Cypress outsources SRAM manufacturing to UMC

By Ed Sperling -- Electronic News, 2/25/2007

Cypress Semiconductor is migrating to a “fab lite” model, turning over its next-generation process development and all manufacturing at 65-nm and below for its core SRAM products to UMC.

The company is hardly alone in looking to foundries for advanced process design and manufacturing. With costs of R&D skyrocketing and the price for new fabs measured in billions of dollars, many companies are outsourcing some core technology development they would never have considered outsourcing several years ago. In 2003, Cypress president and CEO T.J. Rodgers told Electronic News that “the whole fabless model is a bug headed for the windshield of a car.”

Much has changed since then. Texas Instruments announced a similar strategy this year with its foundry partners TSMC, UMC and SMIC and IBM has lined up a long list of semiconductor companies that now use its process designs and foundry partners. Even Intel, which has been steadfastly independent, has begun using foundry partners for non-core technology.

Cypress expects to save $100 million in R&D costs annually from the move, according to Shahin Sharifzadeh, executive VP of wafer fabs and technology at Cypress. “We’ve been running R&D at about 24 percent of revenue,” said Sharifzadez. “Our model is for 16 percent to 17 percent. By Q4 we expect to achieve that goal.”

Sharifzadeh noted that no additional staffing cuts will be required. He said that was done in 2006. “Our strategy is, ‘No more Moore,'" a reiteration of a strategy Rodgers set forth several years ago that characterized Moore's Law as no longer viable for most semiconductor companies.

Cypress currently uses its own 65-nm technology in a manufacturing agreement it has with Grace Semiconductor. Under the new structure, UMC will do all manufacturing at 65nm and below, with manufacturing at 90-nm and above to be a combination of internal manufacturing and external foundries.

Cypress also had a deal with UMC for flash products at 130-nm. That deal will be expanded to include new flash products at smaller lithography nodes.