Intel Opens Door to Contract Chip Manufacturing

PC World

Intel on Tuesday said the company would begin contract manufacturing of chips, a change from the company's policy of serving only itself through its factories.

The company earlier this week said it would make a line of FPGA (field-programmable gate array) products for Achronix Semiconductor using its upcoming 22-nanometer manufacturing process. Intel will start manufacturing chips for laptops, desktops and servers using the 22-nm products later next year.

"We are ... open to adding other customers beyond Achronix," said Bill Kircos, an Intel spokesman, via e-mail on Tuesday. He declined to say when the company would start signing up other customers.

Intel advances its manufacturing process every two years, and invests billions to upgrade factories. The company last month said it would invest between US$6 billion to $8 billion over multiple years to build a new plant and improve existing manufacturing plants in the U.S. A part of that investment will be applied to making 22-nm chips, which are faster and more power-efficient than chips made using the current 32-nm process.

The company also announced the opening of a $1 billion chip testing and assembly facility in Vietnam last week.

Making FPGAs for Achronix would make up a tiny amount of overall chip manufacturing capacity, Kircos said. Achronix makes specialized integrated circuits and chips for sectors like networking, communication and high-performance computing.

By accepting a small customer like Achronix, Intel is dipping its toes in the contract manufacturing waters, analysts said. Intel's chip development and manufacturing are tightly linked, and it could be years before Intel is ready to compete with large-scale contract manufacturers such as TSMC (Taiwan Semiconductor Manufacturing Co.), UMC (United Microelectronics Corp.) or GlobalFoundries.

"It's more of a test drive than a real commitment," said Dan Hutcheson, senior analyst at VLSI Research, which focuses on the semiconductor and chip manufacturing industries.

Intel has a good reason to look at FPGAs as they are "an incredibly profitable market," worth $4.7 billion, Hutcheson said.

Intel excels at chip manufacturing and has an advantage over rivals such as TSMC with its manufacturing process, Hutcheson said. Intel may believe it is faster than rivals at advancing process technology, he said.

Higher capital investments are also needed to advance manufacturing processes, said Nathan Brookwood, principal analyst at Insight 64. Intel perhaps realizes that contract manufacturing could fill extra capacity, and offsettin the high fixed cost related to making chips.

"Every generation gets more expensive," Brookwood said. "Looking forward, you could see where you might want to have these third-party customers to help offset some of the fixed expenses."

Brookwood said Intel may also be taking a page from rival Advanced Micro Devices, which last year spun-off its manufacturing operations into a separate entity called GlobalFoundries. AMD explicitly said it spun off Globalfoundries as it couldn't justify enough demand to make investments to scale production, Brookwood said.

"They could see the same sort of phenomenon that Advanced Micro Devices saw half a dozen years ago," Brookwood said.

Intel has mostly been serving itself through its factories, and will have to learn about supporting third parties, Brookwood said. Contract manufacturers have lots of experience supporting third parties, and have basic designs for different Arm, MIPS and PowerPC cores to attract fabless customers.

If Intel is looking at the foundry business model, the company may initially make specialized third-party chips for devices like smartphones and TVs, markets the company is going after aggressively, said Shane Rau, research director at IDC.

These chips could help improve sales of Intel's processors, while using up factory capacity, Rau said.

"The need to fill the fab is ever present," Rau said.

Texas Instruments Buys Chip Plants In Japan From Spansion Unit

The Wall Street Journal

Texas Instruments Inc. (TI) said Wednesday it will purchase two semiconductor wafer manufacturing plants and equipment in Japan from a unit of Spansion Inc. (SPSNQ) to boost capacity for chips used in a variety of electronic gadgets.

Financial terms of the transaction weren't disclosed.

In a statement, the U.S. chip maker said it will buy a 200-millimeter wafer fab currently in operation in Aizu-Wakamatsu, Japan, that is capable of expanding Texas Instrument's analog revenue by more than $1 billion. The second facility will be either a 200-millimeter or 300-millimeter fab, it said.

A plant using 300-millimeter wafers is more advanced than a 200-millimeter wafer plant, cutting a chip maker's manufacturing costs by as much as 30%.

"This acquisition is the most recent in a series of analog manufacturing expansions announced by TI over the past 24 months which collectively will add capacity for more than $3.5 billion of additional analog revenue per year when fully operational," the company said.

Chip makers globally are expanding capacity this year as demand improves along with the recovery in the global economy. Demand has been stronger than expected thanks to the emergence of new applications such as smartphones, e-readers and tablet PCs in which chips are widely used. Texas Instruments' rivals Intel Corp. and Samsung Electronics Co. have been posting strong earnings in the most recent quarter, thanks to a rebound in demand and higher prices.

