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TSMC wins major Sun Microsystems business contract

"[This] is a solid win for TSMC, as Sun could have elected to adopt IBM's SOI process."

Randy Abrams, analyst at Credit Suisse

Taiwan Semiconductor Manufac-turing Co's (TSMC, 台積電) expansion of its customer portfolio for the latest 45-nanometer technology and new processors made inroads yesterday after Sun Microsystems Inc said that it had selected the world's biggest contract chipmaker to make its next-generation processors.

Server and software maker Sun Microsystems said in a statement that it has selected TSMC to supply processors made with 45-nanometer technology and future generations.

"TSMC gives us leading process technology coupled with an economy of scale -- high volumes and low costs," Sun Microelectronics executive vice president David Yen (顏維倫) said in the statement.

Sun Microsystems' latest move came after its long-term partner Texas Instruments Inc announced it was opting out of the process manufacturing business and would shift development to the foundries. Texas Instruments will continue to test and package the 45-nanometer processors, the Santa Clara-based company said.

The partnership "is a solid win for TSMC, as Sun could have elected to adopt IBM's SOI process or the foundry at Texas Instruments' first source, United Microelectronics Corp [UMC, 聯電]," said Randy Abrams, a semiconductor analyst with Credit Suisse, in a statement on Tuesday night.

The selection also validates TSMC's move into the microprocessor segment with its bulk process, an area it is also developing with processor maker Advanced Micro Devices Inc for its next-generation fusion processor with integrated graphics used in low-end desktops, Abrams said.

Abrams expects TSMC to make revenues from a new partnership with Sun Microsystems beginning next year as Sun will be unveiling its 65-nanometer chipset later this year and will likely have its 45-nanometer line up next year.

TSMC chief executive Rick Tsai (蔡力行) told investors on Jan. 31 he expected to announce positive results for technological development and customer base expansion in the third quarter.

The TSMC board on Tuesday approved a NT$3 cash dividend and 0.5 percent stock dividend, representing a 4.9 percent yield and 72 percent payout, which was lower than Credit Suisse's anticipated NT$3.75 dividend.

TSMC shares fell 0.65 percent to NT$61.1, outperforming the TAIEX index and local rival UMC, which declined 1.62 percent and 2.17 percent respectively.
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