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|  | AMD PUTS UMC IN ITS CORNER | | | To prepare for the next round of microprocessor battles, AMD turns to a new foundry and a new relationship. | | | By Gabriel Allan | |
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Advanced Micro Devices Inc. has been slugging it out with Intel Corp. in the microprocessor arena since 1992, when AMD began shipping the Am386. Rather than continue to fight the heavyweight champ with limited help from others, the Sunnyvale, Calif., semiconductor maker formed a partnership earlier this year with Taiwan's United Microelectronics Corp. (UMC).
 AMD recruited the foundry for three key reasons—to fabricate Athlon, its current-generation x86 processor; to create a joint, 300-mm wafer-fabrication plant; and to collaborate in developing advanced process technologies, specifically, 65- and 45-nm silicon on insulator (SOI).
"We're in a fierce competitive battle with Intel," says AMD Chairman and Founder W. J. Sanders III. "It's investing a tremendous amount of capital to build massive fabs. As we have a smaller die, we have the luxury of utilizing our existing fab through the 90-nm node while developing technologies jointly with our new partner, UMC, so that we can drive additional market share at a very efficient use of capital at the 65-nm node."
AMD has come a long way from what analysts called the "Intel copycat" of the early 1990s. With about 20 percent of the worldwide market for PC microprocessors, it has emerged as a legitimate alternative to Intel, according to Kevin Krewell, general manager of semiconductor information provider In-Stat/MicroDesign Resources, in San Jose, Calif. The company has reached that point not by going it alone, but by creating a design chain with different partners. "AMD has really shopped around" for partners, Krewell says.
Over the years those design chain links have included IBM Microelectronics, Motorola and Fujitsu. In each case, AMD received technology, expertise and insights that helped the company stay competitive in its fight against Intel.
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| "You need to be able to bring a competitive capability in technology to the table." William Siegle, AMD |
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For example, AMD gained important information about SOI from a technology exchange agreement with IBM that will be key to the company's next-generation "Hammer" microprocessors. It also benefited financially from its joint work with Motorola, and even more so from its joint venture with Fujitsu.
Competitive Capability
Nevertheless, to remain competitive, AMD continues to refine the criteria for its business relationships. "We believe it's time to revisit the basic business model for independent device manufacturers," says the company's President and CEO, Hector Ruiz. Flexibility is increasingly important, he says, noting that in the era of 300-mm manufacturing, flexibility leads to maximized utilization rates, which in turn leads to cost savings.
 For low-cost fabrication AMD naturally went looking for a foundry with high-volume manufacturing expertise. "That was key going forward," says In-Stat's Krewell. AMD's search for a foundry soon led the company to UMC.
"UMC has a reputation for being a cost-effective producer of wafers," AMD's Sanders notes. With the partnership, "AMD won't need to expend billions and billions of dollars on incremental production facilities," he says. In fact, a forecast by Dataquest and UMC predicts a $3.6-billion price tag for new fabs by 2003. AMD will also benefit from UMC's existing capabilities and manufacturing expertise, which includes experience with 300 mm.
UMC, on the other hand, will "really benefit from the extensive copper experience that we have," says Ruiz. "It will have the ability to learn a lot from that and improve its own efforts in that area." UMC will also use what it learns from AMD about high-performance micro- processors to improve its fabrication of graphics, networking and other high-performance chip designs, says Fu Tai Liou, the company's chief officer of Worldwide Sales and Marketing.
 Noting each party's contribution, AMD's Chief Scientist, William Siegle, comments, "You need to be able to bring a competitive capability in technology to the table" if you want to form a partnership.
"It's a strategically enabling relationship," Ruiz says of the deal. In fact, the UMC/AMD design chain is so strategic for both parties that Ruiz was the keynote speaker at UMC's Technology Forum 2002, held in Santa Clara, Calif., in June.
Inside the Deal
Under the agreement, UMC will initially produce Athlon processors. The joint fab will make Opteron (code-named Sledgehammer), the eighth generation in the company's line of Hammer microprocessors, which are aimed at next-generation network servers. (It's reported that UMC will also produce Opteron at its new fab, currently under construction.) UMC will eventually manufacture AMD's complete line of microprocessors, including devices for portable and desktop PCs, augmenting AMD's production capabilities in the United States and in Europe.
Called AU Pte. Ltd., the joint venture will be funded equally by UMC and AMD on an equity basis, leveraged with debt, according to AMD's Sanders. "We're equal partners, though there is a slight modification to ensure that we have all the intellectual property rights lined up appropriately." AMD has rights to half the partnership's output for its microprocessor business; UMC will make the other half available to customers. The fab will use the 65-nm, and later 45-nm, process that the two companies will develop together.
The relationship between AMD and UMC doesn't involve library or IP vendors, at least not initially. "We don't see that kind of arrangement at this time," says AMD's Siegle. "Product design we'll retain in house."
 Then and Now
AMD's decision to partner with UMC comes after a series of successful design chain partnerships over the years. While AMD's prior relationships with IBM, Motorola and Fujitsu were quite different from each other, they all provided design chain optimization insights that would be used in its new arrangement with UMC.
The relationship with IBM was strictly fee-based. "We entered into an agreement relating to the design of SOI devices to enhance the Hammer family," explains an IBM official. "It was design assistance, helping them work with SOI and integrate it into the product family. It was just an exchange of information."