The company said it will offer employment to a majority of Spansion Japan Ltd. employees in Aizu-Wakamatsu, Japan, where the facilities are based. It plans to run the first fab and preserve the second facility for future capacity expansion, it said.

The company's analog chips are widely used in set-top boxes, electronic books and smartphones.

Based in Sunnyvale, Calif., Spansion filed for bankruptcy protection in March 2009, weighed down by $1.5 billion in debt. The company, which makes flash-memory chips used to store data in iPods and digital cameras, exited bankruptcy in May.

Samsung Forecasts Record 2Q Operating Profit

Associated Press

 

Samsung Electronics Co. forecast Wednesday that operating profit rose to a record high in the second quarter on what analysts said were strong sales of computer memory chips and liquid crystal displays.

The Suwon, South Korea-based company said it expects consolidated operating profit of between 4.8 trillion won and 5.2 trillion won ($4.2 billion) for the three months ended June 30, according to a statement. That would beat the company's previous all-time high of 4.41 trillion won set in the first quarter.

Samsung, a major force in the global electronics industry, is the world's biggest seller of computer memory chips, liquid crystal displays and flat-screen televisions. It ranks No. 2 in mobile phone handsets after Finland's Nokia Corp.

The company gave no reason for the quarterly performance and will formally announce second-quarter earnings at the end of this month, according to spokesman Jason Kim .

Samsung does not release net profit forecasts. The company recorded net profit of 2.25 trillion won in the second quarter of 2009, a figure based on South Korean accounting standards, according to spokesman James Chung. Samsung adopted international financial reporting standards, or IFRS, from the first quarter of this year.

Lee Min-hee, an analyst at Dongbu Securities in Seoul, forecast that Samsung will record second-quarter net profit of 4.2 trillion won.

Operating profit is seen as a direct indicator of business performance before taxes, dividends, asset sales and other items that are figured into net profit or loss.

Analysts said Samsung benefited in the second quarter from strong sales of liquid crystal displays as well as DRAM, or dynamic random access memory, chips used mostly in personal computers. Seo Won-seok, of NH Investment & Securities in Seoul, estimated that the company's DRAM profit margin exceeded 40 percent.

The outlook for extending its record operating profit performance the rest of this year was uncertain.

"Many investors doubt that this trend is sustainable in the second half as the global economy slows down," said Lee of Dongbu Securities.

Samsung began issuing earnings estimates, or guidance, last year in hopes increased transparency would help minimize market speculation over its performance. The estimates include the performance of its overseas and domestic subsidiaries.

Samsung estimated consolidated sales of between 36 trillion won and 38 trillion won for the second quarter. That compares with sales of 32.51 trillion won a year earlier, a figure Samsung recalculated to conform with IFRS.

The company said in May it would invest a record 26 trillion won this year in capital spending and research and development as it bets on future growth, despite questions about the global economic outlook. Samsung said investment in new production facilities meant it expects to hire 10,000 new workers this year.

Shares in Samsung fell 0.8 percent to close at 769,000 won Wednesday. The company's stock price surged 77 percent in 2009.

Samsung Plans Record Investments to Widen Lead in Chips, LCDs

Bloomberg

Samsung Electronics Co. plans to outspend Intel Corp., International Business Machines Corp. and Sony Corp. combined to widen its lead as the world’s largest maker of memory chips and flat-panel displays.

Capital expenditure will jump to 18 trillion won ($15.6 billion) this year from 8 trillion won in 2009, Suwon, South Korea-based Samsung Electronics said in a statement today. Including research and development, spending will increase to 26 trillion won, it said.

The largest spending budget in the technology industry may help Samsung build on its market lead and force smaller competitors to boost investments to keep up. Samsung’s purchases may be a boon for equipment makers including Applied Materials Inc. as the industry recovers from the global recession.

“I believe this massive amount of spending during tough times will cement Samsung’s leadership,” said Kim Young Joon, who oversees $932 million of stocks at NH-CA Asset Management in Seoul as head of equity investment, including Samsung shares. “The investments could pressure competitors to follow suit, which could be a burden for smaller rivals that aren’t as financially strong as Samsung.”

Samsung fell 3.2 percent to close at 784,000 won on the Korea Exchange, compared with the benchmark Kospi index’s 2.6 percent decline.

‘Substantial’ Increase

Samsung, which said last month it would “substantially” increase its 2010 spending budget, plans to invest 9 trillion won in the memory-chip business, compared with an earlier budget of 5.5 trillion won. Spending on liquid-crystal displays will rise to 5 trillion won from 3 trillion won, it said.

