HSINCHU, Taiwan -- Japan's Hitachi Ltd. and UMC Group here 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, said John Hsuan, CEO of UMC. "The agreement is still under negotiations, but we have begun some engineering work to evaluate the transfer," Hsuan explained.
A couple of weeks ago, Hitachi completely surprised UMC officials when it disclosed plans to strike a major agreement with the Hsinchu 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 10-20% of Hitachi's wafer processing requirements would need a 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," recalled Hsuan, who first heard about the company'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 (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.