MIGDAL HAEMEK, Israel -- With the agreement by Toshiba Corp. last week to transfer its advanced CMOS logic technology to Tower Semiconductor Ltd. here, the Israeli foundry has set in motion the chain of steps that will lead to building its second fab and, it hopes, achieving world-class foundry status, according to Yoav Nissan-Cohen, co-CEO of Tower, in a conference call with analysts on Friday.
The strategic partnership with Japan's Toshiba is the crucial first step toward Tower's future, he said (see March 28 story). Toshiba also made a $10 million equity investment and committed to acquiring manufacturing capacity at Tower, with an option to make a substantially larger investment.
The second step is acquiring the major financing -- estimated at about $1.3 billion -- to build the second fab. With the new fab, Tower expects to attract more customers, Nissan-Cohen said. Tower is already showing signs of improvement and expects to show a profitable quarter this year and thinks it can operate in the black in 2001 (see Feb. 1 story).
"This enables us to move to the next step: securing government support for the project. Clearly, it is crucial to have the technology secured in order to sign major customers." He said that Tower is in "advanced negotiations" for such a large strategic partner, but he would not say when it would be announced.
However, with the prospect such major customers, the Israeli government is much closer to approving a package of financial grants and incentives to Tower, Nissan-Cohen said.
"We have received very positive indications from the government of our importance to the country," he said. "We are very optimistic the financial incentive package will be approved." This process could still take a few months, he added.
During the visit by Toshiba executives to Israel to ink the technology transfer agreement, the Toshiba contingent met personally with senior government officials in Tel Aviv, including Prime Minister Ehud Barak, Nissan-Cohen said.
As for a timetable for the new fab, Nissan-Cohen said much depended on the Israeli government, but he hoped the financial package would be approved in the second quarter and construction would begin in the third quarter. "We are running as fast as we can," the Israeli executive said.
Construction should take about a year, and then equipment would be installed in the fourth quarter of 2001. Commercial production would begin by early 2002, he said.
Nissan-Cohen said that the fab was likely to be a copy-exact of Toshiba's logic process "in order to minimize the risks," and Toshiba would train Tower's engineers in the process. He said Tower's engineers may want to make their own adjustments or customizations to the process, but "we would like to postpone those kinds of improvements to a later date."
However, Tower's micro-Flash technology, which it has licensed from Saifun Semiconductor Ltd., will require specialized modules and Nissan-Cohen said that will eventually be added to Fab 2. He also hinted that Saifun's microFlash technology has achieved some technology breakthroughs that will be announced soon.
The Israeli CEO said it was not Tower's strategy to compete head-to-head with Taiwan's foundry giants such as Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. But with Toshiba's advanced CMOS logic technology, he saw no reason that Tower could not be on the same playing field.
"Our strategy is to specialize as much as we can, because we can get better margins and give the customer more value," Nissan-Choen said. He pointed out that Motorola Semiconductor Products Sector, which uses almost all the major foundries, recently gave its Foundry of the Year award to Tower Semiconductor.
Tower Semiconductor is hoping to attract more investments from its customers, including Motorola. Nissan-Cohen also said he did not see a conflict in having Motorola as a major customer while using Toshiba's CMOS logic process.