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Semiconductor Expert Forum

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The GlobalFoundries Enigma

The GlobalFoundries Enigma
by Daniel Nenni on 02-09-2010 at 9:31 pm
Categories: Foundries, GlobalFoundries

When AMD sought to shed its costly manufacturing unit Ibrahim Ajami saw an interesting opportunity, one that will eventually bring semiconductor manufacturing to Abu Dhabi. Let’s start with the recent interview published with Ajami, the 34 year old Chief Executive Officer of Advanced Technology Investment Company (ATIC), which is owned by the Government of the Emirate of Abu Dhabi, and is the controlling shareholder of GlobalFoundries (GFI).

GlobalFoundries wants 30% of the made-to-order chip market within three years. “Am I setting very aggressive targets? Yes,” Ajami said in a Jan 28 interview in Abu Dhabi. “We need to be a $5 billion company in the next two to three years.” A 30% share would take GlobalFoundries well past United Microelectronics Corp (UMC), making it the world’s second-largest contract manufacturer of chips after Taiwan Semiconductor Manufacturing Co (TSMC).

Mr. Ajami also dispelled recent rumors: “ATIC won’t buy the rest of GlobalFoundries (AMD owns 34%) and the company has no interest in acquiring either United Micro or South Korea’s Hynix Semiconductor Inc.”, Ajami said. “It doesn’t fit with our strategy right now,” he said. “UMC is another foundry in Taiwan and we’re not looking to go there right now and Hynix is a memory company. Memory is not what we’re focused on right now”.

Ajami earned his BS degree from Northeastern University in Boston in 1998 and his MBA from the University of Southern California in 2004. His semiconductor experience comes from the creation of a Silicon Valley startup called ViralSounds Inc., and he worked for Packard Bell/NEC. Ajami, associate director of the acquisitions unit of Mubadala, was tapped to become CEO of ATIC and led the $7.5 billion acquisitions of AMD manufacturing and Chartered Semiconductor that we now call GlobalFoundries.

As I mentioned in TSMC versus GlobalFoundries Part I and Part II, GFI will compete head-to-head with TSMC in the first source semiconductor market, while UMC and SMIC are content to be second and third source semiconductor manufacturers. GFI has not been shy about their challenge to TSMC’s wafer supremacy and TSMC has responded in kind by increasing capital expenditures, increasing R&D expenses, and hiring thousands of engineers.

During my January visit to Taiwan there was definitely excitement in the air at TSMC. The Fab lobbies were filled with job applicants, the Fab cafeterias and coffee shops were abuzz, and meetings were much harder to coordinate, a very big change from a few months ago. On a side note, the food in Fab 12 is by far the tastiest and EVA Airlines is the absolute best carrier from the US to Taiwan, but I digress.

Whether or not GFI is a serious threat to TSMC’s foundry supremacy, TSMC is certainly using GFI’s public relations activities to motivate employees. Déjà vu when the deep pockets of the Chinese government funded SMIC. Unfortunately, as it turned out, SMIC was a sheep in wolf’s clothing. GFI on the other hand looks more like a wolf in an Armani suit.

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TSMC 28nm Design Advisory

TSMC 28nm Design Advisory
by Daniel Nenni on 01-31-2010 at 11:49 pm
Categories: Foundries, TSMC

Transistors may be shrinking but atoms are not. Transistors are now just a handful of atoms so it matters even more when a couple of those atoms are out of place. Process variations, whether they are statistical, proximity, or otherwise, have got to be thoughtfully accounted for if we are to achieve the low-power, high-performance, and high yield design goals at 28nm.

A recent seminar byTSMC and Synopsys entitled “32/28nm Challenges – The EDA Vendor and Foundry Perspective” brought perspective to the coming design challenges. The TSMC section presented by Tom Quan is well worth seeing. Tom Quan has 30 years design and product development experience in the AMS market space. You won’t find a more engaging speaker on process variation than Tom Quan.

