But these days we're looking at everything through rose-colored glasses-spring is arriving on the Maine Coast and it is a marvelous time of the year. Oops, spoke too soon. We got three inches of snow this morning. But it's melting fast to expose the green grass that's early this year.

Intel aims to be No. 1 in making
90-nm chips on 300-mm wafers

Intel doesn't intend to take a back seat to the big foundries in the 300-mm wafer department. The chip giant says it plans to be the world's leader in producing 90-nm chips on 300-mm wafers.

"We will be the leader of 90-nm technology going forward," declares CEO Craig Barrett. "We are planning to ramp up 90-nm technology in mid '03."

To do this, Intel plans to "restart" the construction of its 300-mm wafer fab project in Ireland. After at least two delays with the $2.2 billion plant, the company has once again started construction, with chip production scheduled for the first half of 2004.

Fab 24 in Leixlip represents Intel's first high-volume fab slated to produce chips based on 90-nm (0.09-micron) technology. It originally was planned as a 200-mm wafer plant, but was shifted to the latest generation wafer last year, after it was delayed one year to late 2002. Then, another slippage pushed the opening to late 2003.

After Intel's initial 90-nm chips are turned out at an Oregon development fab, Fab 24 will take over as a high-volume fab. But Intel may not be the first chip maker to bring its 90-nm products to market. Taiwan Semiconductor Manufacturing plans to move into "risk production" with its 90-nm process by the third or fourth quarter of this year.

(See April 25 story.)

At last, Micron, Hynix
sign non-binding deal . . .

Well, it finally happened. Or at least the two DRAM giants moved closer to a final deal. As we predicted some weeks ago, Micron Technology signed a non-binding agreement to buy the memory business of South Korea's Hynix Semiconductor.

If it's completed, the deal will certainly change the face of the global DRAM industry. It would combine the world's second and third largest DRAM makers, moving the Idaho company into the No. 1 position ahead of Samsung Electronics in the $11 billion market.

It's doubtful that Hynix would survive without this kind of a deal, observers say, since it is now being crushed by more than $6 billion in debt.

Signed after months of negotiations, the agreement calls for Micron to purchase the memory business of Hynix for 108.6 million shares of its stock, valued at about $3.2 billion. Micron also agrees to invest $200 million in Hynix in return for a 15% equity stake in the Korean company's non-memory chip business.

Once the acquisition is completed, South Korean lenders will provide $1.5 billion of long-term debt financing to Micron for use in its Korea-based operations.

Additional details remain to be negotiated before a definitive agreement can be signed, says Micron CEO Steve Appleton. He is confident, however, that the combination will create a leading chip giant.

The preliminary purchase agreement has to be approved by the Hynix creditors council and the boards of both companies by April 30. If it is, the deal will then need an okay by U.S. and European antitrust authorities as well as Hynix shareholders.

(See April 22 story.)

. . .but not too surprisingly,
unions plan to fight merger

It shouldn't come as any shock to learn that the South Korean unions are up to their old tricks and are going to fight the Micron Technology deal to acquire Hynix Semiconductor's memory chip business.

The Federation of Korean Trade Unions, largest labor group in South Korea, will strike to support Hynix's own union, which may call its own strike to protest the proposed agreement. And on Friday, 8,000 union workers threatened to resign from Hynix if creditors approved the deal.

This kind of protest is a familiar situation in Korea, where union workers at LG Semicon attempted to block the creation of Hynix when their company was merged into Hyundai Electronics three years ago. In February 1999, LG workers staged a 15-day walkout to protest the sale in February 1999, but returned to work after the company agreed to pay a six-month wage bonus in return for the LG union to accept the merger with Hyundai.

As soon as the Micron deal was announced, the union representing Hynix workers said a strike may be called to protest against the proposed agreement with Micron. The federation followed quickly with their comments. "We will do everything to stop Hynix's board of directors and creditors in approving the sale plan," spokesman Lee Sang-yeon told Dow Jones News Service.

Some 7,500 of Hynix's 13,000 employees are members of the company union, which is part of the federation.

(See April 23 story.)

Micron pays $300 million
for Toshiba's Virginia fab

Micron Technology has been going all out this year to expand its DRAM business. Just after reporting an agreement to buy the DRAM business of Hynix Semiconductor, it completed the acquisition of Toshiba's commodity DRAM business in Manassas, Va.

