CSMC-Tech is effectively a refinancing of China's Central Semiconductor Manufacturing Corp. 6-inch wafer foundry operation.

CSMC-Tech's arrangement with Chartered was formalized in a signing ceremony here today by Peter Chen, chairman and chief executive officer of CSMC-Tech, Chia Song Hwee, Chartered's president and chief executive officer, and Zhu Jinkun, deputy chairman and chief executive officer China Resources Logic Limited (CR Logic), the single largest shareholder.

Under the terms of the deal Chartered will provide 6-inch chip-making equipment and manufacturing process technology. It will receive cash and an equity stake in CSMC-Tech in return. The two companies said they are also discussing additional collaboration, focused on equipment and process technologies for manufacturing on 200-mm diameter wafers.

Under the current deal CSMC-Tech is to pay up to $33 million, made up of cash and ordinary shares. In addition, it has agreed to pay "referral fees" for customers that Chartered introduces to CSMC-Tech, Chartered said. Any referral fee is to be matched with CSMC-Tech ordinary shares, up to a value of $5 million.

CSMC and China Resources Logic announced the initial investment in CSMC-Tech earlier in August. A first round of funding totaling $67 million was led by 3i, Crown Crystal Investments Ltd. and CR Logic. International Finance Corp., the private arm of the World Bank Group and a private equity fund, also participated.

The arrangement between Chartered and CSMC-Tech depends on the completion of CSMC-Tech's fundraising activities, Chartered said.

Chartered is set to transfer to CSMC-Tech its 0.6-micron manufacturing process technologies, including analog, EEPROM, high voltage and BiCMOS modules. Also included are 0.5-micron analog and 0.35-micron logic technology.

The licensed technologies and purchased equipment from Chartered's Fab 1 will be installed in CSMC-Tech's 150-mm Fab 1 facility, located at Wuxi, China. The technology transfer is scheduled to start in the third quarter of this year, followed by equipment decommissioning which is expected to start in April 2004.

CSMC-Tech plans to use the equipment to increase its total 150-mm capacity from the current 20,000 wafer starts per month to more than 45,000 wafer starts per month by mid-2005.

"The CSMC-Tech and Chartered relationship reflects the evolving dynamics of the foundry industry and the importance of the collaboration for lowering risks and delivering proven solutions amidst increasing complexities in IC design and escalating manufacturing costs," CSMC-Tech's Chen said in a statement.

"This important collaboration between two dedicated foundries will provide China's many emerging design centers and fabless companies with proven technology for developing their products," added Chartered's Chia Song Hwee. "For Chartered, the collaboration also represents a significant milestone in executing our fab rationalization plan."

By: DocMemory
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