TSMC’s value proposition for moving to the 28nm process supports Moore’s Law with a better than 2X gate density at 28nm versus 40nm, a significant speed gain, plus reduced power leakage and an overall cost reduction. Target applications for 28nm include high performance computing and peripherals, low power devices such as HD video cameras, mobile internet and mobile computing, home and portable entertainment. TSMC’s Advanced Technology Roadmap is on track for the low power 28nm process in Q210 and high performance-high K metal gate 28nm process in Q310.

Tom Quan’s emphasis on the importance of “Variation-Aware Design” is justified. To start with, a smaller manufacturing window with much less margin to begin with equals more variation. Add to that the fact that global variation is constant, but local variation increases significantly as channel width and length decreases, and you will have a requirement for variation-aware design tools prior to GDS.
The overall TSMC design ecosystem emphasis is on collaboration between design and process. Tom divided this responsibility into Foundry: better SPICE accuracy, DFM rules, providing variation aware reference design kits (RDKs), and restricted design rules (RDRs). Designers: must be aware of layout effects, analyze-fix variation-aware methodologies will be required for area-yield tradeoffs, and pre- vs. post-layout simulation accuracy. The clear implication is that designers need to change their mindset in adopting a variation-aware design methodology as a requirement versus a luxury.

The conclusions are obvious. Partnerships between the foundry, EDA and SemIP providers, and customers will be required to eliminate silicon waste at 28nm. Partnerships that are friendly and cost effective, with shared responsibility will result in productive and innovative solutions to even the most technologically advanced challenges.

I’ve covered semiconductor process variation in my blogs on TSMC Process Variation, TSMC 40nm Yield Explained, Moore’s Law and 40nm Yield, and most recently Moore’s Law and 28nm Yield. I also work on process variation with the foundries and top semiconductor companies through strategic relationships with Solido Design Automation. Device sensitivity and process variability is something you will have to carefully model and design to at 28nm so be sure and look for variation aware methodologies before you start.

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Moore’s Law and 28nm Yield

Moore’s Law and 28nm Yield
by Daniel Nenni on 01-24-2010 at 10:44 pm
Categories: EDA, Solido

This blog is a follow-up to my second most viewed page Moore’s Law and 40nm Yield, with a strong recommendation of how to design for yield at the advanced nodes (32/28/22nm) with Verify High-Sigma design technology.

Case in point: Circuit blocks such as complex standard cells or memory bit cells are repeated thousands or even millions of times on a die. For the overall chip to have good yield, the repeated block must have extremely high yield. Calculating yield in this context is very important due to increasing process variations at each new technology node.

One approach would be to use Monte Carlo sampling. Unfortunately, this would require far too many simulations: a circuit with 99.9999% yield would need, on average, 1 million samples from the true distribution just to observe a single failure against circuit specifications.

Compared to a plain Monte Carlo simulation, Verify High-Sigma design is orders of magnitude faster for estimating yields of high sigma circuits.

With a normal Monte Carlo run, process points are drawn directly from the process variation distribution. The problem, as noted earlier, is that far too many samples are needed in order to get failures in the design. Verify High-Sigma Design changes this by sampling from a different distribution, in which a greater proportion of samples are failures. This approach is a variant of importance sampling. Verify High-Sigma Design estimates the yield of high-sigma circuits by:

[LIST=1]

  • Creating a new sampling distribution such that a greater proportion of samples are failures.
  • Drawing samples from the new distribution, simulating them, and seeing if they meet specifications.
  • Estimating yield by mathematically unbiasing the samples, according to importance sampling formula.
  • Computing yield accuracy, using a statistical technique called bootstrapping.To illustrate that Verify High-Sigma (VHS) design returns yield estimates as accurate as a standard Monte Carlo (MC) run, the following table compares MC and VHS yield estimation results across 6 different circuits on moderate-yield circuits (moderate yield so that MC only needs a moderate number of samples to make a good yield estimate). For all 6 cases, the yield estimates for VHS and MC agree because their yield confidence bounds overlap.

