Nanotech - The Circuits Blog

Advanced Micro Devices' spinoff Globalfoundries will use a groundbreaking ceremony this Friday to proclaim that it's ready to go head to head with the world's largest chipmakers.

Globalfoundries, formerly the chip manufacturing operations of AMD, will break ground next week in Malta, N.Y., on a $4.2 billion facility that may put it among the elite chipmakers of the world. But to get there, it needs big customers. One--or more--of those names will be announced in the next 30 days, according to Jon Carvill, director of corporate communications at Globalfoundries.

Early customers may include companies that design low-power and wireless chips for the consumer electronics market. "There are a lot of benefits to being a significant player in that space," Carvill said.

Globalfoundries also has graphics chip companies in its sights. One large company cited as a potential future customer--though not necessarily among the first customers--is Nvidia, the No.1 graphics chip supplier. Nvidia's CEO, Jen-Hsun Huang, has already stated publicly that he is "seriously evaluating and discussing" the possibility of using Globalfoundries as a contract chip manufacturer, or so-called foundry.

An even more likely customer is ATI Technologies, AMD's graphics chip unit. Carvill said that Globalfoundries has "not run any volume (manufacturing) of AMD graphics processors...not yet," which may imply that there will be volume manufacturing at some point down the road.

Globalfoundries will compete aggressively for graphics chip business at the 28-nanometer manufacturing process level, which is still a few years away. Nvidia and ATI now use a 40-nanometer process in their most advanced graphics chips. Typically, the smaller the chip geometries, the faster and more power efficient the chip is.

It is no coincidence that both Nvidia and ATI currently use the world's largest contract chip manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC) as their foundry. Nvidia and ATI are the kind of elite client that Globalfoundries is looking to wrest away from TSMC. Graphics chip companies are typically among the first to move to a new manufacturing process because they need to pack as many transistors--now up to a billion--as possible into a chip in order to maintain a performance leg-up on the competition.

Globalfoundries may have an advantage here. "They (TSMC) don't have the advanced engineering that AMD does," said Dan Hutcheson, CEO and chairman of VLSI Research, a market researcher that covers the chip manufacturing industry, referring to Globalfoundries in its previous incarnation as AMD. And TSMC has been struggling with its 40-nanometer-class manufacturing process, providing an opportunity for Globalfoundries, according to Hutcheson.

But that doesn't mean it will be a cakewalk. "TSMC is incredibly cost effective and they're very quick at turning things around," Hutcheson said. "That's why they hold 60 to 70 percent of the market."

Why is a quick turnaround important? "If you're late to market, you lose most of your market share in a few weeks," according to Hutcheson. "A chip has to be designed into a socket that's going to go into some electronics product that's going to show up on shelves at Christmas. You can't delay Christmas," he said.

When the facility in Malta is completed and up and running by 2012, it should be among the world's most advanced chip plants. Globalfoundries' current plan is to get started on 28-nanometer technology in the second half of 2012 and then make a quick transition to 22-nanometer. Currently, the most advanced chips are manufactured on 40- and 45-nanometer processes. Intel, whose production is used strictly for its own products and therefore is not a contract chip manufacturer like Globalfoundries, is expected to transition--on a volume basis--to 32-nanometer late this year or early next year.

Joint work with IBM
Another advantage Globalfoundries will have over its competition is close cooperation with IBM, also one of the world's premier chip manufacturers. "That's one of the reasons it's being put there," Hutcheson said, referring to the Malta facility. IBM develops and manufactures chips in New York, with a lot of activity concentrated in East Fishkill.

Last month, Globalfoundries announced at the 2009 Symposium on VLSI Technology in Kyoto, Japan, that it is working with IBM on a technique that allows transistors to be scaled down below 22 nanometers.

And if there's any doubt about Globalfoundries' commitment to work with IBM, the headcount speaks for itself. A total of 70 Globalfoundries engineers work at IBM. "And that number is growing," Carvill said.

Intel concept wide-screen mobile device

(Credit: Intel)

Intel smartphone and mobile Internet device concept designs have potential. So, as Intel prepares to enter the smartphone market with LG Electronics and others, will these designs be realized? And would you buy one?

