SAN JOSE, Calif. - In a major surprise, South Korea's Samsung Electronics Co. Ltd. has gained another foundry customer: Toshiba Corp.
Japan's Toshiba will outsource an undisclosed percentage of its leading-edge logic production to Samsung, according to Reuters, which cited the Nikkei business daily as its source.
The reported deal is a surprise: Samsung and Toshiba are bitter rivals in the NAND flash and logic markets.
But as reported, Toshiba's logic IC unit is going fab lite in a move to cut costs. The company's so-called Logic LSI Division will expand its outsourcing of cutting-edge products, including 40-nm chips, to multiple foundries from fiscal year 2011, according to Toshiba.
At the same time, Toshiba continues to back away from the leading-edge foundry business.
As part of the strategy for transforming its system LSI business and ''securing an asset light business model,'' Toshiba has signed a memorandum of understanding with Sony Corp., expressing the intent to dissolve Nagasaki Semiconductor Manufacturing Corp. (NSM) and to transfer 300-mm wafer fabrication lines
there from Toshiba to Sony. The move was expected.
At one time, Toshiba was in talks about outsourcing some of its 28-nm logic IC production to GlobalFoundries Inc. It's unclear where that stands.
The reported foundry deal between Toshiba and Samsung makes sense, but it is also humbling for the Japanese company. Several years ago, the companies would never cooperate. They are fierce rivals in NAND, and, to some degree, logic.
Now, both Samsung and Toshiba are part of IBM Corp.'s ''fab club'' or process technology alliance. Freescale, GlobalFoundries, IBM, Infineon, Renesas and ST are also part of the group, which cooperates on process R&D.
IBM, GlobalFoundries and Samsung are the main foundry vendors in the camp. Samsung is slowly gaining steam in the arena. TSMC, UMC and others compete in the arena.
''Samsung’s System LSI is prospering. While pre-2009, they had mainly snagged Qualcomm among marquee customers, they now have Xilinx for 28-nm (a shared account with TSMC) and Apple, the biggest consumer of chips, as their customers,'' said analyst C.J. Muse of Barclays Capital, in a recent report.
''In 2010, after many years of $500 million type capex, Samsung found itself crossing the $1 billion and the $1.5 billion capex bar in one swoop by likely spending $1.8 billion, and has publically stated intentions to double capacity every year through 2014,'' he said.
Interesting point eewiz. One can not help but notice how traditional Japanese companies are allowing their manufacturing bases to be diluted. Low cost, yes, yet the shift of the bargaining power in the market should be a significant concern in such a move. Especially, considering that Samsung and Toshiba have been bitter rivals in the past decade or so.
I view this as a risky move by Toshiba in any case. Unless, Toshibha uses this leverage to build on some of its other niches in manufacturing, this move might prove wrong in the long run.
Other than opening up more breathing space for Toshiba to develop its speciality businesses, what other strategic objectives can this move serve?
The industry is cost driven. In order to stay competitive, Toshiba has to reduce the cost of production. If someone, like Samsung, can do it better and cheaper than them, Toshiba will outsource the operation. Manufacturing will always go to the country who can manufacture in a lower cost. China owns the manufacturing industry today. 10-20 years from today, who knows who's going to own it?
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