Seiko becomes the second major chip company to invest in Silterra--after LSI Logic Corp.--and the 10-year supply agreement represents the foundry's entry into the Japanese market, said Steve Della Rocchetta, executive vice president of marketing and sales for the Malaysian startup company.

Silterra began producing its first revenue-generating wafers in new $1.5 billion fab in Kulim during the first quarter this year using 0.25-micron process technology from its original strategic partner, LSI Logic of Milpitas, Calif. Silterra is now also fabricating wafers with a 0.22-micron version of the quarter-micron CMOS process (see Feb. 14 story), and it is preparing to qualify a 0.18-micron technology for production from LSI Logic, said Della Rocchetta, who is based in Sunnyvale, Calif.

"We will be supplying Seiko with 0.25- and 0.18-micron digital logic. It will be used for a variety of applications," said the Silterra vice president in a phone interview with SBN from Malaysia. "The partnership with Seiko involves an equity investment and a buy/sell relationship, but there is no exchange of process technology," he added.

Silterra officials see the new agreement as a key step into Japan, and the company hopes to strike other foundry deals with semiconductor manufacturers in the country. "This relationship gives Silterra an immediate presence in the Japan market at a time when there is increased interest in outsourcing," said Cy Hannon, president and CEO of Silterra.

Malaysia's other chip-foundry startup--1st Silicon (Malaysia) Sdn. Bhd. in Kuching, on the Island of Borneo--has already established a presence in Japan by licensing a 0.25-micron CMOS process from Sharp Corp., is also planning to use 1st Silicon as a major foundry source. Like Silterra, which is located on the Malay peninsula, 1st Silicon is also ramping production in a new 8-inch (200-mm) wafer fab (see Feb. 23 story).

Silterra expects to begin making its first products for Seiko in the fourth quarter, Della Rocchetta said. The foundry startup is also preparing to accept its first 0.18-micron customer designs in June, and the company expects to begin production of ICs with that new process by August, he said.

For next-generation chip processes, Silterra is interested in exploring an extension of its licensing pact with LSI Logic to gain access to 0.13-micron copper process technology. Last week, LSI Logic announced it would jointly develop 0.13-micron technology with Taiwan Semiconductor Manufacturing Co. Ltd., which will contribute its basic copper interconnect process to the project. LSI Logic will use TSMC as a copper-chip foundry and plans to transfer the 0.13-micron to its own fab lines by early 2003 (see April 5 story).

Under its agreement with TSMC, LSI Logic has the rights to negotiate a technology transfer pact with Silterra for the jointly developed 0.13-micron process. "We are viewing this very positively," said Della Rocchetta. "This gives us a path to move forward. We see TSMC as the de facto standard in the foundry arena," he added.

--J. Robert Lineback reporting from the U.S.