The Intel-UMC fab partnership: What you need to know

Intel joins hands with Taiwanese fab United Microelectronics Corp. (UMC) in a new twist in the continuously evolving and realigning semiconductor foundry business. What does Intel’s strategic collaboration with UMC mean, and what will these two companies gain from this tie-up? However, before we delve into the motives of this semiconductor manufacturing partnership, below are the basic details of this foundry deal.

Intel and UMC will jointly develop a 12-nm photolithography process for high-growth markets such as mobile, communication infrastructure and networking, and the production of chips at this 12-nm node will begin at Intel’s Fabs 12, 22, and 32 in Arizona in 2027. The 12-nm process node will be built on Intel’s FinFET transistor design, and the two companies will jointly share the investment.

Figure 1 UMC’s co-president Jason Wang calls this tie-up with Intel a step toward adding a Western footprint. Source: Intel

Besides fabrication technology, the two companies will jointly offer EDA tools, IP offerings, and process design kits (PDKs) to simplify the 12-nm deployment for chip vendors. It’s worth mentioning here that Intel’s three fabs in Arizona—already producing chips on 10-nm and 14-nm nodes—aim to leverage many of the tools for the planned 12-nm fabrication.

Intel claims that 90% of the tools have been transferable between 10-nm and 14-nm nodes; if Intel is able to employ these same tools in 12-nm chip fabrication, it will help reduce additional CapEx and maximize profits.

While the mutual gains these two companies will accomplish from this collaboration are somewhat apparent, it’s still important to understand how this partnership will benefit Intel and UMC, respectively. Let’s begin with Intel, which has been plotting to establish Intel Foundry Services (IFS) as a major manufacturing operation for fabless semiconductor companies.

What Intel wants

It’s important to note that in Intel’s chip manufacturing labyrinth, IFS has access to three process nodes. First, the Intel-16 node facilitates 16-nm chip manufacturing for cost-conscious chip vendors designing inexpensive low-power products. Second is Intel 3, which can produce cutting-edge nodes using extreme ultraviolet (EUV) lithography but sticks to tried-and-tested FinFET transistors.

Third, Intel 18A is the cutting-edge process node that focuses on performance and transistor density while employing gate-all-around (GAA) RibbonFET transistors and PowerVia backside power delivery technology. Beyond these three fab offerings, IFS needs to expand its portfolio to serve a variety of applications. On the other hand, its parent company, Intel, will have a lot of free capacity while it moves its in-house CPUs to advanced process nodes.

So, while Intel moves the production of its cutting-edge process nodes like 20A and 18A to other fabs, Fabs 12, 22, and 32 in Arizona will be free to produce chips on a variety of legacy and low-cost nodes. Fabs 12, 22, and 32 are currently producing chips on Intel’s 7-nm, 10-nm, 14-nm, and 22-nm nodes.

Figure 2 IFS chief Stuart Pann calls strategic collaboration with UMC an important step toward its goal of becoming the world’s second-largest foundry by 2030. Source: Intel

More importantly, IFS will get access to UMC’s large customer base and can utilize its manufacturing expertise in areas like RF and wireless at Intel’s depreciated and underutilized fabs. Here, it’s worth mentioning Intel’s similar arrangement with Tower Semiconductor; IFS will gain from Tower’s fab relationships and generate revenues while fabricating 65-nm chips for Tower at its fully depreciated Fab 11X.

IFS is competing head-to-head with established players such as TSMC and Samsung for cutting-edge smaller nodes. Now, such tie-ups with entrenched fab players like UMC and Tower enable IFS to cater to mature fabrication nodes, something Intel hasn’t done while building CPUs on the latest manufacturing processes. Moreover, fabricating chips at mature nodes will allow IFS to open a new front against GlobalFoundries.

UMC’s takeaway

UMC, which formed the pure-play fab duo to spearhead the fabless movement in the 1990s, steadily passed the cutting-edge process node baton to TSMC, eventually resorting to mature fabrication processes. It now boasts more than 400 semiconductor firms as its customers.

Figure 3 The partnership allows UMC to expand capacity and market reach without making heavy capital investments. Source: Intel

The strategic collaboration with IFS will allow the Hsinchu, Taiwan-based fab to enhance its existing relationships with fabless clients in the United States and better compete with TSMC in mature nodes. Beyond its Hsinchu neighbor TSMC, this hook-up with Intel will also enable UMC to better compete amid China’s rapid fab capacity buildup.

It’ll also give UMC access to 12-nm process technology without building a new manufacturing site and procuring advanced tools. However, UMC has vowed to install some of its specialized tools at Fabs 12, 22, and 32 in Arizona. The most advanced node that UMC currently has in its arsenal is 14 nm; by jointly developing a 12-nm node with Intel, UMC will expand its know-how on smaller chip fabrication processes. It’ll also open the door for the Taiwanese fab on smaller nodes below 12 nm in the future.

The new fab order

The semiconductor manufacturing business has continuously evolved since 1987 when a former TI executive, Morris Chang, founded the first pure-play foundry with major funding from Philips Electronics. UMC soon followed the fray, and soon, TSMC and UMC became synonymous with the fabless semiconductor model.

Then, Intel, producing its CPUs at the latest process nodes and quickly moving to new chip manufacturing technologies, decided to claim its share in the fab business when it launched IFS in 2021. The technology and business merits of IFS aside, one thing is clear. The fab business has been constantly realigning since then.

That’s partly because Intel is the largest IDM in the semiconductor world. However, strategic deals with Tower and UMC also turn it into an astute fab player. The arrangement with UMC is a case in point. It will allow Intel to better utilize its large chip fabrication capacity in the United States while creating a regionally diversified and resilient supply chain.

More importantly, Intel will be doing it without making heavy capital investments. The same is true for UMC, which will gain much-needed expertise in FinFET manufacturing technologies as well as strategic access to semiconductor clients in North America.

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The Intel-UMC fab partnership: What you need to know

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