January 22, 2007 9:00 PM PST

Freescale links with IBM in chip development deal

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The IBM chip federation just got larger.

Freescale Semiconductor, formerly Motorola's chip group, will join a semiconductor technology alliance largely headed by IBM. Under the alliance, Freescale will participate in developing rules and technology for manufacturing 45-nanometer chips. It also has the option of producing chips at IBM's factories.

Other chipmakers that have lined up with IBM include Advanced Micro Devices, Sony, Toshiba, German memory maker Infineon and Singapore's Chartered Semiconductor. Companies in these alliances interact in various ways. Freescale, for instance, joins a group that includes Samsung and Chartered. AMD has a separate deal formed with those companies. IBM, offers up similar technologies in its various alliances.

For most chipmakers, alliances are a part of life, thanks to the rapid pace of Moore's Law, the complexity of contemporary chips, and the cost of building fabrication facilities, or fabs. A modern fab can cost more than $3 billion to build, while modern chips incorporate a larger variety of chemicals and novel structures than in the past. Semiconductor manufacturing can be one of the more intellectually grueling ways to lose money--a lot of brainpower is required to make a product that may not be profitable.

By teaming up, companies say they can overcome technical hurdles faster and at a lower cost than if they worked alone. IBM has also used the alliance as a way to garner millions in royalties and engineering fees by licensing technologies such as Silicon on Insulator to alliance partners.

While alliances can help defray costs, they are also unpredictable. Freescale was a charter member of one of the industry's first alliances, a complex arrangement between STMicroelectronics, Philips and Motorola. The three companies agreed to develop technology together and even shared a research facility. The facility was managed by three executives--one from each company--and each critical engineering project had key technologists from each company.

Subsequently, Philips spun off its semiconductor group, which became NXP Semiconductor. Recently, NXP said it would pull out of the alliance.

See more CNET content tagged:
alliance, IBM Corp., manufacturing, semiconductor, chip company


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