In a pair of moves that could make it the world's largest pure-play foundry, Taiwan's United Microelectronics Corp. (UMC) is in discussions to acquire one of its competitors, while at the same time negotiating a separate deal with Hitachi Ltd. to assume as much as a fifth of the company's wafer production.
According to sources close to the discussions, Hsinchu-based UMC is pursuing a deal to acquire Worldwide Semiconductor Manufacturing Corp. (WSMC), a relatively new foundry concern that has been ramping up production at its first fab since late last year.
WSMC, also located in Hsinchu, is partly owned by Taiwanese IC maker Winbond Electronics Corp. and obtained its sub-micron technology from Toshiba Corp., for which it makes chips on a contractual basis.
The talks have yet to be finalized, nor has a sale price been disclosed. But if a deal were to be completed, UMC's total wafer output would approach-or even surpass-that of its main competitor, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), according to analysts.
John Hsuan, chief executive of UMC, declined to comment on the reports, but he did say that the company wants to increase its production capacity and is looking for acquisition candidates. "Some people think [acquiring WSMC] is a good idea, but we cannot say anything now," Hsuan told EBN in an interview.
WSMC also refused to comment. "There are many rumors circulating and I cannot confirm them," said Chang Bing-hun, a vice president at the company.
Meanwhile, Hitachi and the UMC Group are negotiating a huge manufacturing agreement that could end up sending as much as 20% of Hitachi's wafer-processing capacity to the Taiwan foundry company.
The potential foundry pact involves 0.25-micron process technology and Hitachi RISC processors as well as other logic products, according to Hsuan. "The agreement is still under negotiations, but we have begun some engineering work to evaluate the transfer," he explained.
A couple of weeks ago, Hitachi completely surprised UMC officials when it disclosed plans to strike a major agreement with the silicon foundry supplier. UMC has been unable to place a value on the potential foundry relationship with Hitachi, and Hsuan declined to discuss details of the negotiations.
Industry analysts estimate that 10% to 20% of Hitachi's processing requirements would need a total capacity of at least one entire 8-in. wafer fab. With foundry capacity in short supply, it remains unclear how UMC would attempt to meet Hitachi's chip processing requirements, if an agreement is reached.
It was not immediately known if WSMC's fab was being considered to help UMC fulfill any new manufacturing commitments it might strike with Hitachi.
One dilemma facing UMC is a choice of process technologies. The company has embarked on a new strategy to use only its own process technology when serving integrated device manufacturers (IDMs). Hsuan said he wants IDMs to convert their IC designs to UMC's processes so that the foundry company can more effectively manage the technology and serve a wider range of customers with its production lines.
However, UMC may be willing to bend its position a bit to serve Hitachi's huge manufacturing needs. "We've moved a little in our position, but Hitachi is having to move a lot more," Hsuan hinted. UMC's chief executive would not speculate on when an agreement could be completed.
While TSMC is presently the world's largest foundry in terms of production output, UMC claims that it has surpassed its rival in technology. Hsuan added that UMC plans to run "neck and neck" with TSMC in terms of total wafer output next year.
UMC this year will turn out about 1.6 million wafers, about 300,000 fewer than TSMC. The purchase of WSMC would bring UMC's production capacity to about 2.8 million wafers next year, or roughly equal to projections for TSMC.
Additional reporting by J. Robert Lineback of Semiconductor Business News, an EBN sister site