April 14, 2004 11:52 AM PDT

Chipmaker TSMC adds design services in up market

SAN JOSE, Calif.--Taiwan Semiconductor Manufacturing Co., which makes chips on behalf of others, will begin to increase its participation in chip design as a way to eliminate some of the problems companies are having in getting their products to market.

Executives from TSMC, speaking at the company's U.S. technology symposium here, said the firm's new platform strategy is geared toward eliminating the growing complexity of semiconductors. Chips can now come with up to 500 million transistors, and unless design teams work intimately at the outset of a project with manufacturing engineers and vendors of software design tools, problems will likely occur.

"The foundry business is not just building a fab and cranking out wafers," said Genda Hu, vice president of marketing for the Hsinchu, Taiwan-based company. ("Fab" is industry slang for a chip-fabrication factory.)

A few years back, for instance, a failure to take into account all of the nuances of the shift from copper to aluminum in chip production resulted in the delay of several products, including many made by TSMC.

The new strategy will also give TSMC customers easier access to intellectual property or semiconductor building blocks, such as Bluetooth modules or image sensors, that they can add to their own chips. Likewise, design services will help insulate TSMC from the growing legions of budget-class foundries in China, such as SMIC.

Company executives also affirmed that, after the biggest dip in its history, the chip industry is back. TSMC, which commands 52 percent of the foundry market, is currently booked beyond factory capacity and will build more facilities to meet demand. This year, the company will have the capacity to process 5 million 8-inch wafers. Last year, it shipped the equivalent of 3.7 million such wafers.

"There is no question that supply is tight. It is an industrywide problem," said Kenneth Kin, senior vice president of marketing and sales. "We have seen a recovery in the works since the second half of last year."

Revenue came to $5.9 billion in 2003, up 26 percent from the year before. Because the company manufactures chips on behalf of a number of semiconductor companies, including Broadcom, Nvidia and Microsoft, its revenue can partly be viewed as a proxy for the health of the industry.

Semiconductor demand is particularly hot for wireless, consumer electronics, broadband, flat-panel, digital camera, and camera phone markets. Broadband penetration is already above 50 percent in Asia and is growing in the United States. Because of demand for wireless, TSMC's revenue deriving from communication chips surpassed revenue from computer chips in the fourth quarter last year, Kin said.

But producing chips is getting more difficult, so research and development costs are rising at about 30 percent a year. As a result, Moore's Law, which now dictates that the number of transistors double on a chip every two years, will start slowing down, said TSMC deputy CEO FC Tseng.

"We currently see three years between (transitions), and maybe even longer," he said. "Technologically, we know we can do it, but the economics have to make sense."

TSMC has made similar predictions in the past.

In the immediate future, chipmakers such as TSMC, Intel and IBM will have to shift more production to the 90-nanometer manufacturing process, which means that chips will have features that measure 90 nanometers on average (a nanometer is a billionth of a meter). The transition should be easier than the 2000-2001 transition to 130-nanometer, said Tseng, which involved the jump from copper to aluminum.

In the second half of the decade, manufacturers will also have to master liquid immersion lithography. In this type of lithography, silicon wafers are immersed in water. The mask image, a circuit map illuminated by laser light, is then flashed onto the soaking wafer.

The water reduces the effective wavelength of light to 143 nanometers, which then allows chip designers to "print" circuits on wafers. The wavelength of visible light is 248 nanometers, but semiconductor makers can use tricks to make the effective wavelength 193 nanometers, which in turn is further manipulated to print 90-nanometer transistor features.

The best part is that most of the machinery in use today will remain in use, relieving manufacturers of a huge capital budget, said Ping Yang, vice president of research and development.

"The frequency of light doesn't change, but the wavelength will," he said. "We will begin to implement it at 45 nanometer for sure. For 65 nanometer it will probably not be ready."

45-nanometer manufacturing for commercial production will begin in 2007 or 2008. The company will receive a prototype immersion tool this summer.

 

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