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Foundry deal crumbling between Dongbu, Anam

Posted: 26 Aug 2002 ?? ?Print Version ?Bookmark and Share

Keywords:Anam Semiconductor? Amkor Technology? DSP? communication? wafer?

After several weeks of negotiations, a deal for control of Korean foundry Anam Semiconductor Inc. is just about dead.

Anam's current parent company, Amkor Technology Inc., said that potential buyer Dongbu Electronics Co. Ltd. could not come to terms with Anam's technology partner and major customer - Texas Instruments Inc. - on extending its outsourcing of DSPs to the 0.135m generation.

That takes a lot of polish off the deal. Without TI solidly on board, there would be little obvious growth opportunity for the Korean firms as the Dallas-based TI turns to other foundries with more experience in deep sub-micron technology, such as Taiwan Semiconductor Mfg Co. Because of the impasse, "I would not ascribe a very high probability of (the deal) happening," said Jeffrey Luth, vice president of corporate communications for Amkor, which handles sales for Anam and has a 43 percent controlling stake in the company.

For years, Anam has made DSPs on a foundry basis for TI and has become reliant on that business filling its fab, which produces 30,000 wafers per month. Last quarter, TI accounted for 90 percent of Anam's revenues. That relationship will continue in the near-term, said Gary Silcott, spokesman for TI's Silicon Technology Division, but 0.185m will be the limit of any technology assistance. "We are not going to support a 130nm or 90nm transition in Anam. We feel we are sufficiently covered for 130nm capacity," Silcott said.

The crux of the disagreement between Dongbu and TI may be in the timing of Anam's transition to 0.135m technology, said Wesley Min, Dongbu's COO. Anam does not have the toolsets to expand its technology, he said, and TI wanted a guarantee that the new duo would be able to deliver 0.135m wafers by a certain date. "We were not sure that we could deliver by the time they wanted," Min said. The execution of this new manufacturing deal was a condition in a shareholders agreement between Amkor and Dongbu.

Just days ago, a Korean newspaper reported on an imminent foundry agreement between Dongbu and TI. According to reports from the Maeil Business Newspaper, Dongbu was expected to sign a foundry deal at the end of this month with TI, valued at $300-to-$500 million annually. The low-end figure is more than Anam has made in the last six quarters. Despite the breakdown in negotiations among the parties, Dongbu is still hoping that something will work out. "I wouldn't say its over. I don't want to say never," Min said. "We are still in discussions."

Amkor, however, acknowledged that it is interested in finding another suitor for some of its shares. "We are not a fab company," Luth said. "I don't know who's out there, but if a viable offer came through from someone who has the money and a good management team we would seriously consider it."

Last month, Amkor said it would sell Dongbu's 20 million shares of Anam worth about $186.5 million. As a result, Amkor's ownership interest in Anam would have fallen from 43 percent to 22 percent. At the same time, Amkor would have exited the foundry arena, transferring the business to Dongbu, and then returned to concentrating on its core business of testing and packaging chips.

If the deal does fall through, Dongbu can still move ahead with 0.135m technology development, which has proven a rough ride for just about every chipmaker. Earlier this year, Toshiba Corp. agreed to assist Dongbu in making the transition to 0.135m and the Korean company tentatively plans to start risk production in Q4, offering both FSG and, eventually, low-k processes. Its fab is capable of 20,000 wafers per month, but installed capacity will top out this year at 7,000 to 10,000 wafers per month.

The future for Anam is more uncertain. Its current deal with TI is secure, lasting through 2002, and would likely be renewed. But Amkor's Luth said a technology upgrade would require several hundred million dollars to get the company ready. According to Anam's website, the plan is to make that move next year, entering into risk production in Q1. An Anam official declined to answer questions about whether the company had the financing to make the transition or if it was still on schedule.

- Mike Clendenin

EE Times

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