Washington fab venture lures 2 more

Electronic News, July 1, 1996 by Sarah Cohen

Norwood, Mass.--Even though this year has seen a decline in orders for semiconductor manufacturers and many companies dropping plans to build new fabs, Analog Devices and Integrated Silicon Solutions, Inc. (ISSI) last week joined Taiwan Semiconductor Manufacturing Co. (TSMC) and Altera in a venture to build a $1.2 billion 200-millimeter (eight-inch) wafer fab in Camas, Wash.

The joint venture company building the new fab will be known as WaferTech, the companies said.

Joyce Putscher, senior analyst at In-Stat, said that growth is still anticipated to be healthy in the digital signal processor (DSP) and programmable logic markets between now and the end of the century; chip makers, especially fabless companies such as Altera, with a strong presence in those markets still need to plan ahead for new capacity.

A spokeswoman for Analog Devices suggested that another benefit from this arrangement to the companies involved is the ease with which they might manufacture a "system on a chip," utilizing Analog Devices' expertise in mixed-signal and DSPs, Altera's expertise in programmable logic, and ISSI's experience with SRAM and flash memory. The spokeswoman added that formal plans for such an endeavor have not been made, but Gary Fischer, executive VP of ISSI, said: "As we come down the geometry of linewidths, the conceptual possibilities of combining different functions on a chip opens up. And (the partners) have had theoretic discussions about working together."

The site of Camas, Wash.--across the Columbia River from Portland, Ore.--was selected by TSMC earlier this year (EN, March 18). During the negotiations of the final joint venture agreement, Altera increased its ownership of the joint venture from 16 percent to 18 percent. Altera will invest $140 million in WaferTech over the next two years for its 18 percent ownership. Analog Devices will own 18 percent, ISSI will own 4 percent, private investors will own 3 percent and TSMC will own the biggest piece of the pie at 57 percent.

TSMC's total equity investment of $334.4 million will be prorated into three parts over a year and a half. It will hold four out of seven seats on the board of directors, and Morris Chang, chairman of TSMC, is expected to be chairman and CEO of WaferTech.

Altera and TSMC announced a letter of intent to create the joint venture in November of 1995, and Altera's agreement with TSMC was completed last week. Construction of the WaferTech fab will begin this summer.

Production is slated to begin in 2Q98, with volumes expected to exceed 30,000 200mm wafers per month by early 1999, starting with 0.35-micron process technology, shifting to 0.25 micron and eventually to 0.18 micron. WaferTech is expected to employ approximately 800 people when at full capacity.

Dave French, VP and GM of the Products division at Analog Devices, said: "We are looking toward the year 2000. We are trying to project where the customer demand will come from, and we feel it will come from the DSP market, and this new fab is a perfect way to stay ahead of the ballgame." DSP product line director Bob Conrad of Analog added, "Historically, we didn't have enough total business in VLSI CMOS to build our own fab. Five years ago, we started outsourcing. TSMC was one of the first true foundry companies, and we were there since (the company's) inception. Then six months ago, we bought a CMOS fab in Limerick, Ireland. This venture is our second step (to addressing the increasing demand for CMOS devices)."

Bob Beachler, director of strategic marketing for Altera, said that Altera's motivation to begin this joint venture with TSMC was to broaden Altera's manufacturing base in North America. "We get wafers now from Sharp in Japan, TSMC in Taiwan and Cypress Semiconductor in Texas." The added capacity in Oregon simplifies things for Altera in terms of currency exchange, said Mr. Beachler.

A spokesman for TSMC described TSMC's strategy regarding the joint venture. "TSMC's business philosophy is to extend its roots in Taiwan through subsidiaries in various parts of the world. Since the company was founded 10 years ago, we have been adhering to this philosophy and have become the largest foundry in the world. We will continue investing in new fabs in Taiwan as well as advanced technologies such as 0.35 micron moving into volume production, and developing 0.25 micron and 0.18 micron. This joint venture in the U.S. is a major milestone of our globalization that will give TSMC a proximity to the heart of the IC industry."

ISSI's Mr. Fischer said, "It's extremely advantageous for people in the memory business to move to further down the geometry of linewidths, and WaferTech has the capability of migrating to 0.18. Nobody knows for sure what the worldwide semiconductor situation will be. Last year was tight. This year is loose. But even in loose times, the most advanced process technology is sometimes difficult to obtain." Under the terms of the venture, ISSI will invest $31 million as a 4 percent owner of the new fab.