    [TABLE] style=”width: 528px”
    |-
    | style=”width: 107px” | Circuit
    | style=”width: 209px” | MC Yield (up to 10K samples)
    | style=”width: 213px” | VHS Yield (250 samples)
    |-
    | style=”width: 107px” | Current mirror
    | style=”width: 209px” | 99.580% (99.433% – 99.689%)
    | style=”width: 213px” | 99.709% (99.569% – 99.808%)
    |-
    | style=”width: 107px” | GMC
    | width=”209″ | 99.836% (99.519% – 99.944%)
    | width=”213″ | 99.831% (99.752% – 99.885%)
    |-
    | width=”107″ | LNA
    | width=”209″ | 99.950% (99.883% – 99.979%)
    | width=”213″ | 99.888% (99.760% – 99.9662%)
    |-
    | width=”107″ | Folded opamp
    | width=”209″ | 99.221% (98.027% – 99.699%)
    | width=”213″ | 99.490% (98.639% – 99.370%)
    |-
    | width=”107″ | CP
    | width=”209″ | 99.597% (99.410% – 99.725%)
    | width=”213″ | 99.522% (99.291% – 99.682%)
    |-

    When design teams and managers consider which advanced technologies to incorporate in their flows, their metrics include quality of results (QoR), use model, ease of adoption, and cost. Verify High-Sigma design technology addresses each of these metrics. Designers can improve the quality of their results by changing their designs using High-Sigma extracted corners. They can statistically verify their designs with SPICE accuracy in a relatively short amount of time.

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TSMC versus Global Foundries Part II

TSMC versus Global Foundries Part II
by Daniel Nenni on 01-17-2010 at 11:52 am
Categories: Foundries, GlobalFoundries, TSMC

The foundry business is a tough one. The golden age of semiconductors is clearly over and what remains is a highly competitive marketplace. This blog follows up my original TSMC vs Global Foundries which is the single most viewed page on my site.

Case in point #1: Founded in 2000, SMIC Semiconductor Manufacturing International Corporation is billed as one of the leading semiconductor foundries in the world and the largest and most advanced foundry in Mainland China. Harvard Business School even wrote a case study on SMIC’s business model, characterized as a Reverse Build-Operate-Transfer (BOT). Unfortunately cheap labor does not a foundry make. It takes highly experienced workers, advanced manufacturing technology, strategic marketing, and an ultra competitive business model. The semiconductor foundry business is a marathon, not a sprint. Also see TSMC vs SMIC.

Case in point #2: Chartered Semiconductor was created in 1987 as one of the world’s dedicated semiconductor foundries. Chartered Semiconductor continued a string of losing quarters until the Abu Dhabi government-owned Advanced Technology Investment Company (ATIC) acquisition was passed by investors in a majority vote. Shareholders bought Chartered shares at the 1999 initial public offering (IPO) price of S$3.34, the shares were later consolidated at 10 for 1, so they effectively cost S$33.40 each. ATIC paid S$2.68 a share. Chartered had experienced workers and strategic marketing (Common Platform), but lacked the advanced manufacturing technology and competitive business model to be successful.
2010 brings us a truly global foundry with the ATIC acquisitions of the manufacturing arm of AMD and Chartered Semiconductor. Global Foundries now employs 10,000+ people spanning 3 continents and 12 locations with manufacturing operations in Singapore, Dresden, Germany, and a new leading-edge fab under construction in Saratoga County, New York. Global Foundries was founded with $4.5 billion in cash, with future backing going up to $7B. The New York fab alone will cost an estimated $4.5B.

