Partnerships are critical

The major truth that we have distilled from our experiences during the recent downturn is that close strategic partnerships with customers are essential to optimize growth and success. The future winners in the foundry industry will need to develop strategies to maintain competitiveness in an overcrowded market space that until recently was dominated by only three companies.

This new and harshly competitive environment has given birth to United Microelectronics Corp.'s "partnership foundry" initiative. The logic behind the partnership strategy is that through close, combined efforts and mutual sharing of knowledge and resources, a foundry supplier and its customers can accomplish much more than would be possible in a traditional vendor-customer relationship.

By operating as an intimate business partner, UMC is able to understand each customer's unique applications and system-on-chip design requirements. UMC then works with the customer to define a process technology road map that best-fits the customer's product road map. Our close partnership with certain key customers over the years has been the model for our new strategy, and we have seen excellent results, including UMC's recent announcement of the pure-play foundry industry's first delivery to Xilinx of working products built using 90-nanometer copper/low-k technology.

Applying our partnership approach across the foundry supply chain has also resulted in better services and solutions for our customers. For example, we have teamed with 20 intellectual-property vendors to mutually develop some 100 IP items, including libraries, I/O cells, memory compilers, analog circuits and high-complexity functional building blocks optimized for user-friendliness, manufacturability and cost competitiveness. We have reached agreements with IDM partners such as Oki and SiS to integrate their IP as part of UMC's larger offerings.

As we slowly emerge from what has been described as the most serious downturn in the history of the semiconductor industry, companies must adopt a strategy that will help them not only capitalize during times of prosperity but continue to do well during slower periods. The huge costs of building fab capacity and developing leading-edge technologies are difficult to justify in light of the industry's historical boom-bust cyclical business pattern. We believe that strong business partnerships with customers and suppliers focused on long-term objectives will be the key for success in the coming years.