IBM flexes foundry muscle

Electronic News, March 16, 1998 by Gale Morrison

Essex Junction, VT.--IBM Microelectronics' foundry business with the typical fabless customer who has been traveling to the Far East is gathering tremendous steam as 1998 moves forward. Insiders say IBM is fast grabbing business from foundry giant TSMC and others as Big Blue has--read this twice--made changes to its 0.25-micron process to suit customer needs and shown them what it means to have your foundry at least within a few time zones.

EN spoke with Ken Torino, director of semiconductor contract manufacturing for IBM Micro, on Friday about the sleeping foundry giant he oversees. In closing, he said that not only will the industry hear much more "in the ensuing months" about IBM foundry customers, but also that IBM is to pinpoint before the end of the year when it can give those customers 0.18-micron capability.

Mr. Torino said that the business "has been quiet all along" because "in general, most of the sales and marketing activity is point-to-point contact." But: "We are selling worldwide, and certainly the fabless customers are our number one target, and the U.S. is our number one target region."

Foundries are in some ways very different than they were five years ago, Mr. Torino points out, and a significant driver of IBM's current strong momentum is nailing the 0.25-micron process. As well, he said some foundries have evolved from their roots to ask customers that they be an exclusive source. The original premise was a company could be more secure about its supply if there were more sources for it.

"We're trying to be very faithful to the original foundry model," Mr. Torino said. "What is in the customers interests? An easy ability to second source parts. Some other fabs want to be the only source."

"In our sales presentation we say: 'We have absolutely no problem with second sourcing.' Would it make more sense to have one Far Eastern fab and one domestic and by the way, one domestic that is a manufacturing technology leader across the industry?"

"We're not telling people not to use Eastern fabs. But we think local support is a big part of the decision." But Mr. Torino avoided getting cheeky and pitching the "Why fly to Taiwan?" question outright. "You could imply something like that. I don't believe in negative selling, so I wouldn't say that."

"If you're a fabless company in California, when you come to work you can call us up and we're here (at work in Burlington primarily). If your foundry is in the Far East, you probably talk to a local FAE (field applications engineer). He sends an E-mail. You hear back from him maybe the next day. Or maybe you hear back the next day and they didn't understand your question.

"We can real time out a dialog," Mr. Torino said. "We've had a number of customers feed back to us that our communication support model is the best they have had."

IBM stands on firm ground when it asserts manufacturing technology leadership as a reason to fab with them. "It's lower risk to go 0.25-micron with us. IBM has been there longer (the company has been in volume 0.25-micron for a year).

"We pioneered a lot of process technology that the industry has adopted. The single device cell DRAM, everyone uses that now. We were first to use chem-mech (chemical mechanical polishing, or CMP). We were first with shallow trench isolation, which is really standard in 0.25-micron processes now," Mr. Torino said. "We believe there is lower risk with us, frankly, as a primary source," he added.

At the same time, IBM is serious about converting in some areas to what customers expect, he said, and he provided one example. "Historically, IBM has made its resistors with diffusion. Our customers have made resistors using a block mask on the south (polysilicon) side." He said: "In cases where it didn't make much difference, quite frankly, we're going to use what the standard is, though of course there's no standards committee."

"We're converting to what our customers expect. (The process) will look, act, smell like what they are used to. We do offers some design services to port their designs to our process," Mr. Torino said.

That IBM took counsel on how to manufacture "was true starting two years ago, starting with 0.35-micron. When we pulled the foundry business out and put signifigantly more emphasis on it, our proprietary process was a little problematic. There were certain barriers to entry for fabless customers.

"Over the last two or three years, we've come over to what is de facto standard in the industry. That came as a result of working with foundry customers over time. It had to do with a ground rule compatibility. Our process has to be very similar to what they are used to designing into."

Mr. Torino declined to be specific about the extent of IBM capacity that is dedicated to customers' designs. "In terms of capacity, by the Dataquest definition of foundry, they do include joint ventures. If you look at IBM, we've got the Siemens/IBM manufacturing joint venture in Crolles, France. The Philips joint venture in Germany. The Cirrus (Logic) joint venture in East Fishkill (N.Y.). We've got five 'half a fab's," Mr. Torino.