GFI now has about $3B in revenues from more than 150 customers that include many of the world’s top fabless and fab-lite companies, such as AMD, Qualcomm, STMicro, IBM, and Toshiba. Process geometries in production are: .5um, .35um, .25um, .13um, .18um, 90nm, 65nm, and 45/40nm. Process geometries in planning are: 32/28nm and 22/20nm. Planned capacity is 1.6 million 300mm wafers annually by 2014, supplemented by 2.2 million 200mm wafers a year. Global Foundries has highly experienced workers from Chartered Semiconductor and AMD, cutting edge manufacturing technology from AMD and IBM, strategic marketing from Common Platform, add in a competitive business model and you will have the #2 foundry in the world.

In comparison TSMC has 23,000+ employees and will add 3,000 more in 2010. With $10B+ in annual revenues, TSMC accounts for 50% of the foundry market revenue and 80% of the profits. TSMC is considered a first source for semiconductor manufacture, meaning that leading fabless semiconductor companies work with TSMC first, then replicate manufacturing at the other foundries for redundancy and cost reductions. Global Foundries will challenge TSMC for first sourcing with AMD manufacturing technology and a manufacturing process partnership with IBM. In fact the first production 28nm wafers by a foundry were displayed by GFI at the Consumer Electronics show in Las Vegas this month. At least one of the wafers contained AMD/ATI GPUs.

Unfortunately the semiconductor foundry market is a maturing industry and likely to experience single digit annual growth in coming years. To diversify, TSMC is investing heavily in solar power and light-emitting diodes. Both are fast growing markets, have technological overlap with chip production, and offer far better margins and upside potential. There is a reason why TSMC is the #1 foundry in the world and I don’t see that changing anytime soon. But competition breeds innovation so the foundry business will be much more interesting to watch with GFI challenging TSMC.

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2010 Semiconductor Recovery

2010 Semiconductor Recovery
by Daniel Nenni on 12-31-2009 at 8:00 pm
Categories: IP


Any questions? Christmas was good for electronics and the start of a prosperous semiconductor New Year. Semiconductor inventories are low and demand is increasing around the world. Remember, there are 1,338,612,968 people in China that will need mobile internet devices and the stimulus money is gushing over there. There are a total of 6,795,200,000 people in the world that will need mobile internet devices and today there are only about 1,000,000,000 smartphones in use. Considering that you will purchase a new smartphone every 2-3 years, if you believe 2010 will be a good year for semiconductors, 2011 will be even better.

As consumer electronic devices go mobile, the lines between televisions, computers, phones, cameras, video games, browsers and operating systems will disappear. An electronics bubble has begun and I’m thrilled to be part of it. The Consumer Electronics Show (CES) in Las Vegas last week was certainly an excellent start. CES is an industry recognized barometer as 100,000+ gadget geeks ogle 2,500+ exhibitors with an estimated 20k+ new products.
What I look for personally is technology that will change my life. Porsche changed my life in the 70’s, personal computers in the 80’s, laptops in the 90’s, and the smartphone in the 2000′s. For the next decade it is too soon to tell but certainly nothing at CES this year will change my life. Tablet PCs? 3D TV? E-Readers? YAWN. My prediction is that social media and mobile internet devices will continue to drive semiconductor revenue in the 2010′s.

Speaking of audio, be sure and check out the Virage/ARC Sonic Focus demo. Audiofile or not, the sound quality will amaze you. The embedded processor companies were at CES in force, Nvidia even announced their own Tegra mobile embedded processor. But the most impressive demo is the Sonic Focus audio enrichment software which brings realism back to digitally compressed audio. Speaker size and placement will always be a problem for mobile internet, data will always be compressed, devices will get thinner and lighter. Using technology created by artisans and engineers founded in the music industry, Sonic Focus IP technologies deliver audio performance of today’s consumer devices and enable an immersive, engaging and compelling experience. Hearing is believing so check it out.

