Rockwell eyes Western Digital fab in IC push

Electronic News, August 16, 1993 by Daniel Holden

MOUNTAIN VIEW, CALIF. -- Rockwell International's Telecommunications business segment, Newport Beach, Calif., last week agreed in principle to buy Western Digital's 224,000-square-foot wafer fabrication facility in Irvine, Calif. in a deal aimed at propelling Rockwell further into advanced commercial IC markets and helping Western Digital reduce bank debt.

Under the proposed deal, the Rockwell unit would take over Irvine-based Western Digital's only wafer fab for $115 million in cash plus assumption of equipment leases associated with the facility. Rockwell would also fulfill a three-year supply contract giving Western Digital access to the facility for what Western Digital characterized as "a significant portion of its silicon wafer requirements" for disk drives (currently 85 percent of the company's business) and other products--graphics accelerators and microcomputer and disk drive interface components--following the sale.

The proposed sale (targeted for closing at this point by mid-October) is subject to a number of conditions, including negotiation of definitive agreements, as well as necessary governmental and private party approvals. Western Digital stressed it is not exiting any businesses due to the arrangement.

Against a backdrop of overall corporate attempts by Seal Beach, Calif.-based Rockwell to shift more of its results from declining defense-oriented to potential high-growth commerical businesses (including avionics, industrial automation, telecommunications, automotive components and graphics), the proposed deal marks a company desire to move production capabilities faster toward new multimedia and advanced communications semiconductor fields. This would be well beyond the already good position held in data and fax modems and its current aggressive positioning in cellular IC and other wireless circuit areas--fed by an existing wafer fab facility in Newport Beach.

"This facility will take us into the 21st century," said Lanny Ross, president of Rockwell's Telecommunications business segment, adding that the Irvine plant would complement Newport Beach wafer fab. "This purchase comes at a time when the world supply of advanced technology silicon is seriously lagging demand."

In terms of square-footage, Western Digital's three-year-old facility--including a 25,000-square foot Class 1 cleanroom--was operational for two years and greatly underutilized by the company over the past several quarters. Running mostly 0.9 micron but also some 1.25-micron two-level-metal processes and gearing to produce 0.9-micron triple-level-metal processes by the end of the quarter, insiders say the facility was never producing 100 percent of Western's needs nor was it used by any other semiconductor companies in a merchant capacity.

The Irvine facility is currently running about 1,800 6-inch wafers per week, but while this represents a full production line capacity, Rockwell's Mr. Ross said the whole plant is only equipped at 50-60 percent of its potential, so it is capable of at least 3,500 or even 4,000-5,000 wafer starts per week. He said the plant is currently equipped with an array of automated wet benches, remote chemical-handling systems, Nikon production, Thermco diffusion and Varian sputtering systems plus LTX, Trillium, Advantest and Sentry production test equipment.

Mr. Ross said Rockwell's plans are to equip the remainder of the facility during the next two years for 0.5-micron, triple-layer-metal 8-inch wafer production (starting at about 100 wafers per week for Rockwell needs and moving to 400 per week during the first year). The firm would start implementing this plan in the first six months after closing the deal, he said, and the additional fab procurements could be worth $100 million or more. For most of an estimated five-year period, Mr. Ross expects the facility to run a combination of 6-inch and 8-inch wafers, although long-term prospects are for all 8-inch and most likely well below 0.5-micron output.

Although the proposed deal envisions three years worth of wafer supply to Western Digital, Mr. Ross expects that consumption to decline over time, but he indicated Western Digital is interested in the larger wafers and smaller line widths. A possible closer, long-term partnership may emerge when the current proposed deal closes or via a secondary agreement, according to Mr. Ross. For modem, digital signal processor and other communications devices, the Newport Beach facility current runs 5-inch wafers at 0.8-micron widths but it may also be a future candidate for 0.5 and below, he added.

Nevertheless, the Irvine plant figures closely in Rockwell plans to enter not only more advanced datacom and telecom fields, but also multimedia applications which would combine voice, text, graphics, data and video, plus potential on-line interactive functionality which would require real-time, multitasking CPU platforms. As outlined by Mr. Ross last year (EN, May 11, 1992), Rockwell's positioning for such markets involves a 32-bit RISC signal processor (RSP) at 40MHz and 80MIPS for multiple purposes and a cycle-intensive DSP advanced communications engine (ACE) for desktop/mobile-landline/wireless communications.