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NXP withdrawal threatens ST's game plan

Posted: 18 Jan 2007 ?? ?Print Version ?Bookmark and Share

Keywords:NXP? STMicroelectronics? TSMC? Freescale? Crolles Alliance?

NXP's confirmation that it is pulling out of the Crolles semiconductor R&D alliance is a problem for STMicroelectronics NV (ST) and could mean the end of the alliance.

It seems inconceivable that the alliance could continue into another phase as a duo of ST and Freescale Semiconductor Inc., with increased costs and lower economies of scale, which means ST must find new partners and quickly.

NXP is leaving Crolles in favor of increased cooperation with Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) despite the fact that the foundry has been the advanced CMOS benchmark reference for Crolles2, as an associate partner. If NXP takes TSMC with it to concentrate on work with IMEC it could be a double and fatal blow to the Crolles initiative.

The company is pulling in its horns to work with TSMC on differentiating process modules covering areas such as nonvolatile memory, embedded processing and low-power sitting on top of advanced CMOS platforms provided by TSMC.

This sounds like a similar philosophy pursued by the Crolles2 alliance with TSMC as an advanced CMOS reference. But there are differences here. Philips and NXP have favored a fab-lite strategy for many years. ST and Freescale still, at the last count, believe in direct ownership of processes and production although they are prepared to outsource. However subtle differences multiplied by hundreds of millions of dollars of development money can amount to show stopping differences of opinion. Perhaps NXP tried to negotiate for TSMC as a full time partner in the next iteration of the research initiative only to be rebuffed by ST and Freescale.

It certainly seems that Crolles2 was too "hands-on" for NXP's taste. As Frans van Houten, NXP CEO said during a conference call, "Crolles was much more about realizing the actual process and applying that to a pilot line there." It may be then that the use of that pilot line and its cost of ownership may have been the sticking point for NXP.

It would be unfortunate for Europe if the Crolles fabric should unravel. There is no doubt it has done much to keep Europe at the top table in the semiconductor industry. It undoubtedly does require new emphasis for its third phase although moves were being made even under Crolles2. Unfortunately, if TSMC has gone off to be with NXP it could explain the rumors that IBM is negotiating to join the Crolles Alliance.

ST's research base and production ownership model are based fundamentally on partnership and on Crolles2 in particular. If the Crolles alliance collapses then it threatens ST's business plan. NXP's van Houten is already using the past tense when he talks about Crolles. If ST cannot pull a semiconductor rabbit or two out of its hat, world-class collaborative R&D at Crolles will be a thing of the past.

- Peter Clarke
EE Times Europe

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