Taiwan Semiconductor Manufac-turing Co's (TSMC, 台積電) US-based subsidiary, WaferTech LLC, is finally showing signs of a turnaround after dragging TSMC's earnings dangerously close to losses for the past two business quarters.
Yesterday, WaferTech officials announced that a five-month program to improve chip yields has paid off with strong yield gains in chip manufacturing processes for which customers are willing to pay higher fees.
The yield rate measures for how many microchips a company is able to cut from a silicon plate in good condition.
"With chip manufacturing costs continuing to rise, yield management plays a vital role in determining a company's profitability since it can accelerate the production ramp of new processes and technologies," said Randy Tully, general manager for KLA-Tencor Corp, a US-engineering firm working with WaferTech on the perfecting its manufacturing process.
For example, 1,108 thumbnail-sized microchips can be etched onto an 8-inch silicon wafer. Usually around three quarters of those will run properly, but WaferTech is trying to raise that amount. Greater chip yield translates into higher profits.
During investor conferences for second and third-quarter revenues, TSMC Chairman Morris Chang (張忠謀) blamed large investment losses on WaferTech. These losses pushed TSMC's pre-tax income into the red for the past two quarters. Only government tax breaks for new chip plants and equipment saved the firm from reporting consecutive net losses.
In the second quarter and third quarters, TSMC posted before-tax losses of NT$870 million (US$25.2 million) and NT$200 million (US$5.8 million), respectively. In both cases, investment losses exceeding NT$1 billion in each quarter pushed the company into the red and it was only sizable income tax credits paid out by the government that nudged TSMC into the black.
Since then, WaferTech has been working on its yield rate. The step up in chip-yield rates are all on state-of-the-art manufacturing processes, which etch microchips as small as 0.18 microns and 0.15 microns, over 100 times smaller than a strand of human hair.
Currently, manufacturing at this small size is in heavy demand.
TSMC's chairman said last month that demand remained heavy for chips manufactured using these tiny processes, and Semiconductor Business News reported that TSMC had sold out of production capacity for 0.18 micron wafers despite the global downturn.
The report credited new orders from Intel Corp, Nvidia Corp and ATI Technologies Inc with using the 0.18 micron chip-making capacity.
Steve Tso, president of WaferTech, said improvements in the company's yields have changed its standing within TSMC.
In just five months of process work, WaferTech has become one of TSMC's leading yield performers, further enhancing its strategic value as TSMC's sole manufacturing subsidiary in North America.
The Taiwanese chip powerhouse opened WaferTech as a joint US-venture with customer Altera in 1996 and then bought out Altera's shares in December of last year amid record-breaking profits in the chip industry.
TSMC currently owns 99 percent of WaferTech.
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