Could AMS’ expansion be bad news for Europe?

Could AMS’ expansion be bad news for Europe?

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By eeNews Europe

It is good to see Austria’s AMS wants to expand its chip manufacturing (see Austria’s AMS is shopping for a wafer fab) but the issues are complex and there are many ways this could yet play out.

At first glance this might seem positive for Europe but delve a little deeper and we may find all-to-familiar geographical business tides are running.

As analog, MEMS and sensor chip company AMS not only manufactures for itself but also offers foundry services to others, it should come as no surprise that it wants to expand its manufacturing. CEO Kirk Laney told eeNews Europe that he wants to do this by acquiring a 200mm wafer fab that is near the end of its life making digital circuits and repurpose it for the various manufacturing processes that AMS can run (see CEO interview: AMS’ Laney on driving a sensor-driven business).

Laney made the point buying an older fab usually entails taking over the manufacture of legacy products for the vendor on a supply contract that usually lasts a few years and therefore not only the right sort of fab but also the right sort of relationship needs to be found. If there were no products running through the fab the equipment would have been sold and taken out the building.

A fab is like a organism that lives while gases, materials and wafers flow through it, like air and food flow through an animal. When that flow stops the fab dies and it is almost impossible to resuscitate such a fab.

It is true that buying a fab that is running some product would have the potential advantage of bringing additional process capability to AMS that could be reused for other foundry clients. It all depends on the detail of the deal that can be cut. But this is the strategy that has been followed with some success by the pure-play foundries Tower Semiconductor Ltd. (Migdal Haemek, Israel) and X-Fab Silicon Foundries AG (Erfurt, Germany).

And there are so many struggling IDMs that are looking to get rid of wafer fabs, along with their responsibilities to the workers employed therein, that it is possible to get a great deal on a wafer fab or even be paid to take manufacturing of companies’ hands.

However, what may be of concern to European readers is Laney’s statement that he is 95 percent certain that an AMS wafer fab acquisition would not be in Europe. One argument given was that AMS is looking for dollar-denominated fab but Laney also said that a wafer fab in Asia could work for AMS. And it is true that X-Fab’s acquisition was of 1st Silicon in Kuching, Malaysia, and Tower’s numerous acquisitions have been outside Israel, in China and Japan.

Extrapolate from this and you can see that such an expansion could turn into a transfer of significant weight outside Europe and movement of the effective geographic focus of the operation. It is notable that Austria – present in the name of the company from its origins as Austria Mikro Systeme – has been dropped.

Austria Mikro Systeme was founded in August 1981 through a joint venture between American Microsystems Inc. and the then state-controlled Voest Alpine AG. I first visited the wafer fab at Unterpremstaetten in 1984, which means there has been at least 30 years of manufacturing history on that site although it’s true that the 200mm clean room dates back to 2002.

Nonetheless an AMS with its largest fab in North America or Taiwan would be a very different company. It would be good if Laney could find a European wafer fab to help with expansion. It would be in-line with the argument offered up by TSMC that it likes to build wafer fabs in clusters in Taiwan for economies of scale in purchasing and so on. It would also help to expand European chip manufacturing rather than potentially contributing to its demise.

Europe is definitely on the back foot with regard to chip manufacturing these days and globalization has not helped. And with Greater China responsible for about 50 percent of global electronic equipment production the pull to be located there is almost overwhelming (see Report: Europe can shine in global electronic production).

What would be ironic is if AMS bought a certain 200mm wafer fab on Pocatello, Idaho, from On Semiconductor. That was the headquarters of AMI Semiconductors prior to its acquisition by On Semi in 2008. And AMI Semiconductors was previously, you guessed it, American Microsystems Inc.

Related links and articles:

Austria’s AMS is shopping for a wafer fab

CEO interview: AMS’ Laney on driving a sensor-driven business

Report: India, China show interest in Korean analog foundry

Brazil wins in LFoundry Rousset sell-off

Report: Europe can shine in global electronic production

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