In-line with its semiconductor "capital efficient manufacturing strategy," Royal Philips Electronics’ Scott McGregor, president and CEO of Philips Semiconductors, told investors and financial analysts today it would delay building a new 300mm fab until market conditions improve and its business could sustain it.

During the meeting, McGregor referenced a chart detailing its theoretical model for its manufacturing strategy, which is about how to more efficiently spend capital to get the wafers needed to run its business.

Philips’ model showed how in the beginning, instead of building its own fab, the company would partner in the Crolles2-Alliance. As Crolles ramped, Philips would then outsource to partners such as TSMC. Then, after Philips was assured it could load a fab itself, it would then form a joint venture to build a fab and have its own capacity.

“The reality is that based on bottoms-up demand from products and load estimates from 2003-2004, we have successfully ramped up Crolles. Crolles has done really well. It has exceeded the expectation of us and all the partners at Crolles,” McGregor said.

Also, Philips’ TSMC second-sourcing has been a tremendous benefit. “We have been able to take products out of Crolles, put them in TSMC, tape-out compatible. We can simultaneously tape out at either Crolles or TSMC, without modifying the product and ramp up in either place. That’s a very significant achievement. It gives us flexibility that most companies don’t have,” he said.

In regard to building its next fab, McGregor explained that it was important that the company continue on the road to outsourcing, with the goal to be 50 percent outsourced on advanced CMOS processes, before building its own fab.

“We will delay the timing of building our next fab so we can increase the amount of outsourcing, but also because it appears there may be excess wafers on the market next year,” McGregor continued, and with the amount of companies ramping new fabs, Philips would be better served remaining a buyer of wafers in the market next year, than one bringing on new capacity.

The bottom line is that Philips plans to increase outsourcing through 2005 and 2006, although it does anticipate the need for a joint venture fab in the 2007-2008 timeframe with market conditions dictating the timing, McGregor concluded.

By: DocMemory
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