TI this week also is providing the first details of its planned migration to a 90-nanometer, or 0.09-micron, production process, which the company said will allow it to lower power consumption and double the transistor density and performance of its high-end DSPs and SPARC processors.

Last week, TI confirmed that it will cut its capital spending in 2002 to $800 million, from $1.8 billion last year. The company has already finished a series of fab upgrades that moved analog-IC production from 6 to 8in. wafers, and production of standard logic from 5 to 6in. platters.

While it is still flexing its manufacturing muscle, the company will increase its reliance on foundry capacity during the next capacity crunch, according to Bill Aylesworth, TI's senior vice president, treasurer, and chief financial officer.

"This time around, we plan to use our own capacity for what we think are the stable demand levels and use foundries to address peak demand, providing a buffer," Aylesworth said. "It's a tactical change. We're going to continue our own process development and the bulk of our capacity will remain internal."

It is significant but not surprising that a company like TI would increase its use of foundries, according to Mark Edelstone, an analyst at Morgan Stanley Dean Witter & Co., San Francisco.

"There's no question that the severity of this downturn was a wake-up call for everybody, and now everybody is trying to build in some degree of flexibility," Edelstone said.

TI currently outsources about 5% of its production to foundry partners, the bulk of which is handled by Anam Semiconductor Inc., a Korean manufacturer with which TI has a longstanding agreement. Aylesworth said there is no target for future foundry usage, but he added it's unlikely to grow to more than 20% of total production.

Meanwhile, TI is ramping 90nm production at its recently qualified DMOS6 fab here, the company's first 12-inch wafer facility. The new manufacturing lines are expected to keep overall capacity utilization at about 50% for at least another year, Aylesworth said.

Other top-tier manufacturers, such as IBM, Intel, and some of the leading pure-play foundries, are within a quarter or two of achieving similar processing capabilities and breaking the once formidable 0.10-micron barrier, said Hans Stork, TI's vice president of silicon technology development.

"As we come closer to the horizon, it appears the horizon is a little farther away than we originally thought," Stork said. "Ten years ago, people thought 0.10-micron was the end of the road, and now people are saying 0.01-micron is the end of the road."

TI is also qualifying 0.13-micron production this quarter, and plans to move into full production in the second quarter, according to Stork. Qualification of the 90nm lines is expected in the third quarter of 2003, with production by the end of next year.