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Comment: Winners, losers in ATIC-Chartered deal

Posted: 11 Sep 2009 ?? ?Print Version ?Bookmark and Share

Keywords:ATIC Chartered deal? foundry? fab tool? wafer production?

As reported, Abu Dhabi's Advanced Technology Investment Co. (ATIC) has agreed to acquire Singapore-based Chartered Semiconductor Manufacturing Co. Ltd, for a total of $3.9 billion, continuing its expansion into the contract wafer production business.

Chartered will be folded into GlobalFoundries, the former manufacturing division of Advanced Micro Devices Inc. (AMD), floated as a separate entity earlier this year by ATIC. Pooling resources from Chartered and GlobalFoundries will enable the new company to better compete in the tough wafer supply industry with market leader Taiwan Semiconductor Manufacturing Co. Ltd and others.

So who are the winners and losers in the deal? In my opinion, here are the winners and losers:

Chartered's customers

The ATIC deal must bring a sigh of relief for Chartered's customers. Finally, there is stability in paradise. In recent times, Chartered's largest shareholder, Temasek, made it no secret it was seeking to unload Chartered. Temasek reportedly approached Samsung, SMIC, TSMC, UMC and others about a merger with Chartered. Many of those reports surfaced in the media, possibly hitting a nerve in Chartered's customer base. GlobalFoundries, the controlling firm in the merger with Chartered, could provide some stability for those customers.

The spinoff of AMD recently announced its process roadmap. Based on the roadmap, the company would have taken too long to become a major factor in the foundry business, at least in my humble opinion. Right now, GlobalFoundries produces processors for AMD based on silicon-on-insulator (SOI) technology. Frankly, SOI is not a mainstream technology for most chipmakers; it's a niche technology.

GlobalFoundries is not scheduled to have a mainstream bulk CMOS process until next year. That would be a 45-/40nm process. That's too late.

In ATIC's acquisition of Chartered, GlobalFoundries appears to be assuming control of Chartered. Chartered has mainstream bulk CMOS technology, including 45-/40nm processes. Chartered is readying a 32nm process, based on high-k and metal gates. Simply put, Chartered's technology accelerates GlobalFoundries roadmap, making GlobalFoundries a much more serious player.

Temasek/Singapore government
Chartered was originally formed by the Singaporean government. Temasek Holdings, an Asia investment house headquartered in Singapore, owns a huge stake in Chartered.

In recent times, Temasek made it no secret it was seeking to unload Chartered. The investment firm was most likely tired of the cyclical nature of the semiconductor business. It was also sick and tired of the losses at Chartered. While Chartered was racking up losses, TSMC was rolling in profits over the years. It must have been frustrating for the investment firm.

Consolidation continues in the foundry business. The consolidation of the leading-edge foundry sector eliminates one competitor. GlobalFoundries and Chartered will be merged. GlobalFoundries will run the final company. Goodbye Chartered. Nice knowing you.

That's good for the other leading-edge foundries: IBM, Samsung, SMIC, TSMC and UMC. There are too many foundries on the leading-edge in the first place. As the years go by, there are fewer and fewer customers that require leading-edge designs.

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