SUNNYVALE, Calif. -- Two semiconductor players are better - and more cost-effective - than one, Advanced Micro Devices (AMD at www.amd.com) and United Microelectronics Corp. (UMC at www.umc.com) have decided:
        AMC, the No. 2 global semiconductor player, and UMC, Taiwan's second-largest chip foundry, have announced a joint-venture alliance that will include establishing a 300-mm wafer fab in Singapore.
        The two firms have not yet released the project's projected figures for capital investment and job creation. Industry analysts, however, are predicting that investment at the fab may run as high as US$3 billion; and total employment will top out in the neighborhood of 1,500 workers, they predict.
        AMD and UMC officials characterized the alliance as signaling "the wave of the future." That future, they added, will be characterized by an increasing blurring of the lines that have traditionally separated semiconductor makers and contract chipmakers.

UMC's 300-mm fab under construction in Singapore (pictured above) steered the joint venture with AMD to the Asian city-state.

        "Today's agreement reflects an innovative response to the tectonic shift that has changed the fundamental economics of the worldwide semiconductor industry," said W.J. Sanders III, chairman and chief executive officer of Sunnyvale, Calif.-based AMD. "The advent of 300-mm manufacturing ushers in a new era for the semiconductor industry."
        The Singapore fab's 300-mm technology will employ larger, dinner-plate-sized silicon wafers that offer substantial boosts in cost-cutting and productivity. But 300-mm fabs must run at near full capacity to capitalize on those potential payoffs. The Singapore joint-venture fab, by providing product to satisfy part of two companies' demands, provides the optimal solution, Sanders asserted.
        "Mega-fabs capable of producing complex semiconductor devices in huge volume on advanced process technologies will deliver significant economic benefits, but also entail significant investment that demands efficient use of capital," said AMD's chairman and CEO. "In this new competitive environment, I believe strategic alliances between leading companies will be the wave of the future."

Strategy Enables AMC to Cost-
Effectively Begin 300-MM Manufacturing

Increasing numbers of semiconductor players are opting to use outsourced chip manufacturers. Whether the AMC-UMC model becomes the norm, however, remains to be seen.
        More certainly, AMD seems to have found a strategy enabling it to cost-effectively make what will be its maiden voyage into 300-mm manufacturing. By comparison, chip king Intel has plans for half a dozen 300-mm fabs on the drawing board. (For more, see "Intel Outside," the May 2001 Site Selection cover story.)
        The announcement of the cost-saving AMC-UMC joint venture comes during financially pinched times in the semiconductor industry. Last year was characterized by seriously weakened demand. And analysts are projecting only mild chip demand in 2002.
        Those market conditions have left very few semiconductor companies outside of the foundry business able to afford owning 100 percent of 300-mm fabs, Sanders conceded during the press conference in Sunnyvale.
        "First and foremost, we wanted to make sure that we removed Intel's one remaining advantage, which was volume capacity beyond what people thought we might be able to get," Sanders said. "The joint venture will make available to AMD for its half [of the joint-venture fab] more square inches of silicon than our Dresden facility," he said in a press conference today. Another advantage for AMC lies in partnering with a firm that already has experience with 300-mm fabs. UMC has 300-mm fabs up and running in Japan and Taiwan. Significantly, the company had a third 300-mm. facility that it was building, but had not yet completed, on a large site in Singapore.
        UMC's 300-mm. expertise will enable AMD to make the transition to next-generation manufacturing at the optimal time, asserted Hector de J. Ruiz, AMD president and chief operating officer. "One of the important benefits of working with UMC on technology development is that we will gain immediate access to an existing 300-mm wafer fab for R&D activities," Ruiz said.
        "In the next few years, we expect to require substantial additional production capacity. We believe the optimum time for us to make the transition to high-volume production on 300-mm wafers is in the mid-2005 time frame, when we expect to be starting production on the 65-nanometer node.

The joint venture with UMC will also add to the output of AMD's fab in Dresden, Germany (pictured above), which is scheduled to add enough capacity to produce 50 million processor a year by the end of 2003.

        "It is time to revisit the basic business model in the semiconductor industry," Ruiz continued. "Flexibility and timing are still the keys to success - but the way to optimize these has fundamentally changed."

New Fab Will Be Added As
Expansion to Singapore Facility

The new fab won't involve building an entirely new facility, AMD and UMC officials explained. Instead, the new fabrication plant will be added on as an expansion to the 300-mm fab that UMC is building in Singapore. That facility already houses a joint venture between UMC and Germany's Infineon Technologies AG. The Singapore facility, however, will be large enough to house both alliances, said UMC Chairman and Chief Executive Robert Tsao.
        The Singapore plant will be owned and operated by AU Pte Ltd., according to AMD and UMC officials. The 300-mm fab will be equipped to produce 10,000 wafers per week, they said. The two joint-venture firms will each own half of the Asian production module, with each taking half of the fab's output. AMD will use that output for its processors. UMC, on the other hand, will make its output from the Singapore joint-venture fab available to its customers. The alliance agreement, however, stipulates that UMC cannot sell its output to AMD's competitors.

JV Also Includes R&D
Collaboration, Foundry Agreement

The AMD-UMC joint venture also includes plans to collaborate in the development of advanced process technologies for semiconductor logic products, officials from the two firms said in Sunnyvale.
        And in a separate foundry agreement between, UMC will produce PC processors to augment production capacity for devices produced on 130-nanometer and smaller-geometry technology at AMD's fab in Dresden, Germany.
        The Dresden fab is scheduled to add enough capacity to produce 50 million processor a year by the end of 2003. That capacity increase is of AMD's earlier announced plan to increase its current market share of 20 percent to 30 percent.
        The company's market-share goals, however, have increased with the new joint venture, AMD officials said.
        "We think we can do better than 30 percent market share over time by working with UMC," Sanders said. "We believe they will be building 130-nanometer devices for us certainly by the end of this year."