The Idaho company paid $250 million in cash and issued 1.5 million shares of its stock, now valued at $45 million, to complete the acquisition of Dominion Semiconductor. Dominion was formed originally as a joint venture between Toshiba and IBM, which began full-scale wafer production in 1997. In 2000, Toshiba purchased IBM's share of the business.

Dominion should enable Micron "to further leverage our highly-efficient manufacturing model and continue to reduce our cost per wafer," points out CEO Steve Appleton. "We intend to begin transferring our 0.13-micron manufacturing and process technologies into the Dominion facility as soon as possible and expect the transfer to be completed by the end of 2002," he notes.

(See April 22 story.)

New ASML data supports
diagonal interconnect lines

The outlook for diagonal interconnects in ICs gets more promising. ASML, the Dutch lithography giant, successfully has fabricated test structures on wafers from 0.18-micron design data, using diagonal interconnect lines instead of the traditional right-angled interconnects now employed in most commercial chip layouts.

Switching to the so-called X architecture, supporters say, will result in smaller die that dissipate 20% less power, provide 10% more performance, and fit in 30% more chips on a wafer.

ASML's proof-of-concept wafer exposures should ease concerns about the manufacturing impact of routing ICs with diagonal metal lines, they maintain. Other proof-of-concept tests have included photomask production by both laser and electron-beam reticle tools. Earlier this year, Toshiba laid out the first major IC with the X Architecture diagonal interconnect lines for a new 200-megahertz RISC processor. Toshiba is expected to be the first chip maker to offer commercial products with the diagonal routing concept.

"It is a five year mission, and we're almost one-year into it," says Jan Willus, vice president at Simplex Solutions, which is now being acquired by Cadence Design Systems. "But the progress has been pretty significant to date," she says. "I think most people would now say we have provided many of the answers to the questions being raised last year."

The next steps in promoting the X Architecture will be to add multiple suppliers for technologies and production systems needed to fabricate diagonally routed ICs, Willis says. In design automation, work is needed to optimize design rules for diagonal interconnects.

ASML's latest experiments confirm that existing mask data automation and simulation software could be applied successfully to X Architecture design data to optimize lithographic wafer production results.

(See April 22 story.)

How about 'very smart' card
to get this business booming?

Now this kind of chip just might give the anemic smart card business in the U.S. a good kick in the pants. Sharp has come up with a next-generation "very smart" card that integrates 1 megabit of flash memory, a 16-bit core processor, and a dedicated crypto-processing unit. Now that's a lot of power!

Existing smart cards are limited in that they have to depend on ROM and EEPROM. "Most of the applications must be inserted into ROM at early manufacturing stages, limiting flexibility and increasing time to market," points out Robert Stuart, product manager at Sharp Microelectronics of the Americas.

But smart cards based on Sharp's flash memory technology can be fully programmed at the latest stages of the issuance process. "This provides smart card manufacturers and system integrators with unprecedented flexibility," Stuart claims. "This technology is also fully geared to support open operating systems and post issuance frameworks," he adds.

Biometric identification also is possible with the Sharp smart card module. It can store both vector data and full-image data of fingerprints, as well as the required recognition algorithms, Stuart says. For facial recognition, Sharp's chip can store a series of facial pictures, can easily renew this picture data, and also can integrate portions of the recognition algorithm in the card. I wonder if we all will be carrying one of these cards in the near future?

The new smart-card is already being sampled. When it goes into production, the blank card, without printing or personalization, will cost $10. Although this is one powerful card, that's still a lot of money.

(See April 22 story.)

Chip gear book-to-bill goes
positive for 1st time in years

For the first time in more than two years, business is looking up for U.S.-based suppliers of chip production gear. These companies posted a book-to-bill ratio of 1.04 in March--the first time this ratio has climbed above parity since November 2000, according to the SEMI trade group. This book-to-bill means suppliers were getting $104 worth of new orders for every $100 of products it billed in March.

Suppliers posted $838.8 million in bookings, up a tad from $808.1 million reported in February. "While we look for further confirmation of a recovery in the semiconductor equipment market, the improving trends are encouraging," declares Stanley Myers, CEO of SEMI.

Bookings in March were up 14% from $737.2 million in February and 30% lower than March a year ago. Billings were 1% higher than February but 60% lower than March of last year.

