By Peter Clarke

GLASGOW, Scotland — Scottish Enterprise, the national development agency for Scotland, is discussing the establishment of one or more chip-making foundries as a central part of a plan to double the size of the nation's semiconductor and microelectronics industry over the next five years.

The foundries are one element of a semiconductor action plan aimed at doubling employment in microelectronics from about 8,000 to 14,500 workers by 2004, according to an announcement earlier this week by Scottish Enterprise.

The agency did not disclose what funding would be available to attract investors or to support the creation of an indigenous foundry company, but has already had success in attracting Kymata Ltd. to nearby Livingston to build an optoelectronic wafer fab.

"As we build up the design community through the encouragement of fabless chip companies such as Wolfson Microelectronics, we will need to have foundry support," said Carl Tognieri, director of semiconductors at Scottish Enterprise. "There are three or four scenarios as to how this could happen and we're in discussions now."

The creation of new companies in the style of Taiwan Semiconductor Manufacturing Co. (TSMC), UMC Group or Chartered Semiconductor was one way to proceed, Tognieri said. Alternatively, an established semiconductor or foundry company could be attracted to build a new foundry as an inward investor. "Then there are also partnership models," she added. Tognieri said that in this context she was mainly referring to the creation of a foundry for digital logic in Scotland.

There are already a number of wafer-fabrication facilities in Scotland, including fabs belonging to Motorola and NEC, but many are relatively old. Recently, National Semiconductor announced plans to close a long-established 4-inch fab and sell a second fab, possibly to its management, as an analog foundry to which it would commit to buy back a percentage of the output.

In its presentation materials, Scottish Enterprise referred to the "creation of a new wafer foundry, the first Scottish-owned semiconductor manufacturing company," an apparent reference to a Scottish Enterprise-aided buyout of the National Semiconductor wafer fab.

"There could be more than one foundry; we're not ruling anything out," Tognieri said, while admitting that such an analog foundry was being considered.

Ambitious target

When pressed about how Scottish Enterprise could persuade companies to spend billions of dollars creating a foundry industry in Scotland, Tognieri said, "We appreciate it's an ambitious target but this is a three- to five-year plan. It's something Scotland can do rather than Scottish Enterprise."

"The key to the future of the semiconductor cluster in Scotland is innovation," said Crawford Beveridge, chief executive of Scottish Enterprise. "Scotland must move up the value chain if it is to retain jobs, become a world center for semiconductors and microelectronics and compete in the knowledge economy."

The Scottish semiconductor action plan is intended to build on the Project Alba initiative launched in December 1997, which provided support for a semiconductor design campus at Livingston near Edinburgh, with Cadence Design Systems Inc. (San Jose, Calif.) as the anchor tenant. Cadence has plans to employ up to 1,800 people at the site. Although Cadence is the only company preparing to move to the campus at this time, a number of U.S. companies, including Micro Linear, Level One Communications and Cisco Systems Inc., have begun chip-design operations in Scotland recently under the Alba banner.

The agency emphasized that its use of a "clustering" approach, which encourages several companies with complementary functions to settle in one area, had a powerful effect in stimulating further activity.

Malcolm Penn, chairman of Future Horizons (Sevenoaks, England), a market-research and consultancy firm, said, "I have no problem with a foundry being based in Scotland. But it can't be a small foundry. That was the problem with Newport Wafer Fab and Tower Semiconductor. You've got to jump in and jump in big.

"I think Scottish Enterprise is waking up to the fact that they have a strong electronics base but that parts of it are getting a little bit tired," Penn said. "For example, Motorola's in the same position as National Semiconductor. They [Scottish Enterprise] do seem to be looking at it from an overall point of view and have realized that design helps stimulate manufacturing, and vice versa.

"However, in Taiwan's case the foundry model was underwritten by government," Penn said. "In Scotland, there's no chance of that. It can only be done in a catalytic way."

Other elements mentioned as part of Scotland's plan include increasing the funds available to support the commercialization of academic research and the creation of a Scottish Microelectronics Center, which will offer so-called "incubator" facilities to help small companies grow. Peter Denyer, general manager of the Vision and Imaging division at STMicrolectronics, has been appointed chairman of the Scottish Microelectronics Center. Denyer founded VLSI Vision Ltd., a company that pioneered the manufacture of image sensors on CMOS and was recently acquired by STMicroelectronics.