NEC's chip chief vows customer focus

NEC's chip chief vows customer focus
TOKYO — Kaoru Tosaka, sitting atop a Japanese semiconductor company with enormous technology assets, is borrowing a famous Western phrase: The customer comes first.

Tosaka, president of the newly formed NEC Electronics Corp., has a charter to remake a struggling but still premier global semiconductor vendor into a nimble outfit that delivers the right technology quickly to the right customers.

"The system-on-chip business should be operated like the IT system solution business — like system engineers who create and propose a system solution from the ground up through discussion with customers," Tosaka said in a lengthy interview with EE Times. "If we don't make that change, our SoC system-on-chip business won't be successful."

Tosaka, 60, was named to his new post on Nov. 1, the same day NEC Corp. spun its chip operations into a separate company. The former president of NEC Electron Devices, he becomes one of a handful of Japanese semiconductor captains trying fresh strategies to pilot their ships through tumultuous times.

Hitachi and Mitsubishi have formed a joint venture, Renesas Technology Inc., that will merge most of their semiconductor operations except DRAM, while Toshiba and Fujitsu have forged a loose collaborative relationship in systems-on-chip.

Only NEC, having spun off its DRAM operations into the Elpida Memory Inc. joint venture with Hitachi, has opted to establish an independent semiconductor company.

Going public soon

This latest spinout will mainly focus on the SoC business, but NEC Electronics will also carry other devices including compound semiconductors and memories, excluding DRAM. A wholly owned subsidiary of NEC Corp. at present, the company is scheduled to go public in the near future and intends to accept third-party investors.

The reorganization at NEC, Tosaka believes, improves "the constitution of the whole Japanese semiconductor industry," which has taken a lot of hits over the past several years. Still, he said, it will be "a challenge from now on for the Japanese industry to show that it has really recovered its competitiveness in the world market."

Despite the current economic gloom, Tosaka said he plans to grow the newborn NEC operation, with its 24,000 employees, to the magic 1 trillion yen ($8.1 billion) mark by 2005, from 700 billion yen ($5.7 billion) today.

Tosaka, who started his career at NEC as a computer systems engineer, is leveraging a lot of the customer-satisfaction principles he learned in that and other posts. And it doesn't hurt that Koji Nishigaki, president of parent NEC Corp., came from similar businesses and shares the philosophy.

"President Nishigaki started saying that the system-on-chip business at NEC should emulate the system solution business," said Tosaka, who also sees NEC Solutions, an internal company that provides IT solutions and services to customers, as "one good model for NEC Electronics."

Of course, Tosaka is not the first Japanese manager to cite customer satisfaction as his top priority. But for the most part, he said, Japan's chip giants have focused on the tech side, giving priority to advanced processes and cutting-edge technologies. Thanks to their longtime success in DRAMs, the philosophy of improving their technology in small areas paid off for many years, boosting yields and resulting in strong businesses.

But "such a scheme no longer fits present demands," said Tosaka, who joined NEC in 1966 after earning his MSEE at the University of Tokyo. "The SoC business, especially, should be a customer-driven business. We are going to change all of the operation to a 'pull'-type operation from 'push'. Our challenge is whether we can change our operation completely" in this way.

The push-type operation makes products in advance, usually in volume, for sale to OEMs. DRAMs and cars are prime examples. In the pull-type business model, activity is ignited by customer requirements. Tosaka pointed to European giant STMicroelectronics as one company that has successfully mastered "pull."

At NEC, "We have formed the Solutions Operation Unit within NEC Electronics, which is a conspicuous change for the new company," he said. The unit's mission is to propose system-on-chip LSI solutions to customers from the final-applications level. "Since we separated from the DRAM operation, we can concentrate on this scheme," said Tosaka.

When asked to define NEC Electronics' competitive advantage, Tosaka replied, "There are not many semiconductor companies in the world which can steadily supply highly advanced chip sets such as the one used in the Earth Simulator supercomputer," the NEC-built machine that claims the mantle of the world's fastest supercomputer. NEC Electronics, he said, believes "that there should be customers who want to differentiate their products with such advanced chip sets. Thus far NEC had not put high priority on such approaches to customers."

