Chartered-IBM link not likely to harm nation's foundries

A production agreement between Singapore-based Chartered Semiconductor Manufacturing Ltd (特許半導體) and International Business Machines Corp (IBM) is unlikely to impact Taiwanese chipmakers, analysts said yesterday.

The deal signed Tuesday allows Chartered, the world's third-largest computer-chip manufacturer to start producing new-generation chips in IBM's 12-inch foundry in the US from next fall.

Analysts say the deal will do little to revive the ailing Chartered.

"I think the impact of this deal will be very limited," said George Wu (吳裕良), a chip industry analyst at Primasia Securities Co. "Chartered is a dead horse already."

Chartered has reported serious financial difficulties, posting losses every quarter for almost two years now.

While eight-inch diameter wafers, or silicon disks from which computer chips are cut, are currently standard, the industry is moving to more advanced 12-inch diameter wafers. The larger wafers will yield many more chips, reducing the costs of production.

Chartered's rivals in Taiwan include Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp's (UMC, 聯電), already have 12-inch wafer production facilities, or foundries, that are each producing around 5,000 wafers per month. Chartered is not expected to have its own 12-inch foundry before the fall of 2004.

IBM is expected to gain big from the deal.

"IBM is a newcomer to the foundry business and is trying to get foundry experience," Wu said.

"I think the alliance is going to fail, but at least IBM can gain [Chartered's] foundry experience at low cost."

As well as gaining technology and expertise from Chartered, IBM should win financially.

"The development costs for a 12-inch foundry are very high, so it makes sense for IBM to find a partner to share the costs," said Rick Hsu (徐禕成), chip industry analyst at Nomura International in Taipei.

Chartered stressed the real winners are its customers.

"Partnering with an industry leader on technology development will mean that Chartered's customers have earlier access to leading-edge technology," Chartered said.