TOKYO ( ChipWire) -- Steel giant NKK Corp. has ended its bid to diversify into semiconductors by agreeing to sell its chip design group to Fujitsu Ltd. With NKK's design teams, Fujitsu plans to expand its system-on-chip operation and pursue more products based on its embedded FR-V processor core.
The two companies have reached a basic agreement to transfer NKK's LSI design and development operations to Fujitsu and expect to iron out details by August.
NKK's design unit will become the core of a new wholly-owned subsidiary that Fujitsu will set up at the end of July in Kawasaki, near Tokyo, with capital of $38 million. Fujitsu intends to position the yet unnamed subsidiary as the design and R&D base for two strategic system-on-chip (SoC) fields: network-related devices; and designs using the FR-V core. The unit will join Fujitsu VLSI in Kasugai, Aichi, and five overseas design units in leading the company's SoC thrust.
The new subsidiary will begin operations in October and is expected to bring its first devices to market in 2002. Fujitsu expects that by 2005, the subsidiary will design about 30 percent of the company's total logic devices.
With the transfer, NKK, the second largest steel manufacturer in Japan, will withdraw completely from the semiconductor business. In the late 1980s and early '90s, it joined Japan's other steel giants including Nippon Steel, Kawasaki Steel and Kobe Steel, in diversifying into chip making. NKK made its entry in 1993 but stumbled in the hotly competitive memory arena, which led to the closure of its Ayase LSI Research Center in March 1999. Since then, NKK has been groping for survival in semiconductors as a fabless design house.
Wataru Fukazawa, executive vice president of NKK, admitted that the company's semiconductor operation has consumed about $95 million per year on average. Last year's sales were $76 million -- not enough to make a profit. Overall, NKK posted consolidated sales of $16 billion in the fiscal year that ended March 31.
"We'll withdraw from this business and will concentrate our resources on our own steel-related core businesses," Fukazawa said.
For Fujitsu, the exit will free up a precious raw material: engineers.
"Design engineers who have system-level design skills are really in short supply," said Kazunari Shirai, executive vice president at Fujitsu. "The shortage is the bottleneck for us in terms of SoC business expansion. With the purchase of NKK's LSI design operation, we will acquire engineers with ample experience and skill in SoC design."
Fujitsu's proprietary FR-V embedded processors, announced in July 1999, target next-generation mobile communicators and digital consumer electronics such as set-top boxes, audio/video products and home gateways. "We are going to shift to the FR-V processor" as a base for system-on-chip designs, said Shirai.
The FR-V processor family uses a programmable, very long instruction word (VLIW) architecture that can be optimized to the requirements of applications, according to Fujitsu.
The instructions, functions and structure of the FR-V can be customized as if the processor were an ASIC designed to a customer's specifications, allowing a flexibility that goes well beyond that of other embedded processors, said a Fujitsu spokesman.
Fujitsu began shipping the FR500 core for media-rich applications with the FR-V Design Kit early this month. The MB93501 processor built around the core samples at about $67. The MB93090 design kit costs roughly $5,700.
The processor is fabricated on an 0.18-micron process and has two 133-MHz, 64-bit buses. The company claims the device -- designed for image and audio processing -- is one of the fastest embedded processors on the market, crunching 532 million instructions per second and 1,064 Mflops.