Taiwan Semi advances 'low-k' process
Milestone in push toward 90-nanometer IC production
By Chris Kraeuter, CBS.MarketWatch.com
Last Update: 1:21 PM ET April 7, 2003
ALLENTOWN, Pa. (CBS.MW) -- Taiwan Semiconductor has made progress on a significant obstacle impeding the industry's production of smaller, cheaper and faster chips, according to an announcement made Monday by Agere Systems.
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Taiwan Semi, the world's largest contract manufacturer of semiconductors, will begin producing on Agere's behalf a new communications chip with so-called "low-k" dielectric technology, an insulator film material used within chip transistor wires.
Shares of both companies advanced as part of a broad market rally. Taiwan Semiconductor Manufacturing (TSM: news, chart, profile) rose nearly 6 percent to $7.93 in recent action, while Agere (AGR.A: news, chart, profile) advanced 2.6 percent to $1.56, backing off from earlier gains.
Chips that use low-k dielectric material can, compared to other insulators, operate at faster speeds and with lower power consumption.
Agere said its new DSP16411 processes voice, data and video signals 20 percent faster and consumes 20 percent less power than competing chips.
Several companies have been racing to figure out how to apply low-k insulation, which has proved troublesome due to space constraints on chips as well as the nettlesome nature of low-k technology. The yields on finished chips thus far have been inadequate to merit high-volume production.
"This has been a more difficult transition than originally expected, but this gives us a good indication that companies will be able to bring low-k dielectric into volume production," said Trevor Yancey, vice president of technology with research firm IC Insights.
"All high-performance integrated circuits are going to have to move to low-k dielectric eventually," he said.
Applied Materials (AMAT: news, chart, profile) manufactures the low-k technology, called Black Diamond, that Taiwan Semi utilizes. The other two major manufacturers of low-k tools are Novellus Systems (NVLS: news, chart, profile) and Dow Chemical (DOW: news, chart, profile).
Agere's new chip, to be used in base stations that make up the infrastructure of wireless networks, will be built with transistors 130 nanometers apart -- space equivalent to 1/700th the width of a human hair.
"The ability to deliver a 130-nanometer process using copper and low-k dielectrics has become a defining achievement in the integrated circuit semiconductor industry," said Genda Hu, vice president of marketing for Taiwan Semi.
"This product from Agere marks the beginning of an important transition in semiconductor technology, where low-k dielectrics will enable performance differentiation," Hu added.
'Big bonus'
Analyst Michael McConnell of Pacific Crest Securities said this latest announcement is a sign of definite progress.
"This is further proof that Taiwan Semi's yields are improving and getting to production-worthy levels," he said. "This is a big bonus for 130 nanometers and will be even more important when production begins at 90 nanometers next year."
IC Insights' Yancey said it can be expected that other major players in the semiconductor industry -- a roster potentially including United Microelectronics (UMC: news, chart, profile), also of Taiwan; Intel (INTC: news, chart, profile), IBM (IBM: news, chart, profile) and Texas Instruments (TXN: news, chart, profile) -- to announce in the near future breakthroughs with their own low-k processes.
"There has been a lot of industrywide cooperation in trying to get some of the issues with these materials worked out," he said.
While this wasn't the only obstacle to the manufacture of a next-generation semiconductor, Yancey characterized the low-k dielectric development as a significant breakthrough.
"In the future, the industry will once again have to use different types of low-k materials and could run into the same problems, but this is a good advancement," he said.
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