One thing is certain. A re-badged Apple iPhone running Windows isn't going to upset the Apple cart (pun intended).

So, one obvious challenge is for Intel to get its considerable weight behind a new smartphone or mobile Internet device (MID) design that resets the market.

Just so happens there's a design that Intel has been brandishing for a couple of years now (see photos). It's essentially a high-end wide-screen smartphone or MID (choose your favorite device category nomenclature).

A series of videos demonstrating the Intel Moorestown-based mobile device pretty clearly show how--by virtue of the wide screen--the device would be different.

Intel concept device, with virtual keyboard

(Credit: Intel)

Now, if that device could run a browser and basic applications faster than my BlackBerry Storm (which I gauge has circa 1995 PC performance) on a bigger screen, that would be enough for me to buy one.

At least one analyst expects big things from Intel in this market. Doug Freedman of Broadpoint AmTech upgraded Intel to a "buy" this week, partially on expectations that Intel may flourish in the system-on-a-chip market as a result of the chip production deal struck earlier this month with Taiwan Semiconductor Manufacturing. Intel's upcoming Moorestown chip--the linchpin of the deal--is a system-on-a-chip that's targeted, not coincidentally, at high-end smartphones, among other devices.

Freedman had this to say in a research note about Intel: "The TSMC (deal) likely opens the door to highly integrated (system-on-a-chip) solutions for target markets such as consumer, wireless, communications and networking infrastructure, and automotive," he wrote. "Though we cannot assign a value to future business opportunities without specific customer announcements or end-market intentions...We note that a minor incremental opportunity would not have triggered a press release event for Intel or TSMC."

Translation: there's probably something pretty big in the works.

Updated at 10:50 a.m. PST with additional information from announcement and Intel-TSMC conference call.

Intel and Taiwan Semiconductor Manufacturing Co. will collaborate on Atom chip production, the companies announced Monday.

For its part, Intel is eying big markets--such as smartphones--where it is currently not a player, but TSMC is. "Many of our customers already had an existing IP (Intellectual Property) infrastructure on TSMC that they would like to take advantage of as they ramp Atom-based products. That's essentially what the agreement is about," said Anand Chandrashekar, senior vice president at Intel, speaking Monday morning in a joint Intel-TSMC conference call. Atom is currently the most widely used processor in Netbooks.

Chips are targeted at end products such as handhelds, Netbooks, and consumer electronics, Chandrashekar said.

"(It's about) enabling Atom on TSMC (and) enabling TSMC to go after these new market segments as well as Intel going after these market segments together," Chandrashekar said.

Under the agreement, Intel would port its Atom processor CPU cores to the TSMC technology platform including processes, IP, libraries, and design flows. TSMC, however, will not market Atom chips as a TSMC product. It will serve solely as a manufacturer of Atom-related silicon, company executives said Monday. All products that emerge from the collaboration will be Intel-branded products.

Collaborating with another manufacturer on chip production is an unusual move for Intel, which prides itself on doing chip manufacturing in-house. It is not unprecedented, however, as Intel has consigned production of select silicon to outside manufacturers in the past. TSMC is the largest contract chip manufacturer in the world.

The upcoming Atom processor code-named Moorestown--due late this year or early next year--will be a system on a chip (SOC) that combines the processor, graphics, memory controller, and video encode/decode into a single chip package. An accompanying chip will provide functions such as wireless, storage, and I/O (input/output).

TSMC already makes SOCs for companies such as Qualcomm and Texas Instruments.

Intel's goal is to get its x86 architecture-based Moorestown SOCs into future cell phones. The chipmaker recently announced a deal with LG Electronics whereby LG will use Intel's Moorestown processor in upcoming smartphones.

The challenge for Intel will be matching the energy frugality of silicon from longtime cell phone silicon suppliers like Qualcomm and Texas Instruments. Toshiba recently disclosed that it is using Qualcomm's Snapdragon chip in a forthcoming phone, and Qualcomm supplied the main processor in the first phone using Google's Android OS.

