by 30 percent in the quarter.

Production also ramped up for devices targeting smartphones, offsetting what management said was otherwise a consistent fall in revenues across the rest of its business.

As well as its own cost-reduction efforts, Skyworks credited its ongoing profitability on its arrangements with external compound semiconductor wafer manufacturing partners. By outsourcing to companies like its Massachusetts neighbor Kopin and Taiwan's WIN Semiconductor it can rapidly cut its output with a minimal impact on its own finances.

Investors reacted positively to Skyworks' latest financial results, sending the stock soaring almost 30 per cent to $6.43 in early trading on February 6.

Intel Will Upgrade U.S. and China Facilities During Downturn

Intel Chief Paul Otellini said that the chip maker will spend $7 billion over the next two years to upgrade its U.S. manufacturing facilities.

He made the announcement in Washington, D.C., a surprising place for a chip maker to talk about something as nuts-and-bolts as building a new "fab," or fabrication facility. Over the past eight years, Intel has built six new fabs, and upgraded another. Since 2002 it has invested $50 billion in capital and R&D in the United States. This is the first time an Intel chief executive has rolled out construction plans anywhere east of the Mississippi River.

Even so, this is hardly a political, feel-good exercise. Intel needs its fabs--and in some ways, it doesn't have much choice but to keep marching along to the relentless beat of technology that its co-founder, Gordon Moore, described so succinctly in 1965. Chip power keeps doubling about every 24 months. But only if chip companies push ahead and build smaller chips.

The money would fund factories that use its 32-nanometer manufacturing technology to build faster, smaller chips that consume less energy.

The chip giant will invest in existing manufacturing sites in Oregon, Arizona and New Mexico and will support about 7,000 high-wage, high-skill jobs at those locations -- part of the company's total U.S. workforce of more than 45,000. "The capabilities of our 32nm factories are truly extraordinary, and the chips they produce will become the basic building blocks of the digital world, generating economic returns far beyond our industry," said Paul Otellini, chief executive of Intel, in a statement.

Intel Corp, the world's largest chipmaker, announced it was moving its Shanghai assembly and testing facilities to Chengdu, Sichuan province, dealing a rare blow to the financial hub's role as a magnet to global semiconductor companies.

Observers said that Intel's decision, which will cost Shanghai about 2,000 jobs, stemmed from cost-cutting and many chipmakers were making a similar move.

"Affected by the current macroeconomic conditions, Intel plans to optimize its manufacturing resources in China by consolidating assembly and test operations from Pudong to Chengdu over the next 12 months," Intel China said.

The company said it would continue to operate a research and development centre in Shanghai, one of four on the mainland, and increase its registered capital by $110US million in its Shanghai-based China investment arm. Its other three mainland research and development centers are in Beijing and Shenzhen.

"The trend is irreversible for the chipmaking industry to move deep into the hinterland, where labor costs are lower and governments are keen to offer better incentives than the coastal areas," said Li Ke, the head of information at the Chinese Semiconductor Industry Association.

"Places like Chengdu and Xian have regained their lost ground in the past decade and bank on their heritage in military equipment manufacturing to churn out talent in the area. The current global economic crisis accelerates the shift of tack."

It was the second loss of a leading chipmaker in the Yangtze River Delta over the past few weeks. A $1US billion factory owned by Qimonda, the world's fifth-largest chipmaker, is at a virtual standstill after its German parent filed for insolvency on January 23.

The sharp drop in sales of consumer electronics products worldwide amid the global economic crisis has hit hard the export-reliant mainland semiconductor industry.

Mr. Li said 60 per cent of the country's chipmaking capacity has remained idle since November.

Yang Bin, the chief operating officer of Analysys International, a Beijing research firm, said the relocation of research and development into the country's interior might take some time because international cities like Shanghai remained attractive to scientists and experts.

Mr. Li estimates Intel has poured $500US million into the Shanghai plant and testing unit and the chip plant's annual output is worth 1.8 billion yuan ($2HK billion).

The 13-year-old facilities, based in the industry-heavy Pudong district, was Intel's initial manufacturing project on the mainland, followed by a similar $525US million Chengdu endeavor and an in-progress 300mm wafer fabrication facility in Dalian.

