18:10 PM

ChipWatch: GlobalFoundries Is Spooking Foundry Leader TSMC

By Matt Grimshaw, Editorial Director of the Semiconductor Technical Journal Future Fab International

This week's announcement that GlobalFoundries' parent Advanced Technology Investment Company of Abu Dhabi, has tendered an offer to buy Chartered Semiconductor for $3.9 billion, has prompted this post. For a connection was made in my head regarding some rather odd events of recent times that I couldn't make sense of until now.

Earlier this summer, a true legend of the semiconductor business came out of semi-retirement and I for one (and I'm sure I'm not alone in this) was stunned. Not "oh wow" stunned, but the sort of stunned that only occurs when a blunt object whacks you in the face unexpectedly. Morris Chang, founder of TSMC, the world's largest chip foundry was back as CEO.

By Matt Grimshaw, Editorial Director of the Semiconductor Technical Journal Future Fab International.

In 2005 Morris Chang had stepped down and handed the leadership to Rick Tsai who'd previously been President and COO, but stayed on as chairman. This is normal in business as it is in any movie; the master hands power over to his star pupil and then rides off into the sunset while keeping an eye on things.

However, in June, Morris Chang was back and in control. It's a comeback of true Rocky Balboa scale proportions. It's like Gordon Moore taking back the wheel at Intel. It simply does...not...happen.

So what on earth convinces a 78 year old legend of industry, who should be enjoying the substantial fruits of his many years of dedicated work to step up to the plate and start batting again?

It hardly looked as if Rick Tsai had made a mess of TSMC in the three years he'd been head honcho. The company retained its status as the No 1 chip foundry, and it had even pulled ahead of its nearest competitor, UMC. So why was it that the legendary Morris Chang was back? What had spooked him so badly?

It made no sense to me until the recent GlobalFoundries announcements.

After GlobalFoundries was spun out from AMD last year, there were a few raised eyebrows around the industry. There was a lot of skepticism about its future, despite the fact that it had access to extreme leading edge manufacturing technologies. The problem was that it only had one customer: AMD. And a one customer foundry generally can't cut the mustard.

With the recent news of the ST Micro business win, GlobalFoundries became the new cowboy in town, who wore a poncho, chewed a stubby cigar, and was clinching a fistful of dollars. Then this week with the news of the Chartered Semiconductor purchase, people in the industry have become excited. Analysts have started to runaround shouting "FIGHT! There's a REAL fight!" Mothers are pulling their children in from the streets . . . and somewhere in the distance a wolf is howling.

For years the foundry business was fairly stable and predictable; TSMC was the Grande Fromage and everyone else was fighting for second place. No one has managed to beat TSMC. UMC once came close but got beaten back by the raw muscle power of TSMC. And this has always been the issue for any competitors; this is TSMC's game -- it invented the foundry business.

GlobalFoundries could become a worthy challenger. It has access to technology that made Intel sweat for a while, and it has manufacturing excellence and expertise that's second to none. Plus, it will truly be a Global Foundry, with facilities around the world when the Chartered acquisition is completed.

And TSMC is taking all of this very seriously as the return of Morris Chang clearly demonstrates.

One thing's for sure . . . this is all becoming really interesting.