(See April 22 story.)

Intel surprises by disclosing
ASML to build 1st EUV tool . . .

Intel surprised some experts this week by revealing it has ordered the world's first extreme ultraviolet (EUV) lithography tool from ASML--even though EUV and other Next-Generation Lithography tools aren't expected to move into chip production until the end of this decade at the earliest.

They were surprised mostly because Intel rarely identifies tool vendors to the news media, reportedly because that would give away too much competitive information. But they shouldn't have been surprised. The chip giant badly wants EUV to win the race for the next generation lithography system--hence the ASML announcement.

The chip giant, a major backer and investor of EUV technology, is part of a U.S.-led EUV consortium formed in 1997. Last year the consortium demonstrated the world's first EUV exposure tool, which it hopes will demonstrate that EUV is viable for chip making.

The consortium originally had two tool builders in mind--ASML and Silicon Valley Group. Last year, ASML acquired SVG and merged their two EUV programs. Intel was the most vocal supporter of the merger and brokered the deal, sources say, because the chip giant believed it would take the combined efforts of the two companies to make EUV viable for the commercial market.

. . . even though problems remain,
and production is decade away

Developers are still a ways off from having a production EUV system. The laser source, for example, is still a problem. The EUV alpha tool developed by the U.S. consortium still runs at 10 watts, but the two to four times that power will be needed to make EUV a production system.

In fact, there are experts who still believe that EUV will never move into production fabs. And some even predict that today's optical tools will continue to be used a lot longer than expected for chip production, delaying the need for any NGL tool.

Intel ordered the first "beta" EUV tool from the Dutch company for delivery in 2005, and the first "gamma" or production-worthy system in 2006. ASML's "alpha"--or initial operational system--is due out in 2003 or early 2004. EUV is one of several technologies fighting for the lead in the production of chips with 65-nm (0.65-miron) designs and lower.

ASML's EUV tool will be for full-fledged chip production at Intel's 45-nm (0.045-micron) process node, says Peter Silverman, who heads up litho system development at Intel. The company expects to make chips at the 45-nm node by 2007, he says. The EUV tools will be installed in one of Intel's 300-mm wafer fabs in Hillsboro, Ore., and be paired up with 157-nm scanners to make 45-nm chips in a "mix-and-match" mode, he says.

(See April 22 story.)

No rain in April worries
Taiwanese chip industry

It seems Maine isn't the only place hit by a water shortage. Here thousands of wells have been drying up in a state where most people outside the cities still get their water from wells. Taiwan has got our problem, but there it could even affect chip production.

The drought is beginning to hurt Taiwan. The government has started cutting water supplies in some cities for swimming, car washing, and other "non-essential" activities.

So far, the Taiwanese semiconductor industry hasn't been affected. "We don't think it's a serious problem," claims Jesse Chou, a spokesman for Taiwan Semiconductor Manufacturing. "The authorities have said they have enough water supply for us through the end of May." But other people are worried.

"We're very worried about the situation," says George Wu, chip analyst at Primasia Securities in Taipei. "It would be a disaster if the shortage forced TSMC and United Microelectronics . . . to halt shipments to their customers."

Taiwan had adopted an emergency package in March that was aimed at keeping production at the island's electronics manufacturers from being affected. The package has worked so far, but there is growing concern now due to the lack of rain in April, a month that's normally rainy. April has been rainy in Maine.

(See April 22 story.)

Altera's next-generation PLDs
will use TSMC's 90-nm process

Altera expects to get a big jump in performance with its next-generation programmable logic devices by developing 90-nm (0.09-micron) designs with its partner Taiwan Semiconductor Manufacturing.

The San Jose firm will leverage TSMC's Nexsys 90-nm process technology for its next-generation parts and expects to see a 30% performance gain from the copper-based process. TSMC says it expects to begin early "risk" production of the copper-based 90-nm ICs in the third quarter.

"Altera's PLD products have a unique combination of features--high-density, high-performance transistors, dense interconnects, and well-characterized memory structures--that are ideal for optimization to new process geometries," claims Francois Gregoire, vice president of technology.

(See April 22 story.)

STMicro sees sequential growth
of 10% coming in second quarter

Sales at STMicroelectronics kept going down sequentially in the first quarter, but the big European chip maker blamed it mostly on seasonal factors. "As anticipated, the sequential decline ... was primarily attributable to seasonal factors as well as pricing pressures resulting from industrywide overcapacity," points out CEO Pasquale Pistorio.