Updated at 10:50 a.m. PST throughout.

Taiwan Semiconductor Manufacturing Co. posted a sharp profit decline of 64 percent on Thursday. This comes after Intel posted a steep dive in profits last week.

TSMC, the world's largest contract chip manufacturer, said its sales sunk to 64.6 billion Taiwan dollars ($1.96 billion) in the fourth quarter of 2008, down 31 percent from the same period last year as well as from the previous quarter.

Net income was NT$12.6 billion in the fourth quarter, down nearly 64 percent from the year-earlier period and 59 percent from the previous quarter. Gross margin, a crucial indicator, was 31.3 percent, down 16.5 percent.

TSMC makes chips for Advanced Micro Devices, Texas Instruments, Nvidia, and Qualcomm, among many other top-tier chip suppliers.

"The global economic recession continues to worsen," said Lora Ho, chief financial officer of TSMC, in a statement. "Customers...continue to pare their inventories aggressively, resulting in a further significant cut back of wafer demand," Ho said.

TSMC CEO Rick Tsai, however, said he is seeing some signs of a bottoming out. "There is some indication that we may be bottoming out in the first quarter (of 2009). The numbers are still not good. I do not want to mislead you. But we believe we are seeing a bottom. But we will need more time and data to confirm this observation," he said.

TSMC expects gross margin to be between one percent and five percent and operating profit margin to decrease between 15 percent and 19 percent in the first quarter and revenue is projected to be between NT$32 billion and NT$35 billion.

Intel's fourth-quarter warning is not only bad news but bad timing. With the Consumer Electronics Show kicking off Thursday adorned by all those bright, shiny gadgets, Intel effectively said: gadgets maybe, but not so bright and shiny.

And for an Intel warning, this one was particularly dire. The biggest chip bellwether said it now expects only $8.2 billion in revenue for the quarter, a 23 percent drop from the year-earlier period, and 20 percent from the third quarter. And this comes after issuing a warning on November 12.

So what's happening? The clearest example of the gloom that has descended on the chip industry, and by extension computer and gadget makers, came relatively early from another chip bellwether, Taiwan Semiconductor Manufacturing Company -- the largest chip contract manufacturer, which supplies chips to all the first-tier electronics and computer makers. Back on October 30, TSMC issued a forecast that set the tone for the rest of the industry: CEO Rick Tsai said the supply chain -- the myriad of companies that order chips from TSMC -- was "reducing inventory very aggressively."

That supply chain, either directly or indirectly, is the computer and gadget makers of the world.

So going into CES, the picture is not pretty. "We just heard consumer electronics sales over the holidays were down 26 percent year to year," said Broadpoint AmTech analyst Doug Freedman. "You want to head into CES with a pall over it? There it is, right there."

And go the other way, up the supply chain -- the chip gear makers who supply production equipment to chip companies -- and things are even more bleak, with some gear makers saying they don't expect any orders at all in 2009 for certain categories of equipment. In December, Netherlands-based ASML CEO Eric Meurice said that "never before have we witnessed such a sharp and sudden fall-off in lithography system demand."

Other examples are almost too numerous to list: for starters, Toshiba and SanDisk slashing flash memory output 30 percent, Taiwan's memory chip industry on the verge of collapse, and Micron Technology posting a massive $706 million loss.

Yes, there's probably a silver lining in all of this, in that chipmakers and gadget suppliers have to cut the fat and become lean and mean, but where does it end?

And how will this downturn transform the computer industry? Looking at it through the prism of Netbooks -- which are expected to catch much of the limelight at CES -- may provide some insight. These cheap laptop computers are on fire, partially because they are compelling designs but mostly because of price. Good thing? Yeah, great for consumers and small businesses that are finally realizing they don't have to pay $2,000 for a small, lightweight ultraportable notebook. Or simply can't afford a $1,000 notebook.

But not so great for Intel, Apple, and others. "What is the most expensive laptop out there? The Apple (MacBook) Air," said Freedman. "That's a $1,500 or $2,000 machine. Now all of a sudden I'm giving you ultraportability for $500," he said, referring to the price of a Netbook.