Nancy Zhang, a spokesman for Intel China, said the more than 2,000 affected employees in Shanghai would be offered new jobs in the firm's plants in Chengdu and Dalian, both more than 1,000km away, and in other Intel non-manufacturing operations across the country.

Intel plans to use this particular investment to shift to a new manufacturing process for cranking out faster, smaller processors that use less energy. The company is not building fabs from scratch, but instead refurbishing and upgrading four existing facilities. Executives hope the move will keep Intel's manufacturing capabilities a step ahead of rivals in the market for the so-called x86 processors that power the vast majority of the world's notebook computers, desktop PCs and servers.

"This is the level of technology where we find the sweet spot for a bunch of new markets we have been aiming ourselves at," Otellini said in an interview with Forbes. "You'll start seeing more thin and light products, Apple Air kinds of products."

The gains won't come cheap. "You've got a lot of new equipment involved, and new equipment for manufacturing semiconductors goes in the opposite direction of computer technology: it gets more expensive, not less," says Dean McCarron, founder and principal analyst at Mercury Research.

But the move could continue to help Intel erode the market share of rival Advanced Micro Devices. In the last quarter of 2008, Intel owned 82% of the market for so-called x86 processors--the kind found in the overwhelming majority of servers, desktop computers and notebooks--up from 76.3% for the corresponding period a year earlier, according to Mercury Research.

AMD won't make the shift to 32 nanometer technology until the end of 2010, with volume production beginning in 2011. And while other chip makers, namely IBM, Samsung Electronics, Chartered Semiconductor Manufacturing and ARM, are sharing 32 nanometer process technology that could swing into production as early as the second half of this year, none of them are ready to challenge Intel for control of the PC processor market.

The first Intel processors to use the new technology have been temporarily dubbed "Westmere," and will be used in desktop and notebook systems. The processor will be based on Intel's current "Nehalem" design, but will incorporate features just 32 nanometers wide--71% of the size of Intel's current generation of 45 nanometer processors. The Westmere chips will also incorporate additional graphics capabilities.

For all the dollars involved in the upgraded fabs, there will be few "new" jobs. Instead, Intel executives say the investment will preserve about 7,000 skilled jobs in Oregon, Arizona, and New Mexico, where Intel will begin making the new processors first. Intel generates 75% of its sales outside the United States, but conducts about 75% of its semiconductor manufacturing inside the Unites States, the company said.

And at least for now, there is no end in sight to such spending. Intel is planning on shifting to a new process technology every two years. Long term, that means exploring some pretty exotic technologies, including alternatives to silicon, such as gallium arsenide.

Consumers keep buying the new generations of chips--and that spells a powerful advantage for the company that can build the latest ones.

"Each time we make this kind of transition people go "Big deal, I don't need more power,'" says semiconductor industry analyst Nathan Brookwood. "But two years later if you try to take away their newer, faster machines you'll have to pry it out of their cold, dead hands."

How Will Intel Spend $7B for Fabs?

Intel Corp. has announced plans to spend Rs.34,803.43 crore ($7 billion) to build or expand its fabs in the United States over the next two years. But the question is how will the chip giant spend the money?

The investment comes as Intel is cutting up to 6,000 manufacturing jobs by closing plants in Malaysia, China and the Philippines and stopping production at facilities in Oregon and California.

CEO Paul Otellini said that some construction jobs will be created as the factories are outfitted with the new gear, but added that Intel wanted to deploy the technology in facilities where the company already had lots of engineers and technicians, to speed the time to market.

Intel's investment will be made at existing fabs in Oregon, Arizona and New Mexico. It is investing Rs.34,803.43 crore ($7 billion) to retool existing fabs to the 32nm node, said Edwin Mok, an analyst with Needham & Co. LLC.

"The $7 billion (Rs.34,803.43 crore) is split (about) 50/50 over 2009 and 2010," Mok said in a report. "Unlike 45nm, where Intel built two 'green field' fabs, Intel plans to convert two 45nm fabs and a 65nm fab to 32nm."

And in reality, Intel will lower its capital spending in 2009. "We believe Intel is moderating the rate of 32nm investment, and expect 2009 capex to be lowered to <$4.5 billion (Rs.22,373.64 crore), verses guidance of flat-to-slightly-down from 2008 of $5.2 billion (Rs.25,853.98 crore)," he said. "We believe some of the fabs could have both 45nm/32nm capability. Additionally, we believe Intel will purchase more equipment for FEOL, and less on BEOL."