First quarter sales totaled $1.36 billion, down 6.4% from the fourth quarter, and off 28.4% from the first quarter last year.

Net income was off sequentially too. It hit $32.9 million, down from $45 million in fourth quarter last year.

There was some good news though. "Order flow accelerated significantly in the last month of the quarter, during which time we also experienced a degree of price stabilization that benefited memory and other product families," Pistorio notes.

Sequential revenue gains, however, were achieved in automotive, up 5.2%, and consumer IC products, up 2.2%. But computer products dropped 2.1% sequentially and industrial chip products, including smart cards, declined 1.2% sequentially. Telecommunications products fared the worst, posting a sequential decline of 19.8%.

But the second quarter is looking better to Pistorio. "Based upon available backlog information and current order rate trends, we believe that ST's revenues bottomed-out in the 2002 first quarter, and that the company is positioned to post double-digit sequential revenue growth of approximately 10% in the 2002 second quarter." This growth will come from all the company's end markets, he adds, which will "significantly increase" its fab utilization rates.

(See April 22 story.)

Agere Systems begins
climbing out of the mud

Good news has been in short supply in the past couple of years at Allentown, Pa.'s Agere Systems. But the picture may be changing. This week the Lucent Technologies spinoff reported a 2.6% sequential increase in revenues to $551 million for its second fiscal quarter ended March 31.

"We are pleased to report our first quarter of sequential revenue growth in six quarters," says CEO John Dickson. "We are also excited that we are now taking our final steps toward full separation from Lucent, which we believe will benefit our business, our employees and our customers."" The final spin-off of Lucent's stake in Agere takes place June 1.

Revenues ran higher than its previous estimate, and its pro-forma net loss (excluding one-time items) was $246 million, a bit of an improvement over the pro-forma loss of $282 million in the quarter ended Dec. 31. Agere's pro-forma loss of 15 cents a share was slightly better than Wall Street's consensus forecast of 16 cents share, based on a survey by First Call/Thomson Financial.

Agere's quarterly net loss of $219 million included $24 million in restructuring charges, $176 million in acquisition charges, and a gain of $243 million on the sale of its FPGA business to Lattice.

Agere has gone to great lengths to turn itself around. It decided to dramatically reduce its internal manufacturing capacity. And the last major round of cuts eliminated 950 jobs and realigned the company's operations into two business units.

The third quarter ending in June, however, won't show much improvement over the March quarter. Agere expects both revenues and pro-forma net loss per share will be flat to slightly improved.

(See April 23 story.)

Chartered Semiconductor
is looking for a new CEO

This doesn't look to good. Chartered Semiconductor's CEO, Barry Waite, who turned the Singapore company into the third largest silicon foundry in the world, is leaving the company.

Waite requested early retirement to spend more time with his family, according to Chartered. Waite, who had undergone heart surgery a year, asked to step down as Chartered's financial outlook began improving. Prior to joining Chartered four years ago, the 53-year-old Waite had held top management positions at Motorola Semiconductor and Texas Instrument.

The Chartered board named Jim Norling, a retired executive from Motorola, as interim CEO. The 60-year-old joined the Chartered board as deputy chairman a year ago after a 35-year career at Motorola.

Chartered has started a search to find a successor to Waite. It expects the process to take up to nine months. That's a long time to be without a permanent CEO.

"We are pleased to have Jim lead the organization . . . as the foundry industry is entering a new period of growth," says board chairman Ho Ching. "He is relocating to Singapore and will be fully engaged at every level as CEO, deeply involved in Chartered's day-to-day operations as well as its long-term strategy."

(See April 23 story.)

Is consolidation movement
emerging in EDA industry?

A consolidation movement may be brewing in the electronics design automation industry. This week, Mentor Graphics offered $160 million in cash for Innoveda, a competitor in the pc-board and cable-harness design markets.

Then Cadence Design Systems surprised market watchers by agreeing to acquire IC design and verification software supplier, Simplex Solutions, for $300 million in stock.

Cadence wants Simplex to strengthen its design portfolio for IC process technologies at 0.13-micron and below. Simplex would provide Cadence with a range of design automation technologies for 3-D parasitic extraction and full-chip power-grid planning, electromigration and signal integrity solutions.

