UMC to merge joint ventures, speed foundry expansion
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Story updated 8 a.m. EST/4 a.m., PST, 6/14/99
TAIPEI, Taiwan--UMC Group's three joint-venture foundries and publicly-traded United Microelectronic Corp. have decided to merge into a single company and to accelerate expansion of production capacity by 45% a year during 1999 and 2000. These moves were approved by directors during special sessions here today.
The actions set in to motion the merger of United Semiconductor Corp. (USC), United Integrated Circuits Corp. (UICC), United Silicon Inc. (USIC) and UTEK Semiconductor Corp. (UTEK) with United Microelectronic Corp. (UMC). "This reorganization focuses our Taiwan-based fabs into a single, more financially-efficient and competitive organization, casting the die to be the largest, most profitable, and most technologically advanced pure-play foundry in the world," said Bob Tsao, chairman of the parent UMC Group.
The corporate status of UMC Group's joint venture in Japan, Nippon Foundry Inc., will remain unchanged by the reorganization, according to the company, which is based in Hsinchu.
UMC Group said it hoped to accelerate its capacity-expansion plans by about 12 months as a result of the reorganization. Consequently, the silicon foundry company now aims to increase wafer-processing capacity by 45% a year in 1999 and 2000. UMC Group said it will increase production at the highest rate of any pure-play foundry.
With the semiconductor industry recovering from a downturn, UMC Group and archrival Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) has been racing each other to add capacity since the start of the year. In May, TSMC officially launched its 0.18-micron process technology and promised a steep ramp up of production (see May 17 story). Last week, TSMC announced it was acquiring a 30% stake in Acer Semiconductor Manufacturing Inc. for about $170 million (see June 8 story).
UMC Group today said it will spend $1.3 billion to expand its foundry capacity in 1999 and again in 2000. The company said this investment will bring its total capacity to more than 2.4 million eight-inch equivalent wafers in the year 2000. Moreover, UMC Group is promising that 50% of its capacity will be for 0.25- and 0.18-micron technologies.
"Analysts are forecasting a reversal in the supply-demand balance for 0.25-micron foundry wafers in 2000, and that supply will get progressively tighter in 2001," said John Hsuan, CEO of UMC Group. "We are already seeing this trend emerging in bookings for second half 1999 at UMC Group. With this merger, we will better meet market trends and customer needs."
UMC also said it plans to accelerate the introduction of next-generation process technologies for 0.15- and 0.13-micron IC. No time schedule was made available for the launch of these new technology. However, the company promises to be the first pure-play foundry to offer these technologies--a direct challenge to cross-town rival TSMC.
In addition, the merged operations of UMC Group will also help increase foundry customer service, said Jim Kupec, president of UMC Group (USA) based in Sunnyvale, Calif. "Capacity is the key question on customers' minds that this merger addresses, but moreover, we are convinced this combination will allow us to offer even more seamless and competitive service to our customers in the U.S. and worldwide," he said.
UMC Group said it expects to remain on its plan for $1.68 billion in revenues this year, a 45% increase over $1.1 billion in 1998.
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