Motorola makes TSMC its foremost foundry

Motorola has reduced its capital expenditures this year to about $200 million, or enough to keep its existing fabrication facilities operating efficiently but not enough to expand their capacity. Meanwhile, TSMC has upped its capital expenditures for this year to $2.5 billion, with much of that going to two 300-mm wafer fabs now being ramped at TSMC.

TSMC president Rick Tsai said the company's total manufacturi ng capacity is expected to nearly double to 8 million wafers by the end of 2006, "allowing us to easily satisfy the immediate and future needs of Motorola and all of our foundry customers around the globe."

Motorola continues to develop process technology in partnership with STMicroelectronics and Philips Electronics, which are working together to develop 300-mm manufacturing expertise at a pilot fab in Crolles, France. Those three companies are working with TSMC to make their cooperatively-developed process electrically and design-rule compatible with TSMC's process.

Walker said the agreements between Motorola and TSMC and Philips and STMicroelectronics are aimed at developing a compatible leading-edge process technology. As a complement, Motorola's agreement announced Wednesday with TSMC "guarantees us additional access to world-class external manufacturing capacity aligned with the jointly developed process technology," he said.

A former president of Motorola's Semiconductor Pro ducts Sector, Hector Ruiz, once said that Motorola would outsource 50 percent of its front-end manufacturing capacity, but that plan ran into the reality of the 2001 industry downturn. While Motorola's back-end assembly and test has continued to move out to contractors, front-end wafer outsourcing has actually shrunk during the downturn. A Motorola spokesman estimated that foundries accounted for 30 percent or more of Motorola's front-end manufacturing during peak demand two years ago, but that front-end and back-end work is now in "the high teens or 20s."

The agreement with TSMC is designed to give Motorola "advanced CMOS capacity" while Motorola internally develops such specialty processes as gallium arsenide, silicon germanium, and a future process for MRAM, "giving us a competitive advantage there," the spokesman said.