TI to partner with Asian foundries on chip R&D

Texas Instruments, the world’s largest maker of mobile phone chips, plans to work more closely with its Asian contract chip manufacturing partners to develop new production technologies, a company spokeswoman confirmed.

The company said earlier this year it planned to stop developing its own chip production technologies and instead work more closely with contract manufacturing partners on joint development.

A TI spokeswoman confirmed that the company plans to work with Asian contract chip makers, or foundries, on the new strategy.

TI currently farms out chip production to four Asian chip foundries: Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) of Taiwan; Singapore’s Chartered Semiconductor Manufacturing; and China’s Semiconductor Manufacturing International Corp., according to Tracy Zhou, head of media relations in the Asia Pacific region for TI.

“For the cooperation with foundries, TI will continue working with its current advanced logic foundry partners,” she said in an e-mail.

The change in tactics is significant. TI is one of the world’s biggest chip makers, and has long developed its own production technologies. For any new chip, engineers must focus not only on the circuit design of the chip itself, but also on how it will be mass produced. If a design is too complicated to manufacture at a reasonable price, it can get the boot even if it has promising features.

The outsourcing of chip production development by companies that previously did it mostly themselves, such as TI, has become a trend over the past several months, said Jackson Hu, the chairman of UMC, at the company’s fourth quarter investor conference last month.

“Some companies are even closing their own chip factories and farming out orders to foundry chip makers, while others are simply no longer investing in chip production R&D, and instead putting that investment money into chip product design efforts. We believe this is a positive industry trend, a win-win situation, and a strong affirmation of our R&D capabilities,” Hu said.

The fact that a company the caliber of TI is willing to leave the production side of technology development up to contract chip makers, at least in part, shows how far the foundry business has come.

TSMC was the first company to focus on manufacturing chips that are designed by other companies. Before TSMC opened, small chip design firms had to ask Intel, Motorola, and other big companies to manufacture their chips, and these companies would only agree if their factories weren’t already full. Most small companies didn’t have enough money to set up their own chip factories because the high tech plants then cost around $1 billion each. Now, new ones cost around $3.5 billion.

TSMC stepped in to fill the gap, setting up huge chip factories and taking orders from customers, mainly in the U.S. The result has been the steady growth of chip design companies that never build their own factories. Mobile phone chip developer Qualcomm and graphics chip designer Nvidia are two examples of companies that have been wildly successful, despite not owning their own factories. They farm out production to foundries such as TSMC and UMC.