My award for best gadget goes to Samsung’s 14-inch transparent display. Not that it would change my life but it definitely has the cool factor! Also, if you missed the CEO keynotes, as I did, they are all on the CES front page. Very polished, very Las Vegas, somewhat informative, definitely worth streaming on your mobile internet device while you drive or wait in line for a $5 cup of coffee.

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TSMC Yields @ 28nm!

TSMC Yields @ 28nm!
by Daniel Nenni on 12-31-2009 at 8:00 pm
Categories: Foundries, TSMC


It was an interesting week in Taiwan for sure. Typhoon Fanapi, lightning storms, the first 28nm production silicon, foundry re-orgs, and most importantly Moon Cake pastries! Wednesday was the Chinese Moon (Zhongqiu)Festival, in Taiwan it is a National holiday commonly celebrated by people barbecuing various meats outdoors. I just love those moon cakes!

The biggest news is that Altera demonstrated production silicon @ TSMC 28nm for the Stratix V FPGA family, originally unveiled in April of this year. Altera is using the HP (high performance) version of TSMC 28nm, the same process that the GPU vendors use, so expect TSMC 28nm production silicon announcements from Nvidia and AMD/ATI in the next quarter or so. Altera was the first to yield on TSMC 40nm so they clearly know what they are doing. Xilinx will also use TSMC 28nm, expect an announcement this week.

Speaking of Nvidia, CEO Jen-Hsun Huang did a candid interview on the technical difficulties of the TSMC 40nm Fermi chip:

“The parasitic characterization from our foundries and the tools and reality are simply not related, at all. We found a major breakdown between the models, the tools, and reality.”

You can interpret this different ways and the press certainly will. Enlightened semiconductor people know however that process models evolve while processes ramp. Early access companies such as Nvidia, Altera, AMD/ATI, Qualcomm, etc… start designs with pre production process models. The amount of changes to the models varies but 40nm broke revision records for sure. I have seen this many times while working with early access IP companies.

As I blogged in:

  • Moore’s Law and 40nm Yield
  • TSMC 40nm Yield Explained
  • EDA Marketing Fail TSMC Process Variation

Process variation really kicked in at 40nm and those that prepared yielded, those that didn’t, didn’t, simple as that. The process models had variation built into them but the main stream EDA tools did not. So Jen-Hsun was right, there was a major breakdown between the models and the tools. The reality breakdown however was a design management issue within Nvidia, which Jen-Hsun acknowledged in the interview.
The other news from Taiwan is the departures of Fu-Cheih Hsu and S.T. Juang from the TSMC Design and Technology Platform unit, founders of the TSMC Open Innovation Platform (OIP). EETimes broke the story on 9/20/2010 with “TSMC’s Design Guru Resigns”. Fu-Cheih actually left in August (typical mainstream media lag) with S.T. Juang following him in September.

I’ve received a lot of emails on this from vendors and customers alike. The big question is: will the TSMC OIP initiative continue? The answer of course is: YES it will. Fu-Cheih’s replacement is Cliff Hou who is even more qualified to advance the OIP agenda. Cliff is much more approachable, easy to work with, and has more “hands-on” semiconductor design enablement experience.

Cliff joined TSMC in Dec 1997 as a section manager responsible for process design kit (PDK) and reference flow development from 0.35m to 65nm. In 2007 Cliff became senior director of TSMC in-house IP development. TSMC IP includes: standard cells, IO’s, embedded memory compilers, analog blocks, and high-speed interface modules. He has a B.S. degree from National Chiao-Tung University, and a Ph.D. from Syracuse University, New York. He is also a member of the board of directors of Global Unichip Corp. Cliff knows semiconductor design enablement, absolutely.

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Semiconductor IP Innovation

Semiconductor IP Innovation
by Daniel Nenni on 12-14-2009 at 11:23 pm
Categories: IP

By definition:
Invention is a new composition, device, or process.
Innovation is a new way of doing something or “new stuff that is made useful”.

Even better:

Invention is the conversion of cash into ideas.

Innovation is the conversion of ideas into cash.

