United they stand: AMD, Infineon, UMC partner to cut costs

Electronic News, August 5, 2002 by Suzanne Deffree

There's strength in numbers, especially in this economy.

Instead of going it alone, AMD, Infineon and UMC are joining forces to collaborate on the development of a common 65nm and 45nm manufacturing platform.

The trio chose to split the R&D costs equally, lower their own investments and reduce risk by joining together to meet their ambitious goal of 65nm chips by 2005.

"It's certainly a sign of the times in that even the bigger companies have to make sure that they spend their resources wisely. They end up really needing to focus on that, and partnerships are a way that they accomplish that," said Cary Synder, an analyst at PC2 Consulting.

Risk management is key to agreements like this, as is the opportunity to create a standard and gain firsthand development information.

"The end-goal is to push process technology to the next level," said Robert LeFort, North American president for Infineon Technologies AG. "We're getting pretty close to pushing the levels of physics, and it gets incredibly expensive and, quite frankly, there's more risk at it because these are areas where we don't know that there is a solution."

Partnering is nothing new, but it has emerged as the alternative of choice in this downturn. While Advanced Micro Devices Inc. (AMD) is in no immediate danger, the No. 2 microprocessor vendor did record a 33 percent sequential sales drop in the most recent quarter.

"I see it more from a standpoint that AMD had to do something to sort of be a little more forward-looking with its silicon process technology," Snyder said. "If they all of a sudden became very, very popular, they would be in a weaker position to meet high demand fluctuations than Intel, which has plenty of fabs and plenty of capacity available to them."

Meanwhile, United Microelectronics Corp. (UMC) said the deal is tantamount to a free education, allowing it to explore other areas in which the company has little expertise.

"From UMC's side, we can actually speed up our learning on the highest-speed performance technologies. With Infineon ... it's more SOC, and its product application is wider into the communication application, into the consumer [markets]. For the PC part, AMD is definitely stronger," said Futai Liou, UMC's chief officer for worldwide marketing and sales and formerly the foundry's CTO. "There is a very clear direction so that we don't waste any resources or have an overlap or too much duplication."

Liou attributed about 80 percent of UMC's revenue to fabless companies, with IDMs coming in as new clientele as of late.

"Most of them recently, probably because of the economy, probably because of the overall trend, have started to outsource a little bit more in the advanced technologies area," Liou said. "In the past the IDM companies were outsourcing older technologies and for foundry companies to adapt those technologies is relatively easier. However, once we started to work on 0.13 micron and below, the traditional way becomes very difficult for the interaction between the IDM and those foundry companies."

UMC doesn't see everyone following the outsourcing trend, pointing at AMD target Intel. "Intel is No. 1 in the industry and would never plan to use a foundry or outsource their CPU technology," Liou said.

As a possible partner, Infineon's LeFort concurred, saying that while Infineon and AMD have chemistry together, Infineon and Intel do not. "Intel's philosophy, I believe, is more 'If it's worth doing, it's worth keeping to yourself.' And they have the wherewithal, the financial resources and the leverage to do that."

While Infineon has no stake in AMD, it does have investments in UMC. It also owns nine foundries from which it derives 20 percent of its revenue. But the choice to partner, instead of work internally on the 65nm chips, came from the need for balance.

"We do not have an integral strategy to outsource. We have an integral strategy to balance the two so that we always can support our customers in the upside and so we can balance the risk in the downside," LeFort said. "Some process technologies we consider highly strategic, and we need to have that managed internally. And most process technologies are things we consider more generic and that make sense to work with through a partnership."