STMicro Extends Samsung Outsourcing Deal for Low-Power Chips

STMicroelectronics NV (STM), Europe’s largest semiconductor maker, said it’s extending an outsourced manufacturing agreement with Samsung Electronics Co. (005930) to include a type of production meant to enable more low-power chips.

Samsung will make chips for STMicro at its S1 plant in Kiheung, South Korea, using the FD-SOI process creating products that are faster, generate less heat and are easier to make, Jean-Marc Chery, chief operating officer of Geneva-based STMicroelectronics, said yesterday.

Samsung, the world’s second-largest chipmaker, is trying to bulk up its customer list as the company expands in the chip-foundry market, a business dominated by Taiwan Semiconductor Manufacturing Co. The world’s largest chipmaker, Intel Corp. (INTC), is also trying to get into the foundry business by opening its plants to other companies.

With the billions of dollars of investment required to keep up with each new technology cycle, the foundry business is gaining importance as more semiconductor companies decide not to produce their own designs. Instead the companies are outsourcing the manufacturing to the few chipmakers that can afford to keep developing advanced production techniques. Samsung and Intel trade places in the ranking of capital spenders in the industry.

Smartphones, Cars

Manufacturers of smartphones, autos and game consoles are increasingly relying on chips to boost processing power and memory, or to beat rivals with new features from touchless hover-over screens to self-parking systems for cars. That means they’re asking their suppliers for better design, faster production and cheaper prices.

That has prompted STMicro to adopt a mixed model, making high-end products at its five European factories, while contracting out some of its simpler chips.

With the Samsung agreement announced yesterday, STMicro is getting access to facilities run by one of the top two spenders on plants and equipment in the industry. Under the agreement, STMicro will build semiconductors that are aimed at markets such as computer networking, smartphones, cars and the growing market for the Internet of things.

“This is a strategic agreement, the kind that comes along once every five years,” Chery said in an interview. “Samsung’s backing will promote wider adoption of the FD-SOI process as well as help us secure supply.”

First Half

Samsung is licensing the process from STMicro and will make it available to other customers. The South Korean company said it expects to finish validation of production and begin sampling products to customers in the first half of next year.

Samsung rose as much as 0.3 percent and were little changed at 1,415,000 won at 2:19 p.m. in Seoul. STMicro added 0.1 percent to 7.17 euros in Paris yesterday.

STMicro has been refocusing its business on new segments and trying to tap new clients after its wireless venture with Ericsson AB was shut down last year. STMicro has said that gradually abandoning the venture’s products will continue to affect its earnings in the second quarter after it posted its 10th consecutive quarterly loss last month.

(An earlier version of this story corrected the spelling of the acronym FD-SOI.)

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Mark Beech, Thomas Mulier

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