United Microelectronics Corp (聯電), the world's second largest chip contractor, jointly announced with IBM and Infineon Technologies AG yesterday that they have started production of chips using the most advanced 0.13-micron foundry process technology currently available.
First customer shipments of the high performance chips for network communications and computing applications are expected early next year, the companies said in a press statement released yesterday. A variety of logic and mixed-signal chips are now in initial production at IBM facilities in the US, Infineon in Europe, and UMC manufacturing lines in Taiwan.
Production of the highly advanced technology process should attract orders from integrated device manufacturers in the longer term, analysts said. But the slowdown in the world chip market may dampen any benefits for UMC in the shorter term.
"From the technological perspective, this is good news because it means UMC's capability has reached what is currently the most advanced level," said Thomas Chen, senior analyst at Polaris Securities Co. That should be helpful in getting orders from IDMs in the long term, he said. However, in the short term, "The speed of IDM outsourcing will slow in line with the market slowdown," he said.
The slowdown in PC demand, lower than expected mobile phone demand, and a slowing US economy has resulted in lowered profit expectations, increasing inventories, and analysts' downgraded predictions for major technology companies in the US and Taiwan.
Profits generated by the 0.13 micron technology will also be limited because the proportion of chip production using the advanced manufacturing process remains low, analysts said.
The technology, which is jointly developed, is designed to meet the high performance and low power consumption demands of advanced customer chip designs by using true low-k dielectric insulation and the highest number of copper wiring layers, the companies said yesterday. The technology also continues the semiconductor industry's trend toward smaller, faster, more highly-integrated chip designs.
However, the utilization rate for both UMC and competitor Taiwan Semiconductor Manufacturing Co's (TSMC,
As a result, UMC has established programs such as its recently introduced Silicon Shuttle program for 2001 to help accelerate the adoption of the more advanced 0.13 micron technology process by its customers.
The decision by major electronic manufacturing services provider Flextronics International to join UMC's preferred foundry program benefits Flextronics by speeding up its service to its clients, who include Cisco Systems, Nortel Networks and Nokia.
The strategic move, which UMC announced on Monday, may also benefit UMC in ways beyond recognition of its advanced technology, analysts said.
"Maybe UMC wants to use the strategy to encourage its customers to use more advanced processes," said Ken Cheng, an analyst at China Securities Co. "In the longer term, it is a triumph that that the advanced process will be used," he said.
Indeed, customers are already showing strong interest in the new 0.13 micron technology, said Liou Fu-tai, senior vice president and chief technology officer of UMC. "UMC has already taped-out Silicon Shuttle test wafers carrying the designs of five customers," said Liou.
The Silicon Shuttle program offers customers the opportunity to verify their advanced designs and prototypes in UMC silicon, helping to minimize risks and costs.
The 2001 program introduced last week includes the 0.13 micron platform. "We have more than 16 additional foundry customers who have started their designs for this technology and will start initial production in the first quarter and second quarter of next year," said Liou. "With both IBM and Infineon reporting similar customer interest, it is clear that this technology is rapidly gaining acceptance as the premier global foundry solution for the implementation of advanced integrated circuits."
Analysts see the announcement as positive in the longer term, especially in the development of central processing units and communication chips.
"If you're a long-term investor, you have to take note of this," said China Securities' Cheng.
But with investors more concerned about short term factors such as the utilization rate of UMC and TSMC next year and recent analyst downgrades of the two companies, analysts don't anticipate UMC's stock price to benefit from the announcement for now.
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