In an industry bound by technical standards and the law of physics, innovation is the absolute key to semiconductor IP success. One of the most recent examples of Semiconductor IP innovation is the unified MIPI/MDDI PHY Solution-

Mixel first to market with Unified MIPI/MDDI PHY IP solution

-which leads to the interesting topic of interface standards.

Smartphones and the ever growing features list are driving this technology hard. As smartphones replace your cell phone, camera, GPS, iPod, game console, video player, etc… an incredible amount of data must pass between this pocket-sized device and your face.

The first such interface standard was developed by semiconductor giant Qualcomm:

Mobile Display Digital Interface (MDDI) is a high-speed digital interface developed to interconnect the upper and lower clamshell in a flip phone. The MDDI solution, A Video Electronics Standards Association (VESA) approved standard, supports variable data rates of up to 3.2 Gbit/s, and decreases the number of signals that connect the digital baseband controller with the LCD display and camera. The integration of MDDI is said to enable the adoption of advanced features, such as high-definition (QVGA) LCDs and high-resolution megapixel cameras for wireless devices, and supports capabilities such as driving an external display or a video projector from a handset.

Not to be out done, a consortium of giant semiconductor companies including Nokia, STMicroelectronics and Texas Instruments developed an overlapping interface standard:

The Mobile Industry Processor Interface (MIPI) Alliance is an open membership organization that includes leading companies in the mobile industry that share the objective of defining and promoting open specifications for interfaces inside mobile terminals MIPI aims to shave complexity and costs while boosting flexibility for cell phones and the chips that drive them.

No, wait, it gets even more interesting. In regards to smartphone connectivity there are two standards: Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA). GSM is a European standard a` la Nokia and STMicro while CDMA is an American standard a` la Qualcomm. ATT-Wireless and T-Mobile use GSM while Sprint and Verizon use CDMA, so now you know who’s really to blame when your phone can’t even get one bar! It stands to reason that GSM phones use MIPI and CDMA phones use MIDDI. According toiSuppli:

“The trend is clear. MIPI standard is gaining momentum. In the last couple of years, the number of MIPI alliance members nearly doubled to 180 members.” said Randy Lawson, Senior Analyst of iSuppli Corporation. “As a leader in the embedded IP space for these new high performance interface standards, Mixel is well positioned to take advantage of the growing adoption of MIPI support within portable communications products.” He added.

The Video Electronics Standards Association and Qualcomm may disagree. The $1B question is: Is there room inside your smartphone for both MIDDI and MIPI interfaces? The answer of course is yes, especially with a unified PHY. A much more eloquent explanation can be found in this excellent article authored by two of my LinkedIn connections Tim Saxe and Ashraf Takla entitled: Can MDDI and MIPI Coexist? A must read for mobile internet device (MID) developers and users.

lang: en_US

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Google versus Synopsys (EDA)

Google versus Synopsys (EDA)
by Daniel Nenni on 12-07-2009 at 11:04 pm
Categories: EDA, Synopsys

This Blog is a follow-up to my ever popular declaration that EDA is DEAD. I know comparing Google to Synopsys is apples and oranges, or more appropriately comparing apples and prunes, but the business model contrast is relevant. Googled: The End of the World As We Know It is absolutely the best book on Google to date. I also read Planet Google with much less interest.

Chapter #1 of Googled says it all with the visit of traditional media mogul Mel Karmazin to Google HQ in June of 2003. As CEO of Viacom, he was by his own admission paranoid of the competition. When Time Warner and AOL merged creating the largest media outlet, Karmazin went in search of online business partners. After spending a day with Google founders Larry Page, Sergey Brin, and CEO Eric Schmidt, and understanding the Google engineering approach to advertising, Karmazin uttered the now infamous phrase” You’re f***ing with the magic!”

At the time, Viacom was responsible for $25 billion worth of advertising sold the traditional way which is best understood via Karmazin quotes:

“I know half of my advertising works, I just don’t know which half.”

