UMC re-evaluates plans to build Singapore fab with AMD

A continuing slump in demand for semiconductors and the breakdown of an agreement with Advanced Micro Devices Inc. (AMD) to jointly develop advanced chip technology has led Taiwanese contract chip maker United Microelectronics Corp. (UMC) to re-evaluate plans to build a joint-venture chip fabrication plant (fab) with AMD, a spokesman said Friday.

"The main consideration is market conditions, more so than the relationship between AMD and UMC," said Alex Hinnawi, a spokesman for UMC in Hsinchu, Taiwan. "The agreement (to build the fab) still exists."

The process development agreement between AMD and UMC, which began early last year, broke down after AMD, on Wednesday, announced plans to work with IBM Corp. instead. The AMD-IBM agreement covers the same 65-nanometer and 45-nanometer process technologies that AMD had earlier agreed to develop with UMC and Infineon Technologies AG, which joined the project in July.

Chip makers are in the midst of a transition to chip production using a 90-nanometer process, a number which refers to the smallest size of a feature which can be created on the chip. By shifting to more advanced process technologies, chip makers are able to shrink the size of chips and can produce more chips on a single silicon wafer.

As a result of its deal with IBM, AMD has pulled out of the joint process development project with UMC and Infineon and is expected to soon withdraw its engineers working on the project at one of UMC's fabs in Taiwan, Hinnawi said.

The announcement that AMD has ended process development work with UMC sparked concern among some industry observers that AMD could pull out of plans to build a joint-venture fab with UMC to manufacture chips on 300-millimeter silicon wafers in Singapore. The fab is expected to enter production in 2005 using a 65-nanometer process. Whether those plans are delayed or cancelled remains to be seen, however.

"The decision when to begin construction (on the joint-venture fab) will be based on actual market conditions," Hinnawi said.

While the process development efforts between the two companies may have come to an end, the two companies continue to work together and AMD will remain a customer of UMC, which produces chips for the Sunnyvale, California, company under contract, Hinnawi said.

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