As part of the plan, Intel will spend Rs.14,915.76 crore ($3 billion) to upgrade its fabs in Chandler, Arizona, according to reports.

Fab 22 and 32 at the Ocotillo campus will be converted into one giant fab, called Fab 32. Fab 32 is a Rs.14,915.76 crore ($3 billion) factory that was originally announced in 2005. In 2007, production of a new generation of microprocessors began at Fab 32, Intel's first high-volume 45nm fab.

As many as 1,500 contractors will be on site at the peak of the work. These include technicians who install new tools, construction workers who reconfigure the factories and manufacturers who make the equipment.

Construction of the 32nm plant will begin by mid-year and completed by the end of 2010, according to The Arizona Republic.

Chandler's factories will be outfitted to produce chips based on 32-nanometer technology. The most advanced chips are currently made with transistors as small as 45 nanometers wide. Intel says 2,000 of those transistors would fit across the width of a human hair.

Intel also has Fab 12 in Ocotillo, which went through a retrofit and reopened in 2003

In addition, Intel will spend Rs.12,429.80 crore ($2.5 billion) in upgrades for its Rio Rancho, New Mexico-based fab, dubbed 11x. Fab 11X is currently beginning production on the next-generation 45nm manufacturing process.

The new investment also includes Rs.7,457.88 crore ($1.5 billion) for expansions in Hillsboro, Ore. Intel first produced 45nm processors in its Oregon development facility, called D1D, in January.

"Intel decided to only release dual-core products on 32nm (for the common platform) and keep quad-cores on 45nm until the next generation platform (in late-2010)," Mok said. "This is different from the 45nm ramp where Intel moves every product from 65nm to 45nm."

And here's another interesting twist: "Instead of integrating graphics on single, same piece 32nm silicon, Intel will put a 45nm graphic die and a 32nm processor die on the same package. We believe Intel needs this flexibility on manufacturing to manage this transition, especially given demand uncertainty," he added.

Asia's Chipmakers Reach Crisis Point

A deepening crisis for Asia’s semiconductor industry may trigger a four-way merger between Japanese and Taiwanese giants, says Leo Lewis, Asia Business Correspondent.

A global price collapse in memory chips, massive oversupply problems and deepening crisis for Asia’s “mission critical” semiconductor industry may be poised to trigger a four-way merger between Japanese and Taiwanese giants.

But analysts said that the combined company – potentially the world’s second-largest chipmaker – might still be forced to apply for billions of dollars in financial bailouts from both the Japanese and Taiwanese governments just to stay afloat through the next six months.

Recent industry discussions about the possibility of creating a “$10 laptop” depend heavily on the fact that the essential semiconductors are currently in huge oversupply and command prices far below the cost of churning them out.

The prospect of a merger between Japan’s Elpida and three of Taiwan’s largest chipmakers was welcomed by investors, who have long viewed consolidation as the only realistic way for the industry to overcome what Damian Thong, an analyst at Macquarie Securities, described as “massive structural headwinds”.

Last month, German chipmaker Qimonda filed for bankruptcy despite urgent attempts to raise funds from the government.

Sources within the industry also believe that the next few months could see the outright collapse of several major names – a prospect that the surviving players would tacitly welcome because a string of bankruptcies would ultimately kill the oversupply problem and restore some pricing power.

The memory chip industry, which is worth around $30 billion a year, has taken a particularly severe beating from since last summer as worldwide sales of consumer electronics have been hammered in all major markets. But even before the financial crisis hit, said analysts at Nomura Securities, the chip industry was in severe trouble because of a 90 per cent plunge in market prices for DRAM chips and a giant overhang because too many chip plants were built worldwide during the good times.

Industry wide, the market price of 1 gigabyte of DRAM memory – among the most commoditized chips in the world – needs to be around $2 for its producers to break even. The chip currently commands just 85cents, and was even lower late last year.

Executives from Elpida Memory, Japan’s largest maker of DRAM chips for PCs, mobile phones and games consoles, met government officials in Taipei today to discuss a combined rescue package for the industry, including the prospect of major emergency consolidation.

