Thu, Nov 02, 2000 page18

• TSMC, Alcatel ink agreement

  CHIPS A deal between the chip foundry and the telecom equipment manufacturer could help TSMC apply more of its technology and to the communications sector

  • By Thomas Ker / CONTRIBUTING REPORTER
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  Telecommunications equipment giant Alcatel and the world's largest producer of made-to-order chips, Taiwan Semiconductor Manufacturing Co (TSMC,　台灣積體電路公司), announced on Monday an agreement to embed flash memory in Alcatel's single chip bluetooth products.

  The development agreement will enable Alcatel to use TSMC's advanced mixed signal and radio frequency process technologies to develop bluetooth products with smaller device dimensions. Meanwhile, TSMC will be able to focus more on the communications sector, which is expected to grow faster than the personal computer sector, analysts said.

  "It's not likely to be of great help right now," said Peter Wang, an analyst at Fubon Securities Co. However, "the cooperation, and movement into communications will be helpful to TSMC's long-term growth."

  TSMC announced in October that chips for communications products and computer products each accounted for about a third of sales in the third quarter. Meanwhile, the company predicted that over 60 percent of its capacity output would use advanced 0.18 and 0.25 micron process technology by the end of next year. Already, over a third of capacity output uses this more advanced process.

  Alcatel, which on Tuesday announced better than expected third quarter results and raised its full year outlook, plans to take advantage of this technology. With the development of mixed signal and radio frequency chips made using 0.35 micron, 0.25 micron, and 0.18 micron processes, "Alcatel will be able to provide designers with a bluetooth product that uses smaller device dimensions, increased performance and lower costs than expensive BiCMOS and gallium arsinide processes," said Mike Pawlik, vice president of corporate marketing at TSMC.

  Bluetooth is a technology specification for small form factor, low-cost, short range radio links between mobile PCs, mobile phones and other portable devices. "Alcatel has an extensive offering of `System-on-Chip' application-specific standard products for wire-line and wireless access solutions worldwide," said Steve Beckers, director of the wireless products business unit at Alcatel Microelectronics. "This new Bluetooth development strengthens Alcatel's position in the wireless segment," Beckers said in a statement.

  TSMC's advanced technology manufacturing process is mainly of benefit to its clients, a TSMC spokesman said, but the company is unlikely to go away empty-handed. "Following on from this agreement, definitely there will be orders," said J H Tzeng, manager of the public relations department at TSMC. "This does depend on our customer though," he said.

  At a time when PC growth is slowing and the development of the post-PC era remains unclear, the communications sector is expected to take up some of the slack as chip orders from the PC sector slow, analysts said.

  Earlier this week, local media reported that Intel Corp and VIA Technologies Inc (威盛電子) had reduced fourth quarter orders to TSMC as a result of lower than expected fourth quarter PC demand.

  Meanwhile, the Semiconductor Business News reported Dataquest analyst James Hines as saying on Tuesday that the foundry market will triple in size by 2003 on the back of demand from fabless semiconductor houses and integrated device manufacturers such as Motorola Inc.

  At the same time, Stan Bruederle, another analyst at Dataquest, had not altered his forecast that worldwide handset shipments would grow to 567 million in 2001, the technology news service reported.

  Still, TSMC's agreement with Alcatel represents more of a future trend, rather than imminent production or orders, analysts said. "It's good news, but it's for the future," said Gary Lee, an analyst at International Securities Co. "They've just announced a goal, they haven't signed an order," he said.

  Being a long-term development project, the news is unlikely to have any effect on the company's share price right now. Even if it were, the bearish sentiment caused by the current political climate will scupper any promising company news.

  "The country must first be stable," said Kirby Chi, an analyst at Tong Lin Securities Consultants Co.

  In a political situation which Chi doesn't believe will be resolved quickly, such news is going to be of little help to TSMC's share price. Yesterday, the stock fell 1.02 percent to NT$97.
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