“You buy a commercial in the Super Bowl, you’re going to pay $2.5M for the spot. I have no idea if it’s going to work, you pay your money, you take your chances.”

“I want a sales person in the process, taking that buyer out to drinks, taking an order they shouldn’t have gotten.”
“
That’s the worst kind of business model in the world (Google’s), you don’t want people to know what works. When you know what works, or not, you tend to charge less money than when you have this aura and you are selling this mystique.”

“Advertisers don’t know what works and what doesn’t. That’s a great business model.”

Which is a stark contrast to Google’s customer centric advertising business model. Instead of charging up-front licensing fees with no accountability for the performance of the product, Google takes a success based approach with the Adwords and Adsense advertising business model.

Pay per click (PPC) is an Internet advertising model used on websites, in which advertisers pay their host only when their ad is clicked. With search engines, advertisers typically bid on keyword phrases relevant to their target market.

Business in general is highly measurable if you have the right tools. It’s simple math, if a business invests X dollars in a product, they will get Y return on that investment, the result being a documented value proposition for that product. Google has a literal data mine for advertisers and provides free tools (Google Analytics) to measure success. So yes, the advertising business magic got GOOGLED, by making it more efficient and accountable.

Now contrast that with the Electronic Design Automation Industry and you will see a similar opportunity. Up front licensing fees will be replaced by customer centric, success based models with documented value propositions. Companies that lead this transition will flourish, followers and/or late adopters will get GOOGLED. Either way EDA as we once knew it is DEAD. Believe it.

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UMC vs GLOBALFOUNDRIES

UMC vs GLOBALFOUNDRIES
by Daniel Nenni on 11-11-2009 at 11:31 pm
Categories: Foundries

TSMC Versus Global Foundries and TSMC versus SMIC clearly indicate that TSMC is the number one foundry in the world and it will be that way for the foreseeable future. The question now is who will be number two? Who will seriously challenge TSMC?

UMC has 10 fabs, 8 in Taiwan, 1 in Japan, and 1 in Singapore. Global Foundries will have Chartered’s 6 fabs in Singapore, AMD’s fab in Dresden with 1 more fab under construction in Dresden and another under construction in upstate New York, so 9 fabs in total. UMC just made a key fab acquisition in China (He Jian Technology Co. Ltd.) which has an interesting story to it.

The Chinese semiconductor total addressable market (TAM) is a staggering 1.33B+ people with a median age of 34 years. Fueled by the internet, consumerism is running rampant in China, Western culture is flooding in, allowing the Chinese people to make technology leaps and bounds like no others. Unfortunately, the Chinese government funded semiconductor manufacturing initiatives are struggling due to some serious miscalculations: underestimating the cost and experience required to be successful, underestimating the demand curve of the Chinese consumer, underestimating rapid technological advances, and what it takes to be a competitive semiconductor manufacturer.

Fortunately the political tensions between Taiwan and China are easing, so technology has begun to flow freely between the two countries. The Political Status of Taiwan Wikipedia page is very detailed in case you are interested. If not, here it is in a nutshell, recent Taiwan elections tossed out the DPP (Democratic Progressive Party) and brought in a pro China political party KMT (Chinese Nationalist Party). Also tossed out are the strict Taiwanese laws designed to prevent flight of technology to mainland China, which the DPP controlled Taiwan viewed as a potential military enemy.

This brings us to the UMC acquisition of the Chinese foundry He Jian Technology Co. Ltd. UMC paid $285m for the 85% it did not already own, which had full new KMT Taiwan government approval. Unfortunately the previous 15% UMC purchased did NOT have DPP Taiwan government approval which resulted in the resignation of UMC executives. On January 9[SUP]th[/SUP] 2006, just hours before being indicted in Taiwan for allegedly making illegal investments in He Jian, UMC chairman Robert Tsao and vice chairman John Hsuan resigned their posts. If convicted, the executives may face jail time of between six months and five years, which is highly unlikely under the new Taiwan KMT government.

