In the latest move to transform itself into an independent-and perhaps a fabless-semiconductor company by year's end, Rockwell Semiconductor Systems reportedly is holding serious discussions to sell all or part of its wafer-fab operations to Taiwan's United Microelectronics Corp., according to company insiders.
UMC is in talks to buy Rockwell Semiconductor's recently closed 5-in.-wafer fab in Colorado Springs, Colo., and its existing 8-in., 0.5-micron plant in Newport Beach, Calif., the sources said.
As part of the plan, Rockwell Semiconductor would turn over all or part of its manufacturing operations to Hsinchu-based UMC, one of the world's largest IC-wafer foundry companies. The move is part of an effort by the U.S. supplier to lower its overhead and focus on developing competitive products for the booming communications-IC market.
Rockwell officials could not be reached for comment.
The proposed action also follows Rockwell Semiconductor's previously stated plans to become a new and independent concern by spinning off from its parent company, Rockwell International Corp.
In fact, Rockwell Semiconductor has taken several steps to become a lean and mean stand-alone company in the communications-IC market. Two weeks ago, for example, the operation laid off 10% of its workforce, or 670 employees, and said it would shut down its fab in Colorado Springs.
It did not close its Newport Beach fab, but that plant has been troubled by worker strikes over the past year, analysts noted.
It makes sense for the company to exit manufacturing and cut overhead costs, said analyst Joanne Itow of Semico Research Corp., Phoenix. "It would be a good move for Rockwell to develop more of a foundry strategy," she said.
Other chip makers, including Rockwell Semiconductor's archrival, Lucent Technologies' Microelectronics Group, have moved toward a foundry strategy for similar reasons, Itow added.
The proposed deal with Rockwell would also represent UMC's first U.S. wafer fab. UMC has made it no secret that it would like to expand its manufacturing base beyond Taiwan.
Last week, UMC said it would delay its massive, $14.5 billion fab-expansion plans in Tainan, Taiwan, but added that it was seeking to buy fabs in Asia, Europe, or the United States.
"With the slowdown in the semiconductor industry, several people are talking about selling their fabs to us," said a spokesman for UMC's U.S. headquarters, in Sunnyvale, Calif.
Still, UMC's expansion plans fly in the face of the current downturn and capacity glut in the worldwide foundry business, a trend that's putting pressure on profit margins.
It appears, however, that UMC could be reacting to competitor Taiwan Semiconductor Manufacturing Co. Ltd..
Recently, Hsinchu-based TSMC began running wafers in its WaferTech joint foundry venture in Camus, Wash.
At the same time, UMC may have some opportunities to build a strong U.S. foundry presence by buying trailing-edge fabs from Rockwell and others, according to Itow.