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Technology Stocks : IDTI - an IC Play on Growth Markets -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lewis who wrote (8422)	5/19/1998 5:05:00 PM
From: Rob S.	Read Replies (1) \| Respond to of 11555

I talked to Brian about this before they inked the agreement with IBM. IDTI didn't want this type of co-marketing agreement. Cyrix was forced into it because of their weakness as a fabless uP design house. They also had a similar agreement with TI that ended in dispute a couple of years ago. IDTI was looking more for a simple foundry relationship in which they pay some initial NRE fees and so much for each processed wafer. Usually the wafer cost is about 1/3 more than what the same thing could be produced for in their own plant. That includes wafer probe testing but not the packaging and final testing. My guess for a finished 8" wafer cost from IBM would be $3000. From there, IDTI would have several options on where to do the final assembly and testing. They could do it in their own facilities, have IBM do it - particularly attractive if they want to do ball grid array (BGA) packaging that is used increasingly in portables and higher speed MB designs (AMD uses IBM BGA capability), or contract it out to a third party. A simplified equation for IBM mfg. wafers: $3,000 per wafer divided by 350 good die parts (~80 mm sq. die) if high yields are achieved = about $9 per good die. If yields are lousy and they only get 100 good die per wafer on average, then they will be paying about $30 per die, they won't be able to fill much demand or meet fixed cost hurdles and will loose money. It costs $13 to $18 to package and fully test the parts; total mfg. costs could range from $22 to $48 - a tremendous variable, mostly dependent on yields. Given that IDTI is behind the curve in speed grades, they will only be getting an ASP of $50 to $70 per part (guessing where prices will be by the time they get into volume on 266 and 300s). At high production rates, they can make good money IF yields are high even if they have to sell them at $50 each. The full ramp run rate cost for parts produced in IDTI's own fabs is lower: Brian said (a few months ago) that they expect a run rate cost of bellow $2,000 per 8" wafer when they are cranking out the 2.5 to 4 million parts they have talked about. That would reduce die cost to just $6 to $20. The packaging and testing costs will be about the same no matter where that takes place - too small a differential to determine overall profitability much. If, if, if . . . If they can produce the da*n things in volume and there is still a market waiting for them!