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Infineon keeps faith in tech development

Posted: 03 Sep 2007 ?? ?Print Version ?Bookmark and Share

Keywords:4G tech development? Infineon on fab-lite? R&D?

Eul: The chip industry as a whole won't get around the need to do the research and invest in advanced technologies.

Once a typical IDM, Infineon Technologies AG is transforming itself into a fab-lite manufacturer, using foundry partners for a large proportion of its digital manufacturing and its own legacy fabs for RF, mixed-signal and more esoteric projects. EE Times discussed the ramifications of this strategy with Infineon board member Hermann Eul.

EE Times: Application expertise is increasingly becoming a decisive competitive factor in the chip business. How does that affect the value chain?
Hermann Eul: This process not only affects the value chain but is also driven by it. Today, we integrate on one chip functions and functional blocks that a few years ago would have been allotted to several chips. As a result, the interaction between blocks is no longer the realm of the appliance designer but that of the chip designer. This means such a chip can only be designed competitively if the designer has expertise in different areas such as RF, baseband and application functionality. Someone who does not have the application expertise ultimately cannot build a modern chip, simply for the fact that he does not know what kind of functions to integrate.

So IDMs need to be responsible for process technology, chasing ever-smaller geometries. What about Infineon's decision to refrain from in-house manufacturing beyond a certain geometry node?
In part, you are right. The semiconductor industry as a whole won't get around the need to do the research and invest in advanced technologies. On the other hand, as a single company, you can decide in which areas to keep pace with technology progress.

One always needs to have access to the latest technologies. It is important for a company to arrange that access in a way that can be turned into a competitive advantage.

Infineon has implemented a fab-lite strategy; it has stopped investing in certain parts of the value chain. Does this release financial resources that could now be used for other R&D topics?
We will keep our R&D budget relatively constant, at about 17-19 percent of revenue. The funds released by the fab-lite strategy are investments in the first instance. In this regard, Infineon has said it will reduce the investment quota for new manufacturing lines from the present double-digit percentage level to a single-digit percentage.

Given the change in the value chain, which R&D topics do you regard as urgent?
As a company that sells complete system solutions, it is extremely important to have the expertise that enables us to know how an appliance will work and what it will look like. We regard it as one of our core competencies to understand all aspects of a system's functionality and integrate it onto a chip. We spend our R&D funds in a way that enables us to offer complete system solutions to our customers.

Does your fab-lite strategy imply a need to emphasize design-for-manufacturing (DFM) activities?
No. DFM is important whether you manufacture in your own fab or in a foundry.

Software is becoming increasingly important in sophisticated microelectronics but has not been a core competency for semiconductor makers. How does a company acquire software competency?
Infineon has always pioneered the development of software for such chips. We do not need to acquire software competency, since we've had it in-house for years. This is a significant factor for our competitiveness.

Does this also apply for your activities in the automotive segment?
Infineon closely cooperates with system vendors such as Bosch, Continental, Delphi and Siemens VDO to define the right combination for hardware and software in line with market needs.

The fab-lite model could hit its limits when your manufacturing partners begin to build up their own design competencies and eventually start to compete with their customers. Do you see any danger of a conflict of interests?
This is theoretically possible. But reality shows that design and development costs are also increasing for foundries. At present, we do not see any company that could succeed in breaking out of its own part of the value chain.

Has Infineon implemented a key account strategy similar to the one in place at STMicroelectronics?
I do not know the key account strategy of our competitor. We develop all our products in close collaboration with our customers. These customers are called key accounts here as wellcompanies such as Siemens, Ericsson, Nokia, LG, Panasonic and also Huawei or ZTE. These companies are the key to our future.

In Japan, there are concrete approaches to implementing 4G mobile services with data rates in the 100Mbps range. Is the European mobile-radio industry missing out on 4G?
Certainly not. Japan is a country where new technologies are always accepted and deployed rapidly. This was very similar during the deployment phase of 3G mobile services. But nobody would say that Europe has fallen behind. For 4G, there are massive activities that are underway in Europe, mostly connected to the Long Term Evolution, a project within the Third Generation Partnership Project to improve the UMTS mobile phone standard to cope with future requirements.

In automotive electronics, Infineon has a strong position; the same applies to power electronics. Against the background of the debate on climate change, this could lead to synergies. In addition, the company has announced plans to strengthen its position in Japan, which happens to be the only place at present where hybrid cars are built. Could you give us an update on your efforts with respect to Japan?
The situation is exactly as you have described. Indeed, at the time of the Qimonda spin-off, we announced that a part of the proceeds could be used to strengthen our automotive and/or communications activities. Also, we did not rule out acquisitions in Japan. But there is no news I can communicate.

- Christoph Hammerschmidt
EE Times




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