Besides being a key element for AMD's Hammer microprocessors, the SOI technology will be central to the company's development of its .13-micron process and will be used to build chips at the AU fab.
The design chain relationship between Motorola and AMD was much closer and more involved. "Generally, you start partnerships for cost sharing or for complementary capabilities," says Greg Bartlett, director for Motorola's advanced products R&D laboratory in Austin, Texas. "In the case of Motorola and AMD, we grew our relationship when manufacturing started interacting more. We hadn't originally envisioned working that closely together—we started pretty narrowly focused and ultimately spread. One of the nice things about our relationship was that there wasn't a lot of competition," Bartlett notes. "Our products were complementary in both the market space and the skills space." Both companies had high-end microprocessor expertise, he says, but "AMD's had been from a perspective of very high performance," while Motorola's included balancing power requirements and performance.
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| "We believe it's time to revisit the basic business model for independent device manufacturer." Hector Ruiz, AMD |
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Not only did Motorola share information with AMD over the course of the agreement—which began in late 1998—to develop copper-based CMOS processes, but the companies also shared personnel at a Motorola facility. Although the deal didn't originally involve nonvolatile memory, it evolved to include that technology. AMD used the information for standalone devices, while Motorola incorporated it into embedded memory products. "We had each been working on SLI [system-level integration], and we were able to productize that technology," Bartlett says.
The alliance with Motorola has produced "tremendous value" in other areas, according to AMD's Ruiz. "We've been thrilled to see the yield results we've had," he says. "It's evidenced by the phenomenal success of Fab 30," he continues, citing AMD's Dresden facility as a model for a high-yield, flexible facility.
The Motorola deal is coming to an end, however, with the development of the HIPERMOS 8 (HIP8) .10-micron CMOS process. "Motorola and AMD have jointly come to the conclusion that the 65-nm effort needs to be tied very closely to the manufacturing effort," explains Ruiz. As a result, the two companies agreed "that we would wind down our joint efforts," he says.
As for the design chain relationship between AMD and Fujitsu, the two companies partnered to manufacture memory devices nine years ago, recounts AMD's Siegle. "We couldn't rationalize the investment in fab for the memory venture, so we went 50/50 with Fujitsu." Today, the vast majority of AMD's flash memories comes out of the Fujitsu relationship, according to In-Stat's Krewell.
"That was a very successful relationship," Siegle continues, referring to both the device output and the two companies' close working ties despite the geographic separation. "And we were able to take the experience of that cross-ocean partnership forward" to the relationship with UMC, he notes.
Over There
Indeed, the attractiveness of overseas fabrication facilities in the Asia-Pacific region was tempting for AMD because many locations there offer a large pool of trained electronics workers and relatively low labor costs. At the time AMD was looking for a new foundry partner, UMC had obtained a site in Singapore and started construction of its third 300-mm fabrication facility. It had the backing of the Singapore government—an important factor when dealing with a multibillion-dollar plant—which will extend to the joint venture.
 "We can't be too specific about Singapore's incentives," says UMC's Chairman, Robert Tsao, "but Singapore does offer the most attractive incentives—in many ways even better than what China and Taiwan can offer. We wanted to pick an international city that can accommodate talent from everywhere—people from Taiwan, the United States and Singapore."
For AMD's part, it had already decided Singapore was a good place to be. The company has more than 1,300 employees there. "We do all our microprocessor back-end work there and we have a design team there, and we've been very successful," Sanders says.
The labor and business environment that attracted AMD to Singapore was just the icing on the cake, though. "We concluded that UMC had the culture in terms of people, the flexibility in working with us and the technology capability to meet our needs," explains Ruiz. "Then it became an easy decision that the best location was the one we had already chosen."
That's not to say that implementing the design chain is easy. "It's certainly a bigger challenge than a domestic arrangement," says AMD's Siegle. "But when new partners have an alignment of interest and benefits, you find a way to work those things out."
 Because both AMD and UMC have worked with other semiconductor companies, they had a good idea of what they were getting into when they set up a cross-ocean design chain with billions of dollars at stake. "During the start-up period, when you get to know one another, there's always a barrier. Who are these strangers we're working with?" says Siegle. "Per-haps because UMC is so used to working with a wide spectrum of relationships, we broke down that barrier more quickly."
For its part, AMD had learned a great deal about long-distance partnerships in its relationship with Fujitsu, particularly with the time difference and optimizing the use of technology to communicate.
Based on its experiences with Fujitsu, as well as with Motorola and IBM, AMD evolved a methodology for working with other companies, which includes relying on such features as regular review meetings. To share information and to keep each other up to date, AMD uses a "combination of the modern tools of the trade—telecommunications, presentations and reports instantly available on the Internet, and videoconferencing," Siegle says. "There's a fair amount of travel, as well," he adds.
AMD has applied that knowledge to UMC, says Siegle, "We've already set up the methodology for working together." Adds Ruiz, "Our relationship with UMC is boundaryless—so connected that you can't tell where AMD ends and UMC begins."
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ABOUT THE AUTHOR |
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Gabriel Allan writes for such publications as Information Week, Electronic Business and Network World. Reach him at gallan@designchain.com. Additional reporting provided by Richard A. Quinnell. |
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