Intel to share technology with Chinese chip maker

Intel Corp. has signed an agreement to transfer chip-making technology and equipment to Nanotech Corp., a start-up contract chip maker in China, the companies said in a statement released on Saturday.

Under the terms of the agreement, Intel will provide Nanotech with its 0.35-micron (350-nanometer) and 0.25-micron chip-making processes and will transfer used equipment for the first phase of a production line that will use 200-millimeter wafers, the statement said, noting that government approval is still required for the deal. Financial terms of the deal were not disclosed.

The 0.25-micron and 0.35-micron processes are several generations behind the most advanced processes being used by Intel to produce microprocessors and other products.

The statement did not say where the used equipment would come from within Intel’s existing manufacturing operations.

Intel has two chip fabrication plants (fabs) that produce chips using a 0.25-micron process and 200-millimeter wafers: one in Leixlip, Ireland, that produces logic chips, including Pentium 4 chip sets; and one in Rio Rancho, New Mexico, that produces logic and flash memory chips, according to Intel’s Web site. An Intel fab in Jerusalem produces logic and flash memory chips on 150-millimeter wafers using a 0.35-micron process, it said.

In addition to transferring equipment and process technology to Nanotech, Intel will also provide training to the company, said Stephan Chen, a Nanotech spokesman, in a telephone interview. Chen declined to disclose additional specifics of the agreement between Nanotech and Intel, including whether Nanotech will produce chips under contract for Intel.

Intel does not contract out production of its microprocessors, but the company has contracted out production of some products, such as chip sets, to Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).

Intel officials did not comment on specific details of the agreement with Nanotech, describing the transfer of the 200-millimeter production line and the two process technologies as a “repurposing” of older equipment that Intel no longer needs.

“There comes a point in time when we’re out of products to put on the older technology,” said John Antone, Intel’s vice president and general manager of sales and marketing in Asia-Pacific.

“What we’re not doing is making any announcement — or have any plans to make an announcement — about a factory or wafer-producing capability in China,” Antone said.

“We don’t have any plans today to be doing wafer production ourselves in China,” he added.

Nanotech is registered in the Cayman Islands and has offices in Hong Kong and the eastern Chinese city of Changzhou, where the company plans to build a 200-millimeter chip fab, Chen said.

Nanotech expects to begin production at the Changzhou fab during the fourth quarter of 2005, Chan said. The company has set an initial production target of 15,000 of the 200-millimeter wafers per month during the first phase of operation and will eventually expand that capacity to 30,000 wafers per month during the second phase, he said, declining to say when the company expected to reach these production targets.

Nanotech expects to invest between $600 million and $650 million in the fab during these two phases of operation, Chen said.

China is home to a growing number of contract chip makers, including Semiconductor Manufacturing International Corp. (SMIC), that aim to meet the growing demand for semiconductors in China and other countries. Nanotech hopes to tap into this growing domestic demand for chips and to serve customers outside China, Chen said

“We cannot rely only on the Chinese market. We should be targeting the global market with a focus on the Chinese market,” he said.