Creating know-how through partnerships

Semiconductor design and process technologies are subject to constant technological improvements and require large expenditures for capital investments, advanced research and technology development. Our research and development efforts are increasingly expensive and dependent on alliances to develop new process technologies in line with market requirements. Here is an update on some of our alliances with competitors and suppliers, with a special focus on the Crolles2 Alliance, the joint venture agreement with Hynix and partnerships with leading suppliers.

Crolles2 Alliance

We have been cooperating with NXP Semiconductors (formerly known as Philips Semiconductors) for the joint development of advanced CMOS process technologies in Crolles, France, since 1992. In 2003, we signed a new joint research technology cooperation agreement with Freescale Semiconductor, and NXP Semiconductors for the joint research and development of advanced CMOS process technology on 300mm wafers, as well as for the operations of a 12" wafer pilot line fab which was built in Crolles2 with the stated goal of accelerating the development of future technologies and their proliferation throughout the semiconductor industry. In January 2007, NXP Semiconductors announced that it will withdraw from the alliance at the end of 2007. Freescale Semiconductor has also notified us that the Crolles2 alliance wil terminate as of such date. We remain convinced that the shared R&D business model contributes to the fast acceleration of semiconductor process technology development and we will continue to actively pursue an expansion of our portfolio of alliances to reinforce cooperation in the area of technology development in Crolles2. For more details on Crolles2 Alliance, also read our 20-F report (pages 8, 25, 31, 35).

Our success depends on our ability to obtain patents, licenses and other intellectual property rights covering our products and their design and manufacturing processes. To that end, we continue to seek patents on our circuit designs, manufacturing processes, packaging technology, and other inventions. We maintain our strong IP portfolio (over 19,000 patents) with a consistent flow of new patents.

Joint venture agreement with Hynix

The facility was inaugurated in October 2006. This unit employs approximately 2,700 people and features a 8” wafer production line that began production of DRAM in June 2006 and a 12” wafer production line, which began NAND production in October 2006. The total investment in the project is approximately 2 US$B, and we contributed 33% of the equity financing, equivalent to 250 US$m, while Hynix contributed 67%. The financing of the joint venture also includes funding from local Chinese institutions.

For more details on the joint venture agreement with Hynix, also read our 20-F report (pages 10, 31).

Partnerships with suppliers

We have also established joint development programs with leading suppliers such as Air Liquide, Applied Materials, ASM Lithography, Canon, Gemalto, Hewlett-Packard, KLATencor, LAM Research, MEMC, Teradyne and Wacker and with electronic design automation tool producers, including Cadence, Co-Ware and Synopsys.

For more details, also read our 20-F report (pages 30, 31, 32).