Investments for semiconductors will include a new production line for memory chips and adding capacity to an existing manufacturing facility, Samsung said. The company also plans to build a new production line for LCDs on so-called eighth-generation technology to meet rising demand.

Today’s decision “was made to address indications of improving market conditions throughout the global consumer electronics and IT industries, while further strengthening Samsung’s leadership in memory semiconductors and LCD panels,” Samsung said in the statement.

Samsung, which had about 20 trillion won in cash, equivalents and short-term investments at the end of March, is able to spend “aggressively” compared with rivals who are still recovering from the industry’s three-year slump, according to Lee Sun Tae, a Seoul-based analyst at Meritz Securities Co.

Return to Profit

The computer-memory chip industry posted net losses for 10 consecutive quarters before returning to a profit last year, El Segundo, California-based researcher, ISuppli Corp. said this month. Weaker demand amid the economic downturn prompted manufacturers to cut production and investment plans, helping ease the industry glut.

Samsung posted losses at its semiconductor division in the fourth quarter of 2008 and the following three-month period after chip prices declined. That compared with seven consecutive quarterly losses for Hynix between 2007 and 2009 and Micron’s three years of losses.

Samsung said last month it would “substantially” increase spending in 2010 after first-quarter net income jumped almost sevenfold to a record.

Samsung’s investment in chip-making technology has helped the company reduce manufacturing costs and make faster semiconductors. Demand for personal computers, projected to increase 20 percent this year by researcher Gartner Inc., is also driving up computer-memory prices.

“Distributed Unevenly”

“The benefits of the current up-cycle will be distributed unevenly as the gap between first tiers and second tiers has widened, in terms of both capability to add capacity and technology,” Chung Chang Won, an analyst at Nomura Holdings Inc., wrote in a report last month.

Samsung had a 32.3 percent share of the global dynamic random access memory, or DRAM, market in the first quarter, compared with second-ranked Hynix’s 21.5 percent, according to Dramexchange Technology Inc., operator of Asia’s biggest spot market for semiconductors. Japan’s Elpida Memory Inc. had a 17.4 percent share, while Micron had 14.1 percent.

While investment by computer-memory chipmakers will almost double to $8.4 billion this year, it’s still 32 percent less than 2008, according to Taipei-based Dramexchange.

Don’t Have Potential

Samsung’s spending isn’t a sign that the market “is going to fall apart,” according to Song Myung Sup, an analyst at HI Investment & Securities Co. “If the smaller companies join and increase investment together, then that can be a danger signal. But right now, the others don’t seem to have the potential.”

Global revenue for DRAM, which temporarily holds data and helps computer processors run multiple programs simultaneously, will probably climb 40 percent to $31.9 billion this year, ISuppli Corp. said in February.

Samsung, the world’s largest LCD maker, is also boosting spending for the flat screens to meet rising demand. LG Display Co., the second-largest, last month raised its budget by about 38 percent to 5.5 trillion won for 2010.

Global shipments of LCD TVs may rise 24 percent to more than 180 million units in 2010, Austin, Texas-based DisplaySearch said in March.

Samsung in April forecast profit, which exceeded that of rival, iPhone-maker Apple, in the latest quarter, will probably rise in the current period on sales of chips, flat-screens, TVs and mobile phones.

Analysts predict Samsung’s earnings growth will probably extend until the third quarter, while higher memory-chip and flat-panel prices will help the company post record profit in 2010.

Hynix Turns 1st Quarter Profit as DRAM Prices Rise

 

SEOUL, South Korea (AP) - Hynix Semiconductor reported its third consecutive quarter of profit as sales more than doubled to a record high and prices for its mainstay computer memory chips increased.

Hynix, the world's second-largest manufacturer of computer memory chips, earned 822 billion won ($742 million) in the first quarter ended March 31, the company said Thursday in a release. It reported a net loss of 1.18 trillion won a year earlier.

The net profit was the highest ever for a first quarter, said company spokeswoman Park Seong-ae.

Sales more than doubled to a quarterly record of 2.82 trillion won from 1.31 trillion won the year before, Hynix said.

It was the company's third straight quarter in the black. Hynix recorded its first net profit in two years for the third quarter of last year as prices for memory chips rose amid a rapid recovery in the market.

Hynix Semiconductor Inc. manufactures DRAM chips, used mostly in personal computers. It also ranks No. 3 in the world in NAND flash memory chips, used in products such as digital cameras, music players and smartphones.

Hynix supplies NAND chips to Apple Inc. for its iPod and iPhone products and mobile DRAM chips for the iPad, according to Hynix.

