National Semiconductor Corp. told a group of financial analysts today that its decision to integrate its Cyrix subsidiary's microprocessor operations within its South Portland, Maine fab will result in long-term cost savings and put the company in a good position to achieve its goal of providing "system-on-a-chip" products by June 1999.
"As we fill South Portland, we expect to see about $15 million dropping through to the company's earnings statement," said Don Macleod, National's chief financial officer.
The comments, made at the company's East Coast analyst's meeting here, came on the heels of its announcement on Friday that it will terminate a foundry contract between Cyrix and IBM Microelectronics Inc.
"We are on our own, and we like it a lot," said Brian Halla, National's chief executive.
Under the terms of the contract, IBM manufactured microprocessors designed by Cyrix, and for each two it produced, it took one and sold it under the IBM brand name.
"It was a very unhealthy relationship," Halla said.
The termination agreement calls for that contract to end by the end of December 1998. National will also transfer certain unspecified assets to IBM and take a one-time charge of as much as $55 million, which the company expects to be able to absorb relatively quickly.
"We believe that the one-time costs can be paid off within two or three quarters," Macleod said. He noted, however, that this projection assumes a "best-case scenario" under which Cyrix captures some additional market share and the semiconductor market remains relatively stable.
Despite the costs associated with ending its foundry contract with IBM, Halla said that ramping Cyrix into National's South Portland Fab has enabled the company to streamline the manufacturing process by reducing die-sizes and increasing the chip-yield per wafer.
Halla pointed to the differences between two Cyrix microprocessors -- the MII and MediaGX -- as they were manufactured at the IBM foundry and how they will be manufactured at the South Portland fab.
For the MII, the die-size has been reduced from 119 sq. mm to 88 sq. mm, and the number of chips per wafer has been increased from 196 to 280.
For the MediaGX, the South Portland fab will produce 396 chips per wafer, compared with the IBM yield of 211. The die-size for the MediGX has also been reduced from 119 sq. mm at the foundry, to 64 sq. mm at the South Portland fab.
The facility at South Portland was also designed to reduce manufacturing cycle times for Cyrix microprocessors, an area where the IBM foundry fell short, Halla said.
If a company is to be competitive in the semiconductor market, "the quickest possible cycle time is mandatory," Halla said.
The MII and MediaGX's cycle times have been shaved from 8 weeks at the IBM foundry to 5 weeks at the South Portland fab, Halla said.