TSMC already has manufacturing in China, UMC now has manufacturing in China. TSMC and UMC are both process independent, meaning that they own all of their process technologies outright. SMIC is the largest foundry in China but does not own the process technologies, earlier versions were derivatives of TSMC processes, newer versions will be licensed from IBM. Global Foundries and Chartered Semiconductor do not have China based manufacturing (yet) and also license newer process technologies from IBM.

If you believe, like I do, that manufacturing process technology differentiation is key to semiconductor foundry success. If you believe, as most people do, that the emerging Chinese consumer electronics market is key to semiconductor industry growth, UMC will continue to be a strong #2 contender. Otherwise competitive pricing will rule, generic semiconductor manufacturing processes will dominate, and the foundry consolidation cycle will repeat itself indefinitely.

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TSMC UMC Lead Semiconductor Recovery – Record Year in 2010

TSMC UMC Lead Semiconductor Recovery – Record Year in 2010
by Daniel Nenni on 11-09-2009 at 11:37 pm
Categories: Foundries

TSMC posted its best net profit in a year for Q309, saying demand for chips across all applications improved. Third-quarter sales fell a modest 3.3% year over year to $2.76 billion, but increased 21% from the previous quarter. Earnings per American Depositary Share (ADS) were flat when compared to 2008, but 25% above the second quarter of 2009. The revenue results hit the very top end of management guidance, and TSMC’s recovery continues to be a V-shape, as predicted in my blog TSMC Yields Recovery!

UMC’s Q309 revenue increased 21.1% from the previous quarter, recording the highest revenue for the past seven quarters, and the highest gross profit margin in five years. Utilization is up to 89%, demand for advanced process nodes continue to rise with revenue from 65nm and below growing more than 40%, with further growth predicted in Q4.

In contrast, Chartered Semiconductor continued its string of losing quarters in what will be the final chapter as the the Abu Dhabi government-owned Advanced Technology Investment Company (Atic) acquisition was passed by investors in a majority vote. A total of 665 shareholders attended the meeting, 115 of them expressed displeasure at the return on investment they will receive. Upset shareholders bought Chartered shares at the 1999 initial public offering (IPO) price of S$3.34, the shares were later consolidated at 10 for 1, so they effectively cost S$33.40 each. Atic offered S$2.68 a share. My blog TSMC vs Global Foundries gives further perspective on the acquisition.

Even more contrast, SMIC posted its tenth straight quarterly loss in an endless stream of red ink. SMIC has accomplished a lot in 9 years, China and its IC community should be grateful for that, but if the company is to survive it needs leadership who will push it to operate in an ethical and profitable manner. Unfortunately it may be too late for SMIC. A good place to start is my blog on TSMC vs SMIC , but last week aCalifornia jury found that SMIC stole and used trade secrets from TSMC. The jury also ruled that SMIC breached the terms of a previous settlement related to trade secrets for leading-edge process technologies in chip manufacturing. The next phase of the trial, to assess damages against SMIC, begins Thursday where TSMC will ask for more than $1 billion in total fines. In addition, TSMC is seeking an injunction that would bar SMIC from selling tainted products in U.S. markets. In Q309 59% of SMIC’s sales were attributable to North American companies, according to presentation materials from its third-quarter investors’ conference.

Currently SMIC has more than a $1,000,000,000 in debt and $500,000,000 in the bank. A significant settlement and/or an injunction could force SMIC to offer itself for sale to the highest bidder. TSMC would be the easy choice, but there will definitely be other bidders with the Chinese consumer electronics market as part of the deal. SMIC can appeal the court ruling but has yet to do so, both TSMC and SMIC will push to settle out of court (my opinion). Trading in shares of SMIC have been suspended since Wednesday pending a company statement.