The Icheon, South Korea-based company competes with world memory chip leader and South Korean rival Samsung Electronics Co. as well as Japan's Toshiba Corp.

Hynix said that average selling prices for its DRAM chips rose 3 percent in the first quarter from the fourth amid tight supply and strong demand, while shipments increased 6 percent. NAND flash memory prices, however, fell 8 percent and shipments were flat.

"Overall demand for DRAM was healthier compared with typical seasonality, mainly led by strong PC demand from consumers and Chinese New Year holiday," Kim Min-chul, Hynix's chief financial officer, told analysts on a conference call.

He said DRAM prices did much better than expected due to strong demand amid tight supply.

Kim added that as the global economy continues to recover, demand from developed markets and corporations is expected to fuel purchases of personal computers. He said Hynix projects annual personal computer shipments will grow by more than 15 percent.

Hynix has been making a comeback after recording seven straight losses through the second quarter of last year. The company cut costs, slashed executive pay and positions and encouraged early retirements. It also received 800 billion won in fresh capital via bank loans and a share offering.

Shares in Hynix, which released earnings results before the stock market opened, rose 0.5 percent to close at 28,700 won. Hynix shares more than tripled in 2009.

Intel, Micron Unveil New 25nm NAND Flash Chip

eWeek

The new 25nm, 2bit/cell chip can hold 8GB of digital capacity, more than 10 times the capacity of a standard compact dic [700MB]. The chip measures a mere 167mm2 -- small enough to fit through the hole in the middle of a compact disc.

Intel and Micron Technology reset the NAND flash capacity bar a little higher and the chip size threshold a little lower Feb. 1 with the introduction of the world's first 25-nanometer solid-state processor.

The new 25nm, 2bit/cell chip can hold 8GB of digital capacity, more than 10 times the capacity of a standard compact disc [700MB]. The chip measures a mere 167mm2 -- small enough to fit through the hole in the middle of a compact disc.

"This is not only the smallest NAND lithography in the world, it is the smallest silicon manufacturing technology in the world," Intel Marketing Director Troy Winslow told eWEEK on a conference call.

"This is now the largest capacity multi-level cell device on the market, at 8GB. We were the first on 34nm, now we're the first on 25nm."

The smaller size allows multiple 8GB chips to be packaged more economically to increase storage capacity. The new 25nm 8GB device reduces chip count by 50 percent compared to previous process generations, allowing for smaller, yet higher-density, designs and greater cost efficiencies, Winslow said.

For example, a 256GB solid-state drive now can be enabled with only 32 of these devices, versus 64 previously, Winslow said. A 32GB smartphone needs only four, and a 16GB flash card requires only two, he said.

NAND flash memory, used in consumer devices such as smartphones, digital cameras, and personal music and media players, stores data and retains the information even when the power is turned off. NAND flash also is gaining market share for use as components in high-performance solid-state drives for servers and storage arrays.

IM Flash Technologies, Intel and Micron's NAND flash joint venture, continues to cram more capacity onto tinier pieces of silicon about every six to eight months. IMFT debuted its 34nm, 3Bit/cell NAND flash chip last August.

The 25nm/8GB device is sampling now and is expected to enter mass production in Q2 2010, Winslow said.

Texas Instruments To Open New U.S. Chip Plant

From the Business Review

After nearly five years of waiting, Richardson, Texas, will see the opening of a 1.1-million-square-foot chip-manufacturing plant from Texas Instruments Inc. that will eventually employ up to 1,000 people.

The plant's October launch was announced by officials of Dallas-based TI Tuesday morning.

TI broke ground on the plant in 2004, but the building sat unused for years while TI waited for the right time to open it. That time has come, company officials say.

"We're seeing increased demand for the high-performance analog (chips) that this (facility) will be manufacturing," said Kim Morgan, a TI spokesperson, in an interview with the Dallas Business Journal, a sister publication of The Business Review. "Just like you can't predict downturns, you can't predict upturns ... Opening the facility now will position us for future growth."

The plant is the first chip-manufacturing plant to open in the U.S. since 1996, and is the first globally to use 300-millimeter silicon wafers to manufacture analog chips. Chips are built on, and cut from, silicon wafers, most of which are currently 200 millimeters.

"We can fit more chips onto a wafer. . . The more chips you fit on a wafer, the lower the cost and greater the efficiency in making them."

GlobalFoundry's $4.2 billion computer chip plant under construction in Malta, N.Y., will make chips also on 300mm wafers. That plant, which will eventually employ 1,400 people, is set to opne in 2012.

The Richardson facility plans to ship its first round of chips from the new location by the end of 2010, TI said in a statement.

