EDITOR'S PAGE

Bargain fab

Not all chip companies are moving their manufacturing out of Silicon Valley or outsourcing their products to the foundries. There's at least one semiconductor company that has actually built a brand-new fab in the valley and pulled most of its wafer processing out of the foundries: Sipex, an analog chipmaker with a strategic plan at odds with many trends seen as givens by industry observers, a firm that has also benefited from a fortuitous combination of timing and luck.

"We set our business objective to be a broad-based supplier of analog circuits, so underpinning that, we were going to need multiple processes to do all these product lines," explains Jim Donegan, chairman and CEO of the company, which produces hundreds of power management, interface, and analog display products. "Do you do that in-house or do you manage these 12 outside foundries that you try and con into doing process modification for you? We made the decision that we wanted to do it in-house for the process availability and flexibility."

The foundries' attitude was another determining factor. Sipex's total monthly wafer needs pale in comparison to a foundry's large customers and, like the rest of the analog world, involve many different mask types. "When they [the foundries] have capacity and times are tough, they love us. When the business turns up, they look at us and say, these guys are a pain in the neck.... They would raise our prices through the roof to the point that they hoped we would go away. So the other key element of why we built our own fab is independence."

After looking at existing buildings and sites throughout Silicon Valley, Donegan found six acres in Milpitas owned by Komag. Sipex purchased the land for $1 million per acre in November 1997, broke ground in March 1998, moved in to the first of two projected buildings a year later, and then occupied the second building in 2000. The price tag to date for the land, buildings, facilitization systems, process and support equipment, the whole kit and caboodle? A mere $34 million, according to Donegan. "The way we were able to do that is because we did it when no one else was doing it. Right smack in the middle of the downturn, we're out there shoveling dirt, putting in capacity for the upturn.... And we got most of the equipment in that building for 5 to 10 cents on the dollar."

Here's where Donegan's Irish luck came into play. Remember a start-up named Interconnect, which started building a fab and then tanked? Turns out Sipex's contractor, Hathaway Construction, also worked on the Interconnect site. "Literally the day we broke ground," recalls Donegan, "the president of Hathaway came up and said, 'we just got a stop-work order on this [Interconnect] fab.' He said, 'if you guys can move quickly, you can save an ever-lovin' fortune.' The next day we wrote a check and we just bought it, lock stock... the fab walls, filters, DI water plant, transformers, generators, chillers—all of it came off that job site, most of it still in the original containers. We got it all for $1.4 million...you're probably looking at about $25 million worth of stuff."

Yener Gurler, Sipex's senior vp of operations, expects the fab to reach 12,000-16,000 wafer outs per month by next summer, once all the processes have been transferred, new product lines tweaked, and production ramped at the South Hillview Avenue site. "We have matched UMC's yields in most products," says Gurler, "and we are tuning up some parameters on our new products. Generally speaking, we are quite happy with the yields we are getting."

The Milpitas fab, which now features about 28,000 square feet of cleanroom and runs mostly 6-in. wafers, is equipped with refurbished tools, except for a set of brand-new horizontal furnaces. It's a trip down fab memory lane seeing all those vintage Lams, Applieds, Nikons, and the like, but there they are, running process and helping the company's margins. "We just live on everyone else's hand-me-downs," jokes Donegan. "That's the nature of analog—just making money."

Tom Cheyney
Editor

tom.cheyney@cancom.com

MicroHome | Search | Current Issue | MicroArchives
Buyers Guide | Media Kit