HSINCHU, Taiwan Japan's Hitachi Ltd. and UMC Group here are negotiating a huge manufacturing agreement that could send as much as 20 percent of Hitachi's wafer-processing capacity to the Taiwan foundry. UMC is also negotiating to purchase Worldwide Semiconductor Manufacturing Corp., according to reports.
The potential foundry pact involves 0.25-micron process technology and Hitachi RISC processors and other logic products, said John Hsuan, chief executive officer of UMC. "The agreement is still under negotiations, but we have begun some engineering work to evaluate the transfer," Hsuan said.
Separately, UMC is negotiating to purchase Worldwide Semiconductor Manufacturing Corp. (WSMC), a competing foundry in Hsinchu, according to Electronic Buyers' News. If completed, that deal would make UMC's total wafer output approach or even surpass that of its main competitor, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), according to analysts.
Hsuan declined comment on the possible acquisition. "Some people think acquiring WSMC is a good idea, but we cannot say anything now," Hsuan told EBN in an interview.
Hitachi completely surprised UMC officials a couple of weeks ago when it disclosed plans to strike a major agreement with the Hsinchu foundry. UMC has been unable to place a value on the potential foundry relationship with Hitachi, and Hsuan declined to discuss details of the negotiations.
Analysts estimate that 10-to-20 percent of Hitachi's wafer processing requirements would need the total capacity of at least one entire 8-inch 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.
Even UMC officials are unsure how the deal will play out, but they are taking it seriously. "When I called to find out what was going on, Hitachi told me they wanted to make me happy before my visit," said Hsuan, who first heard of Hitachi's plans to outsource wafer capacity to UMC before making a trip to Japan earlier this month.
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. Hsuan said he wants chip makers to convert their IC designs to UMC's processes so that the foundry 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 said. UMC's chief executive would not speculate on when an agreement could be completed.