Transmeta (Semiconductor) (TMTA)

[UKBird]

Investors high on TSMC, UMC based on new chip
By Dan Nystedt
STAFF REPORTER
Taiwan's top two chipmakers are expected to hit their stride in the middle of the second quarter and surge through the rest of the year, according to a report from Goldman Sachs.

The investment firm predicts that sales at Taiwan Semiconductor Manufacturing Co (TSMC, ¥x¿n¹q) will surge in mid-April as the company adds new technology partners in addition to a deal inked recently with STMicroelectronics NV, and Royal Philips Electronics NV, two of Europe's top chipmakers.

Goldman analysts believe TSMC will likely announce similar agreements during an upcoming technology forum hosted by the company in mid-April.

STMicro and Philips are working with TSMC to develop a manufacturing process for making system-on-a-chip (SOC) semiconductors using 0.09 micron etching processes, far smaller than leading edge technology today.

SOCs incorporate the functions of two or more chips to save space and cut costs. They are expected to make a big splash in the PDA, mobile phone and Internet appliances markets.

TSMC expects to ramp production at 0.09 microns by the fourth quarter of this year and offer the technology to all its 500-plus clients.

"We believe a crucial element in TSMC's development effort at [0.09 micron] is that the technology will be standardized, whereas in the past TSMC had adapted its technology to meet varying requirements from different customers. For [0.09 micron], there will be only one technology offering so customers will have to design their products according to the TSMC standard," the Goldman Sachs report says.

The investment firm also said surging demand for chips from TSMC and United Microelectronics Corp (UMC, Áp¹q) has sent prices higher and that companies have become so anxious to secure capacity at the firms that they have voluntarily given up discounts.

Executives at TSMC expect sales to rise by 30 percent this year as the economic recovery takes hold. At a technology forum hosted by Merrill Lynch earlier this month, the company also said it would likely to build more new semiconductor wafer fabs.

Originally, TSMC believed it would spend around US$1.6 billion on equipment for new production lines, but Goldman Sachs believes this figure could rise much higher. TSMC officials said they would make a firm announcement later this year.

UMC, TSMC's top competitor in the contract chipmaking business, is reportedly selling off manufacturing capacity for lower technology processes popular with Taiwanese chip-design firms.

Goldman believes this will result in these companies turning to TSMC if they cannot get their chips made on time, however, many of these firms, most notably, Mediatek Inc (Ápµo¬ì§Þ) and Novatek Microelectronics, are both UMC spin-off firms and unlikely to move orders unless necessary.