Intel invests in German chip manufacturer

Communicant Semiconductor Technologies, based in what was formerly East Germany, will essentially act as a foundry, or contract manufacturer. The company will adopt Intel's manufacturing processes under a license, an Intel spokesman said Thursday. Communicant's factory, under construction, will begin shipping chips in 2003.

Although Communicant will make a variety of chips, it will specialize in communication chips made out of silicon germanium-carbon, a new, exotic chip material primarily used in new high-speed networking chips. Silicon germanium chips have been around for years, but silicon germanium-carbon chips are new.

Despite the semiconductor slump, foundries are expected to continue to grow in influence, if not size, in the foreseeable future. Most chipmakers cannot afford to build their own fabrication facilities, or fabs, which can cost more than $2 billion each.

As a result, chipmakers are farming out the work to companies such as Taiwan Semiconductor Manufacturing. The foundry business is largely located in Asia.

Although it remains the world's largest chipmaker, Intel has begun to use foundries in recent years. Many of the companies that Intel has acquired in the past two years had pre-existing foundry arrangements that remain in place.

Through its investment in Communicant, Intel will own 25 percent of the company and have the rights to reserve 20 percent of the output. In addition, Intel will receive royalties for the technology license.

Other major investors include IHP, an institute funded by the German government that is providing the silicon germanium-carbon technology, and the government of Dubai, which is aggressively courting the high-tech industry with tax breaks and other incentives.

Communicant's foundry will become operational in the third quarter of 2002, with chips coming out of the factory on a commercial basis in the first quarter of 2003. The foundry will be located in Frankfurt.