September 28, 2011

UPDATE: Chip Makers Commit $4.4B To Semiconductor Research In NY

By: Shara Tibken

Source: Wall Street Journal

--Leading semiconductor companies have committed $4.4 billion to work on developing chip technology in New York
--Group is working to move to 450-millimeter wafers and is working on other advanced processing technology
--Five chip manufacturers are leading the consortium, including IBM, Intel, Samsung, TSMC and Globalfoundries
--Semiconductor-equipment companies also have committed funds and will participate in the 450-millimeter-wafer transition

NEW YORK (Dow Jones)--The world's leading semiconductor manufacturing giants--including International Business Machines Corp. (IBM) and Intel Corp. (INTC)--have committed $4.4 billion to work on developing chip technology in the state of New York, allowing them to share resources as they move to more advanced manufacturing.

The agreement seeks to help the industry move to manufacturing chips on 450-millimeter wafers, which would reduce the cost per processor by more than doubling the number of chips made on each wafer. The companies will be combining their semiconductor acumen and financial resources to ensure a smooth transition to the advanced technology, while also cementing New York's position as a hub for semiconductor development.

Other partners involved include Samsung Electronics Co. Ltd. (SSNHY, 005930.SE), Taiwan Semiconductor Manufacturing Co. (TSM, 2330.TW) and Globalfoundries, the former manufacturing arm of Advanced Micro Devices Inc. (AMD). Semiconductor equipment makers also have committed funds for 450-millimeter development and will serve as "associate" members of the new consortium, said Alain Kaloyeros, chief executive of the College of Nanoscale Science and Engineering, or CNSE, at the State University of New York.

"We're trying to get as many companies signed up as we can," he said. "All of the companies are a critical component of what's going to make 450 a success."

As part of the $4.4 billion pact, IBM is committing $3.6 billion of the total over a five-year period to work with CNSE and other partners on research for the next two generations of computer chips at dimensions of 22 nanometers and 14 nanometers, or billionths of a meter.

For decades, chip manufacturers have raced to shrink the size of components, which increases the performance of chips while decreasing the cost of each computing function. Competition has spurred companies to introduce ever-smaller processes every couple of years. Intel already has plans for 22-nanometer manufacturing, and other companies are expected to follow.

At the same time, chip makers are trying to cut the smaller processors from larger wafers, which lowers the cost of production while also increasing productivity. The industry is currently standardized on 300-millimeter wafers but expects to move to production in 450 millimeters by the end of the decade. To do so takes significant investment from the companies, and the pact unveiled Tuesday will allow them to share the expense of the research.

Each company involved in 450-millimeters development has committed about $75 million in funding over time to the group, known as Global 450 Consortium, Intel spokesman Chuck Mulloy said.

CNSE's Kaloyeros said the semiconductor-equipment industry has committed $600 million to $700 million as part of the $4.4 billion, though he declined to specify which companies are involved.

The Global 450 Consortium will work in a new demonstration fab being built at CNSE. Tools will be installed in 2013, allowing companies participating in the consortium to run tests on 450 millimeters. Intel also agreed to establish its 450 millimeters East Coast headquarters in Albany to support the overall project management.

"This will be a noncompetitive layer of research," Mulloy said. "Everyone sees it and works together, and if you want to add value above that, you will work at your own sites."

Globalfoundries spokesman Jason Gorss said the pact extends the company's presence in New York. Globalfoundries also is manufacturing a new facility in the state.

"We chose New York to build a new leading-edge fab because of a strong tech ecosystem here with industry partners like IBM and R&D partners like CNSE," he said. "Clearly the inevitable transition from 300 millimeters to 450 millimeters is important...and we really feel that it's important to work collaboratively with partners."

Analysts said the deal announced Tuesday should help the semiconductor-equipment industry get on board with the transition, which they have been hesitant to support.

"This is really significant because it says the industry is moving forward with 450 millimeter," VLSI Research analyst Dan Hutcheson said. "It takes a lot to pull it off, and everything is being done a lot more smartly this time."

The semiconductor industry faced problems when moving to 300 millimeter wafers, with the equipment makers designing tools long before the chip makers were ready for the transition. Concerns about a similar situation for 450 millimeter--as well as worries the more efficient manufacturing would reduce the number of factories and equipment needed--have led to caution from companies such as Novellus Systems Inc. (NVLS) and Applied Materials Inc. (AMAT).

Novellus Chief Executive Rick Hill said in an interview earlier this month that equipment makers have been waiting for semiconductor manufacturers to make a capital commitment for 450 millimeter before the equipment companies become more involved.
"The investment level is so high to go to 450," Hill said. "And in the equipment industry, you don't want to be early."

The company declined to comment Tuesday, while Applied Materials didn't immediately provide comment.

IBM's $3.6 billion commitment for research and development will be spread out between CNSE and IBM's New York facilities and brings IBM's total semiconductor investment in New York to more than $10 billion since 2000, IBM spokesman Michael Loughran said.

The chips being developed eventually will be used in systems ranging from the world's most powerful supercomputers to "extremely energy efficient" consumer devices, Loughran said.

"These [processor] features are so small it starts to matter if you have an extra atom or two out of place," Loughran said.

Along with the commitment from the companies comes a $400 million investment in CNSE from the state of New York. Gov. Andrew M. Cuomo said in a press release that the investment in the two projects will create and retain about 6,900 jobs.

Representatives from Samsung and TSMC weren't immediately available to comment.