Microsoft Contracts Taiwanese Foundries to Build Latest XBox360 Chips

Taipei, May 7, 2008 (CENS)--Microsoft began in April farming out production of 65nm graphics chips and north-bridge chips for its latest version of XBox360 game consoles to Taiwanese foundries Taiwan Semiconductor Manufacturing Co. (TSMC), Advanced Semiconductor Engineering Inc. (ASE) and Nanya PCB Corp.

Microsoft will make available its Jasper version of XBox360 game consoles in August this year and has contracted dedicated chipmakers to build chips for the latest machine. Contracts for manufacturing, packaging and testing the 65nm Xenon microprocessors have gone to International Business Machines (IBM).

TSMC is chosen to make the 65nm graphics chips and north-bridge chips for Xenon chips, ASE is contracted to package and test the two chips, and Nanya has won orders to supply flip-chip packaging substrates. The contract has booked a total of foundry capacity for around 10,000 300mm wafers at TSMC, currently the No.1 player of silicon-foundry industry worldwide.

People familiar with the contracts said Microsoft ordered 50% more contract packaging and testing capacity as well as flip-chip substrate in the second quarter than the first one, giving a boost to Nanya and ASE in their revenue growth this quarter.

Industry watchers pointed out that Microsoft decided to install 65nm chips in its latest XBox360 machine on grounds that the company had depleted in the first quarter the inventory of 90nm chips for its Falcon version of XBox360 and sought to bring down costs and heat in the machine by using smaller chips.

Falcon machines are equipped with 90nm processors made by IBM and Chartered Semiconductor Manufacturing as well as packaged and tested by ASE. TSMC was contracted to build 90nm graphics chips for the older machine.

Industry watchers estimated TSMC to win contracts to make chips for next-generation version of XBox360 dubbed as Valhalla, slated to debut in the fall of 2009.