Xilinx to go with TSMC at 28-nm, says analyst

SAN FRANCISCO—Market-leading programmable logic vendor Xilinx Inc. is set to use Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) for foundry services at the 28-nm node, according to one analyst.

It is widely believed that a competitive evaluation is in progress between TSMC and rival foundry United Microelectronics Corp. (UMC) for Xilinx' 28-nm business, said Ian Ing, an analyst with Broadpoint AmTech, in a report circulated Friday (Jan. 15). But sources indicate that Xilinx is on track to go with TSMC, Ing said.

Xilinx has completed multiple iterations of 28-nm test wafers with TSMC, Ing said. He said Xilinx could disclose the move to TSMC at its analyst day in March.

Spokespersons for Xilinx did not immediately respond to request for comment on the Broadpoint report.

Xilinx has a longstanding with UMC and uses a two-foundry strategy. The firm is currently using UMC for 45-nm Virtex-6 FPGAs and Samsung Electronics Co. Ltd. for 40-nm Spartan-6 devices. Last year Xilinx was forced to lower its outlook for the June quarter due to a supply problem, which was reportedly a 65-nm manufacturing glitch at UMC.

Checks indicate that Xilinx' use of Samsung for Spartan-6 parts is tracking relatively well, and that any foundry issues remain far from the critical development path, Ing said.

Broadpoint initiated coverage Friday on Xilinx and rival Altera, rating Xilinx as "buy" and Altera as "neutral." The firm said it has a long-term neutral bias on the overall programmable logic space because of what it described as slower than expected ASIC replacement opportunities and increasing customer complexity that is likely pressure operating margins.

Ing said he believes that FPGAs will replace ASICs at a slower rate than many expect at 40-nm for several reasons, including die size advantages of mainstream ASICs that offset the non-reoccurring engineering (NRE) and design tool costs of FPGAs.

Many have postulated that FPGA use is growing at the expense of ASICs and ASSPs due to what Xilinx President and CEO Moshe Gavrielov calls "the programmable imperative," created by the growing NRE investment required to support ASICs and ASSPs.

Checks with customers indicate that Altera is gaining market share at the expense of Xilinx, particularly in leading edge communications/networking equipment, Ing said. For example, he said, Cisco Systems Inc., once a dominant Xilinx customer, is now splitting its programmable logic purchases closer to 50-50 between Xilinx and Altera for new products in key business areas such as internet services, he said.