Friday, June 29, 2012

Samsung, Qualcomm: New Foundry Business Model

See in two articles below the recent comments about the foundry business model. I explained some of the issues in my March 18, 2012 blog post - Moore's Law End? (Next semiconductors gen. cost $10 billion)

Additional articles included in recent blog posts

1. Nvidia #1 at TSMC Fab? Nvida has Priority for 28nm capacity
2. Nvidia: TSMC 20nm Essentially Worthless
3.Intel: "Fabless model collapsing". Is it correct?


Qualcomm Weighs Writing ‘Big Checks’ to Ensure Chip Access
By Ian King on June 28, 2012

Qualcomm Inc. Chief Executive Officer Paul Jacobs, girding against a shortage of chips, said he wouldn’t rule out owning a manufacturing plant or tapping the company’s cash pile to ensure access to needed parts.

Qualcomm is weighing different business arrangements with its suppliers and would consider “writing big checks,” Jacobs said yesterday at a briefing in San Diego, where the company is based.

“If that’s what it took in the future, I wouldn’t say no to that,” Jacobs said. Qualcomm would prefer to keep relying on other companies to make its chips, rather than building plants, he said.

“It’s not something that’s high on our list of things that we want to do. But I wouldn’t rule it out completely.”

Qualcomm is the biggest in a growing group of chip companies that focus on designing chips and leave the manufacturing to other companies, usually so-called foundries in Asia. As smartphone demand surges, parts suppliers are struggling to keep up. That has prompted electronics makers such as Apple Inc. (AAPL) (AAPL) to use cash payments to the tune of hundreds of millions of dollars to secure their quota.

“The gut reaction of investors to Qualcomm building a fab would be negative -- it would be changing their business model,” said Daniel Berenbaum, an analyst at MKM Partners LLC. Using upfront payments to lock down supply from existing partners would be a “judicious use of cash,” he said.

Higher Orders

Qualcomm said earlier this year that earnings growth will be constrained because it can’t get enough chips from Taiwan Semiconductor Manufacturing Co. The company had received more orders than anticipated for chips made with the most advanced manufacturing processes.

Jacobs said that while supply is improving and Qualcomm may be able to provide enough chips to match demand for phones by the end of the year, some customers will miss planned introductions of phones -- even as fresh orders for those chips roll in.

Jacobs also said yesterday that devices powered by Qualcomm’s Snapdragon processors will be available later this year, when Microsoft Corp. (MSFT) (MSFT) releases its Windows RT software. Snapdragon will run some of the thinnest and lightest computers available, he said.

Qualcomm is one of three chip companies partnering with Microsoft to develop devices using processors based on ARM Holdings Plc (ARM) technology. Microsoft is enabling ARM-based chips, which dominate mobile phones and are the heart of Apple’s iPad, in a computer operating system for the first time.

ARM Tablets

Nvidia Corp. (NVDA) (NVDA) and Texas Instruments Inc. (TXN) (TXN) are also working with Microsoft to deliver ARM-based computers and tablets. Intel Corp. and Advanced Micro Devices Inc. (AMD) (AMD), whose processors have traditionally run Windows computers, are working on a similar Microsoft touch-screen operating system.

Windows 8, for Intel and AMD chips, and Windows RT, for ARM-based chips, are Microsoft’s first computer operating systems designed for touch displays.

Qualcomm (QCOM) (QCOM) declined 0.9 percent to $54.41 at 9:36 a.m. in New York. Through yesterday, the shares were little changed this year.

Google Inc. yesterday said it will use a Tegra processor from Nvidia for its Nexus tablet computer based on an updated version of the Android software. That followed Microsoft’s choice of Tegra for its Surface tablet.

Qualcomm’s Jacobs said those decisions came before Qualcomm released an update to Snapdragon. That chip, with two processing cores, outperforms Tegra, which has four, he said.

Dual Core

“It was a timing thing,” he said. “Our dual core is better than their quad core.”

“Nvidia will let its design wins speak for themselves,” said Hector Marinez, a spokesman for the Santa Clara, California-based company.

Qualcomm is restructuring to form a parent company, which will include corporate operations and most of its patent portfolio, as well as a wholly owned subsidiary to operate research and development and run its products, services and semiconductor businesses, the company said in a statement today.

“Our internal reorganization will provide even greater protection for our industry-leading intellectual property portfolio as our products and services businesses seek to accelerate innovation and deliver our products to market quickly,” Jacobs said in the statement.

Samsung Semiconductor Calls for New Foundry Business Model.

Samsung Predicts Closer Collaboration Between Chip Designers and Foundries

[06/26/2012 11:46 PM]

by Anton Shilov

As chips become more complex while process technologies thinner and trickier, it becomes harder for fabless chip companies and contract makers of semiconductors to interact and consequently ramp up production of new chips quickly. With the emergence of 450mm wafer production and FinFET transistors, the collaboration between foundries and clients should become different, believes Samsung Semiconductor.
"There is no doubt we are at a crossroads at the most advanced process technology nodes. In order to take positive steps forward, significant monetary and collaborative investments and resources are required from both the manufacturing and design sides of the equation," said Ana Hunter, vice president of Samsung’s North American foundry services.
Intel recently predicted that due to dramatically increasing complexities of semiconductors and process technologies the foundry model would collapse in the coming years and only integrated device manufacturers (IDMs) will be able to make leading-edge chips using leading-edge manufacturing technologies. Nonetheless, given the fact that contract makers of chips are increasing their purchases of manufacturing equipment, it appears that they do not believe in the collapse of the industry. In fact, since fewer companies going forward will be able to afford own fabs, it is clear that the amount of clients for foundries will increase.
Samsung Semiconductor thinks that a new approach to doing business is in order to stay competitive with pure IDMs. The foundry industry has taken huge strides on the ecosystem side to ensure that physical IP, libraries and design flows are all in place as a new process node comes online. That tight working relationship needs to be pushed beyond the partner ecosystem to include the customer’s design teams.

For faster product rollout and ramp to high-volume manufacturing at the most advanced process nodes, integrated relationships between the foundry and its strategic customers where quasi-IDM operating procedures are established is key to the health and growth of the foundry industry, believes Ana Hunter, who works with clients (such as Apple) of Samsung Semiconductor's U.S.-based unit on daily basis. Fabless companies and foundries need to collaborate on the factors that allow products to be manufacturable, crossing traditional customer and vendor barriers. In fact, this is already happening as leading fabless companies learn from experience that closer integration with foundry design flows and kits, starting very early in the development cycle, enables faster feedback and improvement to both the product design and the manufacturing process.
"The industry is at an inflection point and the model is changing. A more simulated IDM environment will allow fabless semiconductor companies to be more competitive at the advanced process nodes. As an IDM foundry, Samsung is keenly aware of the advantages that can be gained by this approach. We strive to deliver these benefits to our foundry customers," concluded Ms. Hunter.

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