TI to double 300-mm analog fab capacity

Analysts believe the ramp of TI's 300-mm analog fab could allow for healthy margins in computing, consumer electronics, and handsets, high-volume vertical markets where competition is fierce.

Suzanne Deffree, Managing editor, news -- EDN: Information, News, & Business Strategy for Electronics Design Engineers, April 27, 2010

After announcing significant Q1 growth in part based on its analog business Monday afternoon, Texas Instruments Inc this morning announced it is expanding its 300-mm Richardson, Texas, analog fab's capacity.

TI is doing so with the recent purchase of more than 100 tools from Qimonda North America and Qimonda Dresden, Germany.

TI opened RFAB in September 2009, claiming it as the world's only production facility to use 300-mm silicon wafers to manufacture analog chips. TI moved ahead on phase one outfitting of the fab after the company was able to purchase semiconductor manufacturing equipment "at an opportune price" through a tool buy from financially struggling Qimonda.

This morning's announcement is the first step in launching TI's phase two expansion of RFAB. When complete, RFAB's analog manufacturing capacity will double, bringing its revenue capability to about $2 billion, the company estimated. TI said it will begin moving phase two equipment into the facility immediately so it is ready to be brought online as market demand warrants. TI noted further room for expansion, stating that phase one and two combined will fill only two-thirds of the 1.1-million-square foot facility.

"Our 300-mm fab is a unique cornerstone of our analog business," said Gregg Lowe, TI senior VP in charge of the company's analog business, in a statement. "With phase one progressing well and on track to begin shipments by the end of the year, this phase two expansion will give us a head start in providing our customers access to significant analog capacity to fuel their growth."

The RFAB announcement came hours after TI on Monday afternoon reported significant year-over-year gains in revenue, net income, and EPS (earnings per share). Q1 revenue of $3.21 billion was up 54% as compared to Q1 2009 results and was up 7% on a sequential basis. Q1 net income of $658 million was up 3771% as compared to Q1 2009 results and was flat on a sequential basis. And Q1 EPS of 52 cents was up 5100% as compared to Q1 2009 results and was flat on a sequential basis.

Specific to TI's analog group, revenue of $ 1.367 billion was up 70% year over year and up 8% on a sequential basis. TI noted that the Q1 year-over-year increase in revenue was due to growth in all major product areas, especially high-volume analog and logic and power management products.

Financial analyst reported positive on TI after the Q1 statement and RFAB news.

"We believe the ramp of TXN's [TI's] 300-millimeter analog fabrication facility later this year could allow for healthy margins in computing, consumer electronics, and handsets, which are high-volume vertical markets where competition is fierce," Bobby Burleson, a technology sector analysts at Canaccord Adams, said in a research note this morning. Burleson said revenue is expected some time in 2011, based on the expansion.

Tim Luke, a semiconductor industry analyst at Barclays capital, described TI's analog business as "strong" in his report this morning. "TXN's analog business, at $1,367M or 43% of sales, increased 8% [quarter over quarter] on stronger high volume analog (HVAL), high performance analog (HPA), and power management," Luke said. "Revenue from HVAL reported its fourth consecutive quarter of sequential growth. Management continues to invest in the analog segment with recent investments in product technology, sales support, and manufacturing capacity with the build out of the 300-mm Richardson fab. Management expects to have full qualification on the Richardson fab by year-end.

"Longer term, TXN's competitive positioning remains strong and management remains committed to allocating appropriate resources to grow the analog business," Luke continued. "We note that TXN's purchase of assets from bankrupt Qimonda to produce the world's first analog chips on 300-mm wafers could likely accelerate TXN competitive position as a low-cost producer of analog chips (likely 30% reduction in production cost from 200-mm wafers)."

RFAB will produce analog ICs based on TI's proprietary process.

*Editor's note: This article originally incorrectly stated RFAB was located in Richardson, Va. It was corrected on April 28, 2010 to state Richardson, Texas.