The Taiwanese government has identified its semiconductor industry, which consumes a notoriously huge annual research and development budget, as sufficiently central to its national economy to deserve public fund injections of perhaps $2 billion. Government officials have vowed that it will not be allowed to fail, despite the pressures it faces.

In Japan, the government is about to revise the law to allow vast public fund infusions to non-financial firms. Elpida, with or without its merger with the Taiwanese, was expected to become the first company to tap the new facility.

Elpida said that its president, Yukio Sakamoto, would hold consolidation talks with his counterpart at Powerchip Semiconductor – the largest of Taiwan’s memory chip producers. A merger between the two firms, possibly drawing in Powerchip’s local rivals Rexchip Electronics and ProMOS Technologies, would create a company large enough to challenge the semiconductor dominance of Korea’s Samsung Electronics.

Elpida, which has been loss-making for five straight quarters, is testament to the relentlessly boom-bust cycle that has defined the global semiconductor industry since it began. The company was formed in 1999 when the chip divisions of Hitachi and NEC were forced to combine to weather the fallout from the Asian financial crisis. Korea’s Hynix was created in the same year and for similar reasons as the industry struggled to cope with yet another of its periodical production gluts and price collapses.

Chip production, especially in Asia over recent years, has seen wild investment in new factories as producers licked their lips over what seemed to be the unlimited demand for iPods, laptops, digital cameras and mobile

Ramtron Enters Foundry Agreement with IBM

US semiconductor maker Ramtron International has entered into a foundry services agreement with IBM, to install Ramtron's ferroelectric random access memory semiconductor process technology in IBM's Burlington, Vermont, advanced wafer manufacturing facility.

Ramtron said that, once installed, the new foundry supply will serve as a foundation for the introduction of new ferroelectric random access memory (F-RAM) semiconductor products.

Ramtron expects to generate first production wafers during 2010 on the IBM 0.18-micron wafer manufacturing process. IBM will become Ramtron's third foundry supplier for its F-RAM semiconductor products, along with Fujitsu and Texas Instruments.

Bob Djokovich, COO of Ramtron, said: "We look forward to increased manufacturing capacity through our foundry relationship with IBM to help meet the growing demand for Ramtron's F-RAM semiconductor products. This new foundry will provide a manufacturing platform for our new product development initiatives, which will drive new market opportunities for Ramtron. We have high confidence in IBM Microelectronics and believe that the addition of its process development and foundry services will help Ramtron serve the future needs of F-RAM customers around the world."

Navitar Sells Coatings Division

Precision optical systems maker Navitar Inc. announced it has sold its coatings division, Navitar Coating Labs of Newport Beach, Calif., to its president for an undisclosed amount.

The company said it based its decision to sell the division on the success of Special Optics, a Wharton, N.J., firm Navitar acquired a year ago, which has quadrupled the company's optical design capabilities and expanded Navitar's in-house optical coating capabilities.

Navitar supplies precision optics and optical subsystems for applications including semiconductor chip fabrication, flat panel display inspection, solar photovoltaic cell inspection and laser scribing, fluorescence imaging, laser micromachining, lab automation and digital projection, among others.

Special Optics specializes in the optical design and rapid prototyping of complete electro-optical systems. After the acquisition, additional optical design personnel were added at both the Special Optics facilities and Navitar's Rochester, NY headquarters.

"The purchase of Special Optics was the beginning of a dramatic surge in our design efforts and the rapid development of next generation optical systems. Navitar is now one of the few optical companies that can seamlessly integrate optical and mechanical engineering, rapid prototyping, and volume custom lens production in one operation," said Jeremy Goldstein, Navitar co-president.

With in-house optical coating capabilities at the Special Optics facilities in New Jersey, the Navitar Coating Labs facility in Newport Beach became a non-core asset, the company said. Formerly the GM Vacuum Coating Laboratory, Navitar Coating Labs was originally purchased by Navitar in 1998 and has remained a separate organization with its own customer base, producing vacuum-deposited and sputtered coatings for ultraviolet, visible and infrared applications.

Navitar Coating Labs were purchased for an undisclosed amount by its president, Dan Coursen, who has been with the company for over 35 years. The company name will soon be changed to Coursen Coating Labs Inc. with a new Web site, www.coursencoatinglabs.com, Navitar said.

"The transition will be seamless to Navitar Coating Labs customers as they have always been serviced by the same core management group," Goldstein said.