By Jeff Dorsch
In the silicon foundry business, there’s a new kid on the block – and it’s a chipmaker who’s been around the block more than a few times.
Intel’s Custom Foundry group was established three years ago, yet it’s been attracting a lot of attention in the past year. Altera and Microsemi have signed on as customers, and Cisco Systems is reportedly a customer for the Intel business. With the continuing fallout between Apple and Samsung Electronics, who provides foundry services for the custom-designed processors in Apple’s mobile devices, there has been speculation that Intel’s foundry may pick up part of Apple’s foundry orders.
The chipmaker’s other publicly announced foundry customers are Achronix Semiconductor (field-programmable gate arrays), Netronome (network processors), and Tabula (also FPGAs). These fabless semiconductor companies, along with Microsemi, which does have its own wafer fabrication facilities, are interested in Intel’s manufacturing prowess – in particular, its 22-nanometer, 3D Tri-Gate process. There are other presumed customers whose identities have yet to be announced or who have been mentioned only in industry rumors.
Brian Krzanich, IntelIntel’s new chief executive officer, Brian Krzanich, comes from the manufacturing side of the company, leading to speculation that he will look to boost the chipmaker’s foundry’s business.
Intel is advertising positions within the Custom Foundry group in Chandler, Ariz., and Hillsboro, Ore., where it has wafer fabs, and in Bangalore, home of the Intel India Development Center and the Intel India Systems Research Center. It is seeking to hire an analog layout manager, a foundry customer engineer, a physical verification engineer, and a senior software engineer, among other jobs.
“Intel is looking at all the problems in the PC business,” says Risto Puhakka, president of market research firm VLSIresearch. “There are various alternatives to growing their business. Foundry is one of them.”
While Intel has attracted some A-list semiconductor companies and startups, “they’re quite a ways away” from being “a full-fledged foundry,” he adds. “I wouldn’t rank them with TSMC [Taiwan Semiconductor Manufacturing Company], GlobalFoundries, or Samsung.”
Still, “they definitely have interest in working with selected companies,” Puhakka says of Intel Custom Foundry.
Semiconductor suppliers are interested in having Intel fabricate their chips because of the company’s advanced manufacturing technology, he notes. “Intel is two years ahead,” Puhakka says. Already turning out chips with 22-nanometer features, when other foundries are coming up to speed on 28-nanometer devices, Intel is looking ahead to 14-nanometer chips with FinFETs, he observes. Those semiconductor companies that can make use of that advanced process will have a competitive advantage in the marketplace, Puhakka says, creating “winners and losers” – that is, Intel foundry customers and those unable to avail themselves of Intel’s foundry services.
In 2013, the silicon foundry business in general is “really the bright spot in the industry,” Puhakka says. GlobalFoundries is “doing quite well,” he adds, and Taiwan Semiconductor Manufacturing isn’t letting any of its worldwide competitors catch up with them.
“The majority of [semiconductor] equipment sold these days is the foundry business, followed by memory,” Puhakka says.
In 2012, the global market for foundry services was worth $34.6 billion, up 16.2 percent from 2011, according to Gartner, with TSMC accounting for just under half of those revenues. GlobalFoundries overtook United Microelectronics Corp. as the second largest foundry in the world, measured by revenues, with $4.2 billion in revenues to UMC’s $3.6 billion, Gartner estimates.
“2012 was the first year that the semiconductor revenue for mobile devices surpassed that of PCs and notebooks,” said Samuel Wang, Gartner’s research vice president, in a statement. He added, “It also marked the first year that advanced technology for mobile applications drove the foundry revenue. Furthermore, 2012 saw not only major foundries improve the yield of 28-nanometer technology, but also many foundries fine-tuned the device performance of legacy nodes.”
Coming in fourth and fifth last year among foundries were Semiconductor Manufacturing International Corp. and Samsung Electronics, at $1.7 billion and nearly $1.3 billion, respectively, according to Gartner. The market research firm filled out the top dozen list with Tower Semiconductor/Jazz Semiconductor (which does business as TowerJazz), IBM Microelectronics, Shanghai Hua Hong NEC Electronics (which last year included Grace Semiconductor Manufacturing, acquired in 2011), Vanguard International Semiconductor, Dongbu HiTek, and MagnaChip Semiconductor, in that order.
Demand for low-cost smartphones in China and other emerging countries drove demand for foundry wafers with 40-nanometer semiconductors during the second half of 2012, Gartner notes. Foundries also shipped near-record numbers of complementary metal-oxide semiconductor image sensors, embedded flash memory chips, high-voltage devices, microelectromechanical system devices and power management integrated circuits in 2012, according to the market research firm.
Among the top three silicon foundries, only UMC is scaling back its budget for capital expenditures in 2013, from $1.7 billion last year to $1.5 billion this year, according to Semiconductor Intelligence. The market research firm sees TSMC increasing its capex budget by 17 percent this year to $9.8 billion, from last year’s $8.2 billion, while GlobalFoundries is boosting its capital expenditures by 16 percent to $4.4 billion, compared with $3.8 billion in 2012.
Samsung Electronics is apparently standing pat this year with $12.9 billion in capital expenditures, and Intel is increasing its capex by 9 percent in 2013, to $12 billion from last year’s $11 billion, according to Semiconductor Intelligence.
Whether or not Intel expands its Custom Foundry group business this year remains a question. What is clear is that Intel is certain to lead the industry in turning out the most advanced and complex chips in the world for themselves and now for certain select customers.