Big Blue Opens $3B Fishkill Chip Plant

The recession and ongoing contraction in the semiconductor group has not
scared off IBM Corp. from making big bets. Big Blue is
bucking the belt-tightening trend in the sector by opening a $3 billion chip
foundry in East Fishkill, not far from its Armonk, N.Y headquarters.

IBM’s ribbon-cutting ceremony, which included New York governor George
Pataki, officially opens the door to the company’s most costly capital
investment — a state-of-the-art facility that will house IBM’s
Microelectronics business.

Big Blue, one of a handful of chipmakers the financial muscle to develop and
market nanotechnology chips, said the new plant would help transfer its
chip-making technologies into high-volume production.

Work on prototype customer designs has already begun and the facility is
on-schedule to begin volume manufacturing later this year, IBM said.

While competitors band
to tackle semiconductor development at the deep sub-micron
level, IBM appears content to go it alone, even in one of the toughest
environments for memory chips.

But, Big Blue’s big bet also comes a bit late. Texas Instruments already has a DMOS 6 DMOS 6 facility up and running to make
deliverable product and companies like Advanced Micro Devices Inc.
and United Microelectronics Corp. also have 300
nanometer chip making facilities.

IBM is, however, hyping the new 300mm facility as “the most advanced of its
kind,” noting it is part of a collaboration with the State of New York and
major New York universities to establish the region as a center for high
tech talent, investment and innovation.

The new facility would combine IBM’s chip-making technologies — such as
copper wiring, silicon-on-insulator (SOI)-based transistors and improved
insulation —
with the economies of scale resulting from production of chips on larger,
300mm diameter silicon wafers, the company said.

The 14,000 square feet plant has been fitted with 200 miles of piping and
tubing, 600 miles of cable and wiring and two million pounds of ductwork.
IBM said the manufacturing line would be driven by over 1700 processors
operating at over 1GHz speeds each and accessing over 110 terabytes of
storage. It would support the creation of chips with circuits smaller than
100 nms in size.

“Demand for advanced technologies is growing in the chip industry, as
customers look to improve the performance and function of their products.
Many chip-makers, however, are finding it difficult to keep pace, as each
new generation of technology becomes more challenging to master,” IBM said.

Yet, the most optimistic of observers expect the plant to put a strain on
the company’s finances. IBM’s Microelectronics business is by no means a
money-losing entity and because IBM makes semiconductors for its own
computers, the new plant can be filled with products for IBM’s mainframe and
server computers.

However, the return on such a massive investment is dependent on outside
business and with hundreds of potential customers succumbing to the
industry-wide contraction, the company’s semiconductor group’s losses could

The company currently makes chips at a plant in Vermont but capacity there
has been cut and the company recently moved to write down older equipment
and technology there.

Still, despite the pessimism, Big Blue spent the day patting itself on the
back. “Technology continues to be one of our cornerstones in delivering
value to
our customers,” CEO Sam Palmisano hailed. “We are reinvigorating our
Microelectronics business and are confident that we have the right formula
of technology and expertise with a business that is focused on the strategic
areas that play to our strengths,” he added.

Last month, IBM signed up Xilinx
as the first customer for the plant, a deal aimed at helping custom chip
designers shave hundreds of thousands of dollars off the cost of creating
future chips.

Under terms of that deal, IBM has licensed Xilinx’s field programmable gate
array (FPGA) technology for integration into its Cu-08 application specific
integrated circuit (ASIC) product set. It said Cu-08 would support circuits
as small as 90 nanometers.

Published reports say IBM will also ink a deal with Sony Corp. to design
chips for next-generation PlayStation in 2004.

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