Motorola expand ties with TSMC, but is U.S. company serious?

AUSTIN, Tex. -- Is Motorola Inc. finally getting serious about its chip-outsourcing strategy in an effort to cut costs?

In another attempt to jumpstart this strategy, Motorola here today announced that it would expand its ties to foundry partner Taiwan Semiconductor Manufacturing Corporation (TSMC) of Hsinchu.

Based on a long-time foundry relationship, the two companies will now significantly "enhance" the portfolio of products that TSMC will build for Motorola on a foundry basis.

The agreement includes Motorola's advanced CMOS devices. TSMC will also manufacture products that are fully compatible with Motorola's own, internal process technologies.

The arrangement will increase Motorola's external manufacturing over the next several years. The move is designed to slash the company's manufacturing costs, according to analysts.

Motorola has been talking about its chip-outsourcing plans for some time, but the company has been dragging its feet. Late last year, Motorola announced its so-called "asset light" chip-manufacturing strategy, which included plans to shut down its outdated wafer fabs and IC-packaging plants worldwide. The move, part of an ongoing cost-cutting plan, also included plans to shift a large percentage of its chip production to foundry providers (see Dec. 18, 2001 story ).

At the time, the company claimed it would eventually shift 50% of its CMOS-based chip production to outside foundries. Over the last year or two, Motorola has announced major foundry alliances with Singapore's Chartered Semiconductor Manufacturing Pte. Ltd. and TSMC (see Dec. 19, 2001 story ).

But so far, Motorola's shift to the foundries is sluggish at best. In 1998, only 7% of the company's total IC output was manufactured by foundries, according to analysts.

In May, Motorola's total chip-outsourcing efforts with the foundries stood at "less than 10%," said Ray Burgess, corporate vice president and director of strategy and marketing for Motorola's Semiconductor Products Sector (SPS), in an interview after a presentation at a technology conference (see May 7 story ).

Earlier this year, TSMC announced its 90-nm process technology. Several companies, including LSI Logic, Motorola, Philips, NEC, and STMicroelectronics, "aligned" themselves with TSMC's 90-nm process, announcing plans to develop chips around the technology.

Following that announcement, Motorola, Philips and STMicroelectronics formed a joint venture to develop chips based on TSMC's 90-nm process technology. And today, Agere Systems Inc. announced plans to leverage TSMC's 90-nm process for its ASIC designs.

Now, Motorola claims it will make good on its chip-outsourcing promises. "Motorola's asset-light strategy is aimed at providing customers with embedded solutions based on leadership technologies and world-class manufacturing," said Bill Walker, senior vice president and general manager of Motorola's Semiconductor Products Sector, in a statement.

"While our recently announced partnership with STMicroelectronics, Philips and TSMC is dedicated to breakthrough technology development, this relationship with TSMC guarantees us additional access to world-class external manufacturing capacity aligned with the jointly developed process technology," he said.

"TSMC's help in the rapid execution of our asset-light strategy will further enable us to meet our customers' needs," he added.