Foundry Watch: Atmel, Qualcomm form alliance
By Mark LaPedus
Silicon Strategies
07/07/2004, 11:20 AM ET
SAN FRANCISCO--Securing a new source of supply, Qualcomm Inc. has reportedly struck a product and foundry deal with Atmel Corp., according to a report from RBC Capital Markets Inc. on Wednesday (July 7).
"Based on our checks, we believe (Atmel) has secured an RF/IF transceiver design win with Qualcomm," said Satya Chillara, an analyst with RBC, an investment banking firm in San Francisco, in the report.
Atmel will reportedly make the RF transceiver line on a foundry basis for Qualcomm, but details of the chip were not disclosed in the report. "We believe Qualcomm has added Atmel in addition to IBM and Motorola Semi for foundry services," Chillara said. "We expect production will begin in Q3 with potential upside to our RF/Automotive estimates in Q4 and 2005."
Before the deal, Qualcomm's foundry partners included IBM Corp.'s Microelectronics Division and Freescale Semiconductor Inc., formerly Motorola Inc.'s Semiconductor Product Sector. Qualcomm also does foundry business with Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and others.
Atmel's deal with Qualcomm is expected to boost the San Jose-based supplier of chips. Atmel is expected to improve its profitability picture in 2004 despite missing the flash-memory window and suffering from excess wafer-fab capacity, according to a recent report from RBC (see April 16 story).
And until now, the outlook was not positive for Atmel's RF chip business. Its RF expertise came from the acquisition of Germany's Temic in 1998. But since 2000, the company's RF business has been on the decline as the company's biggest customer, Motorola, pulled most of its business from Atmel, according to RBC.
Atmel is also making progress in other areas. "Cost improvements in ASIC and non-volatile memory are proceeding well," according to the new report from RBC. "Our checks indicate 0.13-micron transition (flash) is slated for production in Q4:04, while ramping production at N. Tyneside (U. K.) for ASIC should stem operating losses," the report said.
Overall, Atmel is holding the line. "We expect results to be inline with Q2 revnue estimate of $427 million, up 4.8 percent q/q, and our Q2 EPS estimate of $0.04. We believe Q2 has tracked inline with management expectations and the company's various initiatives continue to contribute," according to RBC.
"We remain comfortable with our street low Q3 estimates as we expect a somewhat cautious outlook from management," the report said. "Although we believe customer forecasts are for the most part coming through, we believe the industry may be experiencing inventory rationalization in Q3. Our current Q3 estimates are for revenues of $439 million, up 2.8 percent q/q, and EPS of $0.05. Street estimates are at $451 million and $0.05."
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