Tower seeks to build 2d Israel facility

Electronic News, Oct 27, 1997 by Peter Brown

Migdal Haemek, Israel--Tower Semiconductor is currently "engaging in serious discussions with the Israeli government" to build its second manufacturing facility designed to ensure the longevity of the company, co-CEO of Tower Yoav Nissan-Cohen revealed to Electronic News.

Dr. Nissan-Cohen said Tower wants to develop a new facility quickly in order to guarantee capacity for its current customers and customers it is in discussions with. Tower also wants to move to a 0.25- and 0.18-micron manufacturing process in order to retain these customers as they move to deep submicron designs, he added.

Tower is also in discussion with other governments outside of Israel to bring a fab on-line in case the discussions with the Israeli government fall through. "We may end up having to go outside of Israel but we prefer not to," said Dr. Nissan-Cohen. "The company wants to do this for sure and soon. It will be of crucial importance for the company to get another fab on-line for longevity reasons. And I don't think that's possible with our existing facility." Dr. Nissan-Cohen declined to comment as to time frames for breaking ground on a second facility.

New Facility Needed

According to Bill McClean, president of IC Insights, a market research firm based in Scottsdale, Ariz., in order for Tower to start manufacturing devices on a 0.25- and 0.18-micron process, the company is going to need a new facility. Mr. McClean said most pure-play foundries--such as a TSMC or Chartered Semiconductor--have the ability to scale down to 0.18 or 0.25-micron in their current facilities; however, Tower with its old fab does not have that luxury.

"If they do decide to build a facility starting say in the next few months, then we are probably talking volume production in the mid-1999 or 2000 time frame and it will probably go to 12-inch wafers," said Mr. McClean. "This wouldn't be a bad time for the company to begin large-size wafers, especially if they have this flash process and keep gathering customers. They will also need a deep submicron large wafer facility to compete with these other foundries going forward."

Another factor pushing this drive for a second facility is Tower's development of embedded flash memory for its OEMs. Last week, Tower signed an agreement with Israeli start-up Saifun Semiconductor to deliver ultra high-density embedded flash memory up to 128 megabits utilizing a 0.5-micron CMOS process. Tower claims this is twice the density of Intel's 64-megabit StrataFlash.

"Rather than playing a vanilla foundry we are becoming a specialized foundry with specific expertise in embedded non-volatile memories," said Mr. Nissan-Cohen. "We are determined to be a market leader and you can not do this without good flash technology. We already have embedded EPROM processes and they work very good for us, but it is not good enough for the future of the market."

According to Mr. McClean, the investment in flash has to be for long term growth and differentiation with the market as sluggish as it has been in recent months following the DRAM memory downturn.

"Foundries are becoming like ASIC vendors, the more capabilities you have the more customers you have and obviously having on-chip flash is a way to differentiate yourself from the TSMCs and UMCs of the world," Mr. McClean said.

Under terms of the agreement with Saifun, Tower has an equity position in Saifun as well as a Tower executive sitting on the company's board of directors. The agreement with Saifun is for 10 years.

According to Mr. Nissan-Cohen, other foundries are working with embedded flash, however, none of them can provide the cell size or density that the Saifun architecture allows. Tower does not have any plans to be a mainstream flash player and will continue to serve as a foundry, he added. Saifun, on the other hand, does have plans to take this technology mainstream when the time is right. Implementation and sampling of the embedded flash technology in Tower's facility is slated to begin in the middle of 1998.

VLSI Invests

In other fab facility news, VLSI Technology has found a use for its defunct San Jose facility which the company closed down last year and terminated all IC production (EN, Nov. 25, 1996). VLSI recently signed an agreement with Wafer Technology Malaysia (WTM)--a Malaysian based foundry--to invest in a deep submicron semiconductor manufacturing facility in Malaysia. Also under terms of the agreement, WTM will take ownership, manage and upgrade the San Jose facility with 200 millimeter (eight-inch) equipment and strip the facility of all its 150 millimeter (six-inch) equipment.

"We will then both co-exist in the San Jose fab," said Cliff Roe, VP of strategic programs for VLSI. "WTM will also change the process for its foundry customers. This way we both have benefits and interests in the San Jose fab. For WTM developing customers now will help them open doors in Malaysia when that fab goes on-line."

Mr. Roe said VLSI is investing $120 million in the Malaysian facility that will be located in the Kulim High Technology Park--40 kilometers east of the state of Kedah and North of Kuala Lumper. The other investors of the $1.2 billion venture include the Industrial Bank of Malaysia and National Treasury Investment Arm of Malaysia (Khazanah National Berhad).