TI bares details of new 'hybrid' fab strategy
Moving to remain competitive in what has become a brave new world of IC manufacturing, Texas Instruments Inc. had disclosed the details of its revised "hybrid" fab strategy. The chipmaker is bolstering its in-house efforts in analog production, but it is also shifting more of its logic-based IC work and process flow to the foundries.
As a result of the shift, TI has pushed out the production ramp date for its new—and still unequipped—300mm fab in Texas by about 18 months.
Nearly half of TI's logic chip production is outsourced to the foundries today, but that figure could jump to 70 percent over time, according to analysts. TI says it has no intention of going fabless for logic. But the chipmaker's foundry partners for the 45nm node—TSMC, UMC and a yet-to-be-determined vendor—will play a much bigger role than TI has afforded foundries in the past. And by 32nm, TI will co-develop its processes at the foundries, whereas traditionally it has done that work in-house.
By turning over more control of logic process development to its foundry partners, TI is also offloading some of the risk. It's a calculated move as the chip industry approaches a new inflection point in manufacturing, with complex technologies introduced for the 45nm node and beyond.
Those technologies include immersion lithography, ultralow-k and, to a lesser degree, high-k dielectrics.
The foundries "will meet TI's requirements," said Kevin Ritchie, senior VP for the company's technology and manufacturing group.
Partners at 45nm
At TI's financial analysts' meeting early this month, Ritchie revealed two of its foundry partners for the 45nm node: Taiwan Semiconductor Manufacturing Co. Ltd and United Microelectronics Corp. Meanwhile, Singapore's Chartered Semiconductor Manufacturing Pte. Ltd appears to be on the outside looking in, although TI has not yet identified the third partner that will split the 45nm business with TSMC and UMC.
Another open question is the future of TI's own processor foundry business. For years, the company has manufactured leading-edge Sparc processors for Sun Microsystems Inc. According to Ritchie, UMC will begin making Sparc processors on a foundry basis at the 45nm node. Sun officials, however, insisted that Sun is still exploring its foundry options and has not selected a new outsourcing partner.
In any case, the new chip-manufacturing strategy is a dramatic departure from the philosophy TI was professing only a year ago, said Robert Lineback, an analyst with IC Insights Inc. Back then, "they were talking about the need to develop technology," Lineback said. "The fear factor of foundries' not being able to quickly ramp leading-edge digital processes was part of the reason for TI's strategy to do its own technology. But TSMC and UMC proved they could do it as good or better than TI's own R&D team and fabs."
Given the soaring costs of fabs and process development, TI's new foundry push makes fiscal sense, said David Lammers, an analyst with VLSI Research Inc. But Lammers believes TI "will not go fabless" in the foreseeable future. With the huge volumes anticipated for its single-chip cell phone products, the company will require both internal and external production, he said.
TI's logic production at 130nm and 90nm nodes. Foundries take a bigger slice of the pie.
During a presentation at the financial analysts' meeting, Richard Templeton, the Dallas chip giant's president and CEO, said the manufacturing strategy frees up resources to focus more on design. But that is not to say TI has stopped investing in fabs, Templeton said. On the contrary, capital spending and resources for analog production are "going up."
TI's capital spending is targeted at $900 million for 2007.
For years, TI prided itself in developing its own leading-edge processes for analog and logic applications. The chipmaker also built logic fabs to keep pace with IBM, Intel and other leading-edge IDMs.
As the 300mm era arrived early in the decade, however, fab costs soared, prompting some IDMs to adopt "fab lite" strategies. At the same time—indeed, even before the start of the 300mm era—the top silicon foundries had begun to amass huge sums of capital in order to develop leading-edge processes and fabs.
That changed everything for IDMs and their fabless rivals. For example, by using leading-edge foundries, fabless Qualcomm Inc. has been able to close the manufacturing gap with rival TI.
In January, TI dropped a bombshell when it announced it would withdraw from the costly business of internal digital-logic process development after the 45nm node, instead relying on foundry-supplied processes at the 32nm node and thereafter. The company also closed its Kilby wafer fab in Dallas, a move that affected 500 employees, including 200 process development engineers.
The decision was "an emotional change for TI," Ritchie said. After the announcement, he said, "one employee choked backed tears and said: 'I believe it's the right decision, but it hurts.'"
The events fueled speculation among analysts that TI would sell its next-generation 300mm fab—dubbed RFab—in Richardson, Texas, U.S.A. Announced in 2003, the fab was targeted for production in the 2009 or 2010 time frame.
TI has finished the shell on RFab but has yet to equip the plant. The company has no plans to sell RFab but is pushing out the production ramp date by a year and a half, Ritchie said. In the meantime, TI will expand production at an existing 300mm fab in Dallas, Texas. R&D wafer lines at DMOS6 will be converted to production, raising the overall capacity to 26,000 wafers per month from 17,000.
Current production at DMOS6 is on a 65nm process. While TI plans to install its 45nm process at the fab, with production slated for the second quarter of 2008, foundries are expected to lead TI's production ramp at that node.
TI's foundry strategy is partitioned by product category: wireless, DSP and Sparc processors. At the 65nm node, TI has three foundry partners for its wireless chips: Chartered, TSMC and UMC. For wireless chips at 45nm, TI will continue to use UMC and TSMC, Ritchie said. "Disruptive pricing" is a key criterion for the sought-after third partner, he said.
Within its own logic fabs, TI develops processes and makes its own 65nm high-performance digital signal processors. At the next node, TI and TSMC will manufacture DSPs.
A foundry will also take over production of Sparc processors for Sun at 45nm. Ritchie said, but Sun has not confirmed, that the foundry will be UMC "for the first iteration."
At 32nm, TI plans to bring its hybrid strategy to new heights. In the past, process development efforts required three distinct R&D activities. TI developed its own process; foundry partners independently did the same. A third R&D effort brought the separate processes into the production phase.
Starting at the 32nm node, TI and its foundry partners will jointly work on process technology. The process will be defined and developed at the foundry, instead of within TI, and then be "copied" and transferred or fanned back to TI's own fabs. In a sense, that will make TI's fabs complementary to the foundries, VLSI Research's Lammers said.
Even as it shifts responsibilities to the foundries for digital processes, TI is investing in its own analog processes and fabs—and for good reason. Nearly half of the company's total sales revolve around analog, and the fragmented sector is growing faster than the overall semiconductor industry, said Art George, senior VP of high-performance analog at the company.
Focus on analog
TI is already the world's largest analog supplier. "I believe that high-performance analog could be the core growth engine for TI," Templeton said during his presentation. "We are building our skills and competencies around analog."
TI has 200mm analog fabs in Japan, Germany and Dallas. In 2008, the company may expand its analog fab capacity, perhaps leveraging the used tools from its shuttered Kilby fab.
Over the past year, TI has quietly rolled out and ramped up four analog processes. BiCom3HV is a 36V bipolar silicon-germanium process. HPA07 is a high-precision analog technology. A035 is a high-density analog CMOS formula. LBC7 is a high-power BiCMOS technology, based on 0.25µm technology. TI has dropped hints that it will roll out LBC8, an 0.18µm version of LBC7, in 2008.
- -Mark LaPedus