by Bob Haavind, Editorial Director, Solid State Technology

Rumors and speculation about Texas Instruments’ ‘fab-lite’ strategy were addressed in an enlightening talk by Thomas M. Thorpe, VP, external development and manufacturing, at the recent Strategic Materials Conference in Half Moon Bay, CA.

Already more than half TI’s chips are being made at foundries, and Thorpe stated that no more advanced CMOS wafers will be processed within TI’s own fabs. He said that 45nm wafers have already been made on a sampling basis at foundries on the same schedule as if they had been done in TI factories, and that no 32nm work is going on inside TI’s fabs. Packaging and test do stay within TI facilities, however, he added.

At the same time, he said, the advanced CMOS technology could be brought back into TI if there were any advantage to doing so. He called this part of a “flexible manufacturing strategy,” but explained that TI has not stopped developing advanced CMOS technology. Instead TI has moved to a partnership with selected foundries, doing joint development using TI-specific models, within a single R&D activity. This contrasts to the recent past, he said, when there were as many as three R&D projects going on between TI and the foundry.

Analog chips, by contrast, are being made in TI’s own fabs. In fact, Thorpe explained, there have been 50% increases in both the development and modeling teams for analog. He said that TI is No.1 with some 13% market share in analog, and there will be accelerated focus in this area because of bright prospects for growth.

Impetus for the fab-lite strategy, which was announced roughly a year ago, was a tightening of the return on invested capital that TI experienced back in the 2000-2001 time frame, according to Thorpe. He showed that in 2000 fab depreciation was 11% of revenue, but this jumped to 21% of revenue in 2001. The fab-lite strategy has enabled TI to lower this depreciation to only ~7% of revenue in 2006, and allowed TI to cut down on the variability in capital spending from year to year.

The transition to foundries for CMOS was made possible, Thorpe said, as foundries closed the timing gap to the most advanced nodes. But TI maintains over 200 people working on advanced CMOS development — doing modeling, process definition, and working on foundry ramps. He showed a normalize chart showing the steep rise in development costs from node to node, and suggested that TI was saving about $150M/year in advanced CMOS development as a result of the partnerships with foundries.

Foundries also benefit from these partnerships, Thorpe said, because of their ability to see products early, TI’s help in flushing out process issues, and the help they get in ramping advanced technology. — B.H.