This week Cadence also reported that it had completed its purchase of Plato Design Systems, which supplies scalable routing technology for advanced semiconductor layouts. The acquisition will augment Cadence's system-on-chip design software to address timing, signal integrity, power, run-time, and capacity issues.

(See April 24 story.)

Fairchild Semi order rate
best in more than 2 years

The news keeps getting better from Fairchild Semiconductor. The Maine chip maker, which two months ago had raised its first-quarter forecast from a 5% decline to flat sales sequentially, reported this week that sales instead for the period had grown sequentially by 4% to $336.9 million.

First-quarter bookings, in fact, were at their highest levels in more than two years. This hiked orders to 28% over the prior quarter and drove the company's book-to-bill ratio to more than 1.3 for the period.

"We're extremely encouraged to see such broad-based demand at this early point in the industry recovery," says CEO Kirk Pond. First quarter sales were only 13% below the year-ago quarter.

Net income for the first quarter moved back in the black to $2.7 million because of a $20.5 million gain on the sale of its military and space discrete power line to International Rectifier. Excluding special items, Fairchild had a $1.1 million loss, or a penny a share to beat the Wall Street consensus of 3 cents a share.

"Merchant power supply demand and wireless handset orders were weak in January but strengthened through February and March," Pond says. "Computing and consumer demand remained strong throughout the quarter, driven by notebooks, desktop PCs, hard disk drives, DVD players, monitors, and displays."

"The overall breadth of demand we're seeing," he adds, "has given us the confidence to begin hiring again globally to increase our worldwide wafer fab capacity levels." I certainly hope Fairchild is leading the industry out of this downturn.

(See April 23 story.)

Optimistic Cymer sees sales
up 15-to-20% in 2nd quarter

It's been a while since I've read such a forecast. Cymer currently figures that its second-quarter revenues will increase between 15-to-20% over the first quarter.

The San Diego company didn't have such a bad first quarter either. It reported sales of $62 million, a 13% increase over fourth quarter sales, though down 32% from the year-ago quarter.

Quarterly net income amounted to $4.1 million, down half from that of the first quarter last year. The company had a loss of $1.9 million in the previous quarter.

The sequential growth in sales was due to "competitive wins and ongoing technology buys," says CEO Bob Akins. "Additionally," he says, "demand increased for our consumables and spare parts," which were up about 6% over the previous quarter, he says. This was the first time in five quarters that these sales were up sequentially, he says.

Cymer experienced a "very significant shift in product mix" during the quarter. That was the company's advanced, higher value-added 4-kilohertz argon fluoride (ArF) products. "This drove greater than expected growth in our average selling price," he says. New orders received in the first quarter included "substantially more capacity buys than did orders received in the fourth quarter of 2001, which is reflected primarily in the pick up in orders for our ELS-6000 and ELS-6010 light sources," he adds.

(See April 23 story.)

DRAMs are good to Infineon
in quarter ended March 31

Now I know why Infineon Technologies has been trying so hard to expand its DRAM operations. Thanks largely to memory chips, the Munich chip maker reported a sequential jump of 34% over the previous quarter in sales to $1.24 billion for the quarter ended March 31.

It was also able to cut its quarterly losses by two-thirds to $96 million from $298 million in the prior quarter.

Infineon's revenue performance was driven not only by a "strong incease in prices for memory products," but by "the overall improvement of demand in all business groups," says CEO Ulrich Schumacher. "We were able to significantly reduce our net loss and further improve our cost position despite continued strong pricing pressure in automotive and communications."

Quarterly revenues of the Memory Products Group surged 105% sequentially to $520 million and 13% higher than the same quarter last year. The loss before interest and taxes (EBIT) was $25.2 million, a fraction of the $340 million the group lost in the prior quarter. "In the last quarter, we have seen growing demand in all of our business segments, especially for memory products," Schumacher says.

While the outlook remains somewhat uncertain for the next six months, Infineon sees increasing signs of improvement. And Infineon is encouraged by a move for consolidation in DRAMs.

Revenues in the Wireline Communications Group grew 16% sequentially to $85 million, and sales in the Wireless Solutions Group were up 1% sequentially to $185 million. The company's Automotive & Industrial Group posted a 9% increase sequentially in quarterly revenues to $266 million.

(See April 23 story.)

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