This morning, as its new customer was talking about Q2 results, Globalfoundries said STMicroelectronics has decided to shift some production to its Dresden fab. ST, a big customer of number-one foundry TSMC, will use the foundry spin-off from AMD to make chips based on a 40nm bulk-silicon process from next year.
As the deal is with ST rather than the 50/50 joint venture ST-Ericsson, it is possible that the Franco-Italian company will use Globalfoundries for consumer-product devices such as settop-box chips rather than the larger business of cellular handset integrated circuits (IC). But because of the way that ST consolidates results from ST-Ericsson, handset devices may also be covered in the deal. However, with 32nm and 28nm processes coming, advanced handset devices seem likely to stay with TSMC. Even so, coming on the day before the foundry discloses its own Q2 results, it's a headache for TSMC. Deals like this are perhaps one reason why Morris Chang decided to shift Rick Tsai aside and take over as CEO of TSMC as well as chairman.
Although TSMC is the runaway market leader in foundry services right now, the company has the problem of maintaining market share when new players are coming into the business and who can use shared R&D costs to play catch-up. It is somewhat ironic that TSMC CTO Fu-Chieh Hsu used his keynote at the Design Automation Conference yesterday to eulogise collaborative working in chipmaking when the threat to the foundry's business comes from exactly that model.
TSMC does a bit of collaborative process research but not at the same scale as IBM and the Common Platform. For years, Common Platform did not look that much of a threat. IBM and Chartered Semiconductor Manufacturing had reasonable chunks of business but nothing approaching what TSMC and UMC could claim. Then Samsung came onto the scene, with a dedicated fab for foundry services, followed by Globalfoundries. And on the sidelines, Chinese foundry SMIC has licensed process technology from IBM.
In truth, integrated device manufacturers (IDMs) such as ST were always going to be the least loyal of its customers. They can afford to have people thrash out process problems on site and, moving to Dresden, ST obtains the advantage of having its major design groups in the same timezone as the fab. That will make it easier to have people onsite and debug process problems. ST is also the kind of customer that can get attention from Globalfoundries when a lot of its time will spent working on AMD's issues. Most fabless companies are not in that kind of position.
But as the IDMs look for cheaper wafers, they will cheerfully take advantage of the commonality of processes that Common Platform offers - it is one reason why Chang has been keen to explain to customers that TSMC will work with them on customised process technologies - and those negotiations will naturally depress the price that TSMC can charge for its own wafers.