NEC Electronics has divided its business into three interlinked sectors: advanced-technology solutions, system solutions and platform solutions. The advanced-technology sector, which is the technology driver, targets high-end applications such as servers and workstations. The system solutions sector is NEC's main profit maker, offering system solutions that differentiate customer products such as mobile handsets, PC peripherals, and automotive and digital consumer systems. The platform sector covers more commodity-like products such as microcontrollers, gate arrays, SRAMs and discrete semiconductors, from which the company expects stable sales.

In the NEC Electronics model, the most advanced technologies will swiftly migrate down to the system solution sector and then to the platform sector, where the company expects they will result in profits and volume sales. Tosaka described the setup as a "technology waterfall," and cited it as the strength of the integrated device manufacturer (IDM) system.

Being an IDM "enables us to bring the most advanced technology quickly into volume production," he said.

Poised at the top of this tech Niagara at the moment is the CB-90, a system LSI design platform featuring NEC Electronics' UX6 90-nanometer technology, using the CMOS 9 copper layer process. Announced in mid-November, the CB-90 device family will feature high-speed operation of more than 1 GHz and high-level integration of 100 million usable gates. A CMOS transistor with an inner supply voltage at 1 V contributes low power consumption at 2.7 nanowatts/MHz per gate.

NEC will first use this platform for Earth Simulator chip sets, for which "we target a 2.6-GHz clock," said Hirokazu Hashimoto, senior executive vice president of NEC Electronics.

Optimized libraries

The company will also offer three cell-based libraries built around this technology, the CB-90H, CB-90M and CB-90L. Each library is being customized to provide the optimum performance for target applications.

The CB-90H library is designed for high-speed applications such as networking, graphics and servers, and enables up to 1-GHz operation. The CB-90M targets cost-sensitive digital consumer applications enabling 100 million-gate integration. The CB-90L, for mobile, battery-powered applications, uses cells that offer reduced current leakage in standby mode.

"It is difficult for one library to satisfy all applications. We developed three libraries and optimized each of them to the requirements of each application category," said NEC's Kazu Yamada. "We are going to offer a wide range of devices. Some operate at the gigahertz level while some others can control picoamperes."

NEC Electronics says it will begin accepting customer orders in March. First samples of CB-90-based ASICs are scheduled for delivery in June, with volume production targeted for the third quarter of 2003. For LSIs designed using the CB-90L library for low power consumption, orders will be taken starting next September; sampling and volume production are to begin in 2004.

Test production of CB-90 based LSIs will begin at the company's 8-inch test line at Sagamihara, Japan, for the samples due at midyear, Tosaka said. NEC's 8-inch fab in Yamagata will handle volume production. Several game, server and communications companies have already showed interest in the CB-90, Hashimoto said.

Despite his focus in systems-on-chip, Tosaka is not lunging toward 300-mm (12-inch) wafer-manufacturing capability. In fact, he intends to upgrade the company's existing 8-inch fabs to handle 130-nm and 90-nm processes right away. "A 300-mm fab is not mandatory for the system-on-chip business," he said. "SoC LSIs do not require large-scale production systems." Still, Tosaka is not ruling out 300-mm fabrication. "I haven't reached any decision on the300-mm fab yet," he said. NEC Electronics plans capital investments in the $325 million range this fiscal year. "I don't think a $1 billion-level investment is necessary for the next fiscal year, either," Tosaka said. Based on its present investment plan, 300-mm fab construction would not begin before 2004.

In the meantime, NEC Electronics will use the Advanced SoC Platform Corp. (ASPLA) as the base for test production of next-generation chips. ASPLA is a joint R&D company with a 300-mm test production line established by 11 major semiconductor companies in Japan.

When ASPLA begins operation next June, it will become the main test line for NEC's 90-nm process devices. Following test production at ASPLA, "volume production of these devices will be done at a 300-mm fab," said Hashimoto. "There will be several choices: to build our own fab, to have a joint venture with partners or to use foundries."

For the time being, the most likely solution is to use Taiwan Semiconductor Manufacturing Co., where NEC has already established a partnership. "We may depend on foundries for up to 20 percent of total production," said Hashimoto.