Once the company’s first phase of equipment is up and running, Texas Instruments expects it will be able to ship more than $1 billion worth of analog chips annually. TI has only 13 percent of the roughly $35 billion to $36 billion market for analog chips, although officials view that as an opportunity for the business to grow.

The need to create more chips at once inspired Texas Instruments to begin pursuing the development of the plant several years ago.

“The time is right for this investment,” said Rich Templeton, the company’s chairman, president and CEO. “Customer demand for analog chips is growing, and there’s tremendous desire to save energy and protect the environment. The chips produced here will help our customers make thousands of electronic products that are more energy-efficient. It is significant that these devices will be made here, in North Texas, in one of the industry’s most environmentally responsible fabs.”

TI’s (NYSE: TXN) chips are used in electronic devices such as smartphones, Netbooks and computer systems. The company said Tuesday it will immediately begin hiring 250 people to fill positions at the plant.

“These are high-quality, well-paying engineering, manufacturing and administrative jobs for our North Texas region," Templeton said in a statement. "The infrastructure that a facility like this requires will create other indirect jobs with suppliers and support services."

Unity Semiconductor Corp. Unveils Latest Evolution In Memory Chips

Story from the Wall Street Journal

After seven years of labor in secrecy, a Silicon Valley start-up is disclosing one of the most radical efforts yet to replace today's memory chips.

Unity Semiconductor Corp. hopes to provide an alternative to chips known as NAND flash memory, which are a mainstay of products such as digital cameras and Apple Inc.'s iPod music player. The closely held company says its technology can store four times the amount of data as NAND chips of the same size, and record data five to ten times faster.

Unity said it has working prototypes but doesn't expect to offer chips commercially for two years. Besides completing a finished product, analysts say, the start-up must find a big manufacturing partner.

"For anybody to come out with a new memory it must be adopted by one of the major NAND makers," said Alan Niebel, an analyst at Web-Feet Research who has been briefed on Unity's plans.

Unity Chief Executive Darrell Rinerson, formerly an executive at memory chip specialist Micron Technology Inc., said Unity hopes to forge a partnership with an existing memory chip maker, but didn't disclose a candidate.

NAND chips, which retain data even when electrical power is switched off, have become an essential commodity in the tech sector. But price competition has whipsawed suppliers. The research firm iSuppli estimates world-wide sales of NAND chips fell 15% in 2008 to $11.8 billion.

NAND also faces an uncertain future. As companies keep shrinking circuit dimensions, many experts believe that at some point it may become impossible to boost the storage capacity of the technology any further.

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Prominent candidates to succeed today's memory-chip technology

* PCM: Phase-change memory records data by causing material to change from a crystalline state, or phase, to a disordered state.
* MRAM: Magnetoresistive random-access memory uses magnetic charges rather than electric charges to store data.
* FRAM: Ferroelectric random-access memory is another technology for exploiting magnetic rather than electric charges.
* RRAM: Resistive random-access memory stores data as a change in the electrical resistance of materials under varying circumstances.
* NRAM: A technology based on carbon nanotubes, materials that can be fabricated in ultrasmall dimensions.
Source: WSJ Research

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Unity's approach is particularly unusual, dispensing with basic concepts such as the use of electrons to store data. The company bases its technology on ions -- charged particles formed by the addition or loss of electrons -- and the way they move through certain materials, Mr. Rinerson said.

Memory chips, which are fabricated on silicon wafers, typically store data using transistors in cells that are laid out in a two-dimensional pattern. Unity says its technology, which uses no transistors, makes it possible to stack four cells on top of each other and pack more data in less space.

In another unorthodox tactic, Unity plans to buy partially finished wafers from services called foundries. Mr. Rinerson said costly production tools will only be needed to add final layers on the wafers. As a result, a new factory to make Unity's chips might cost around $1 billion, instead of $4 billion, he said.

Unity plans to jointly finance a factory with the aid of the unnamed manufacturing partner; both companies would sell a portion of the output under their own brands. With the aid of about 60 patents issued so far, Mr. Rinerson said Unity's intent is "to keep others out, to not allow this technology to be commoditized."

Unity, which has raised close to $75 million in venture capital so far, expects by mid-2011 to offer a commercial chip that stores 64 gigabits -- about twice the capacity of the most advanced NAND chips on the data centers market now. The will help in applications where chips have played a limited role to date, Mr. Rinerson predicted.

But the company faces many hurdles, including proving it can churn out chips at competitive prices. Jim Handy, an analyst at the market-research firm Objective Analysis, said other NAND alternatives have been proposed before that never met that challenge. "The memory game is always about cost," he said.