In this sense, over-priced notebooks could be seen as roughly equivalent to large SUVs -- overkill. Just as General Motors must wean itself off lumbering SUVs, so may Intel, Hewlett-Packard, Sony, Toshiba, et al., be forced, to some extent, to wean themselves off high-profit notebook computers. After all, what took Sony so long to bring out a Netbook? And why don't we see an Apple Netbook? It's not a stretch to say that those companies don't like the idea of selling a lot of inexpensive computers.

At CES, companies will be hawking flashy gadgets, as always, and maybe attendees can suspend disbelief for a few days blinded by the glare of the gadgets. But that's really just lipstick on a pig.

More dire forecasts for the chip industry.

On the heels of comments from a chip industry watchdog group last week saying the chip equipment business is "on hold," Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chip manufacturer, said PC-related chip shipments are expected to be off 20 percent in the fourth quarter.

This bodes ill for PC makers, which appear to be cutting way back on chip orders.

"(For) our fourth quarter computer-related wafer shipments...we expect to see over a 20 percent decline. Which is very severe...compared to a seasonal mid-teens percentage growth," said CEO Rick Tsai on Thursday, speaking during the company's earnings announcement.

TSMC is considered an industry bellwether because it makes graphics chips for both Advanced Micro Devices and Nvidia and manufactures a variety of chips that go into cell phones and consumer electronics devices as well as other chips for PCs.

The "supply chain"--the myriad of companies that order chips from TSMC--is "reducing inventory very aggressively," he said.

Because of the state of the world's financial markets, "most our customers are aggressively paring their inventories and have thus reduced significantly their wafer demand," said Lora Ho, VP and chief financial officer of TSMC.

"We believe the foundry sector will likely underperform the overall semiconductor industry in 2009," he said. Foundry refers to a contract chip manufacturer. "In 2009, we now expect the semiconductor industry to decline by mid-to high single digit in 2009. With very little visibility."

TSMC reported a net profit of NT$30.574 billion ($930 million) in the July-September quarter, the company said Thursday. That was slightly higher than NT$30.4 billion reported a year ago.

Chartered Semiconductor, another large contract chip manufacturer, also said on Thursday that it "started to see orders declining from the middle of August, followed by some customer requests to reschedule deliveries forward. The weakness is expected to deepen into the fourth quarter."

The prepared comments continued: "Based on current outlook, we are guiding for Chartered revenues to be down approximately 21 percent sequentially...in the fourth quarter. In line with the demand outlook, we are also reducing our capital expenditure for 2008 to $650 million, which is $100 million lower than the amount we had earlier anticipated."

Taiwan Semiconductor Manufacturing, the largest contract chip manufacturer in the world, will crank up its MEMS foundry business. Micro-Electro Mechanical Systems (MEMS) technology is used in Apple's iPhone and the Nintendo Wii.

Nintendo Wii uses MEMS technology for motion detection

(Credit: Nintendo)

MEMS typically have a microprocessor and other components such as microsensors. For example, MEMS technology is used in the iPhone and Wii to allow these devices to detect motion and changes in orientation.

In the iPhone, a device called an accelerometer detects when the user rotates the iPhone from portrait to landscape modes, then automatically adjusts the display, so the entire width of a web page or a photo can be seen in its proper aspect ratio.

Hewlett-Packard also uses MEMS technology for its inkjet print-head that combines integrated electronics with microfluidic channels to control ink droplets when printing.

TSMC will provide manufacturing services such as surface micromachining and manufacturing processes for CMOS-MEMS integration and packaging, according to Nikkei's Tech-On. (CMOS stands for complementary metal oxide semiconductor, a common class of integrated circuits used in microprocessors.)

MEMS technology, which in the past was limited mainly to in-house manufacturing or automotive products, is now being applied to a raft of consumer devices and mobile phones, the Tech-On report said.

The MEMS industry was estimated to be worth US$5.95 billion in 2007 and it is expected to exceed US$10.771 billion in 2011, the report said.

TSMC will detail the company's MEMS business plan at a technical seminar in Tokyo on May 15, the report said.