This is common knowledge in Taiwan but apparently the guys over at SemiAccurate.com did not get the memo. I hear a name change is in the works: www.RarelyAccurate.com. Remember, these are the same clairvoyants who said TSMC shut down 28nm which as we now know is absolutely false. The QCOM elite stay at the Hsinchu Royal Hotel which is 5 minutes away from UMC HQ. The Royal is also my hangout so I see and hear these guys quite a bit.
This article is titled “UMC Wins Qualcomm’s 28nm Node Contract” but what they mean is second source contract. We all know QCOM is at TSMC 28nm, as is everyone else. QCOM mostly uses the TSMC 28nm LP process for both low power and low cost. TSMC and UMC are the only foundries today with both a 28nm LP (poly/oxynitride) process and 28nm HLP (high k metal gate) processes. GlobalFoundries only has 28nm HLP, so sorry Charlie, QCOM will NOT be “moving majority of production to GlobalFoundries” anytime soon.
If you look through the UMC 2010 annual report you will see that UMC has a handful of customers that do the bulk of the business. Leading those is Texas Instruments. TI went fab-lite 5 years ago and chose TSMC for first source and UMC for second source. First tape-outs go through TSMC because TSMC is always first to market with a new node. Once UMC ramps production the fight for the best wafer price begins and that will go to UMC, which is why TSMC’s profit margins are 31% versus UMC’s 9%.
Does TSMC enjoy doing all of the bleeding edge work only to get shut out when serious production starts? Of course not, it is very frustrating but second sourcing is the nature of the fabless semiconductor business.
Qualcomm and Broadcom are different as they buy wafers from multiple fabs at 40nm and above: TSMC, UMC, SMIC, and GFI, because that is the way they do business. Other companies like Altera, Nvidia, and Oracle, single source at TSMC which is a much more intimate relationship but capacity can always bite you in the ass which at 28nm it certainly did.
One thing you have to understand is that the Fabless – Foundry relationship is hugely contractual. Fabless companies sign up for a certain wafer count in a defined time period and there are penalties on both sides if it is not met. To my knowledge, based on what I have read and heard at the Royal Hotel, TSMC has fulfilledALL contractual commitments on 28nm. Don’t believe me? Ask that question on the next QCOM or NVDA conference call. “Did TSMC meet the contracted wafer delivery numbers at 28nm thus far?”
What happens if the Fabless Company needs more wafers than in the contract? That is called a “Hot Lot” or a rush order which they pay a premium for, up to 50% I have heard. Correct me if you know otherwise.
20nm will be more of the same. The TSMC 20nm first customer list will be the same as 28nm plus maybe Apple. The same yield drama will ensue only to be debunked. Some will stay at TSMC 20nm, some will second and third source if they can. TSMC’s recent CAPEX increase is for 20nm capacity so the race is definitely on!
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