October 5, 1999
Taiwan Chip Cos Fully Operational;Normal Output In Nov
TAIPEI -- With most production lines now operational following the recent earthquake, Taiwan's two leading chip foundries Tuesday said they expect to return to normal monthly wafer output in November.
"In terms of business disruption, in September we have 25% revenue loss (and) in October 12.5%," said Peter Chang, chief executive of foundry operations at United Microelectronics Corp. (Q.UME). But, "November will be as normal."
Taiwan Semiconductor Manufacturing Co. (TSM), the world's largest dedicated chip foundry, lost between 10% and 15% of expected wafer output last month and expects to lose around 10% of output in November, Steve Tso, senior vice president of operations, said.
Despite that, Tso said TSMC could well post record sales in October amid the current strength in the global semiconductor industry. Monthly revenues are seen hitting NT$7 billion by year-end, he added.
While both companies have resumed normal production, a cycle time of over a month means most lost work in progress won't be fully digested until the end of October, officials at the companies explained.
Total losses will likely be limited by insurance cover.
Administrative authorities at the Hsinchu Science-based Industrial Park, where both companies are based, estimated total losses for all wafer fabrication companies at about NT$10 billion.
Kung Wang, director general of the Science Park Administration, said loss of power was the biggest obstacle that chipmakers in Hsinchu had to overcome in the wake of the quake. Some 75% of losses at the chipmakers was due to lost production.
The construction of a second cogeneration power plant, due to be completed in two years time, will help solve future power supply problems, Wang said.
The plant, a joint venture between companies in the park and power providers, will cost between NT$200 million and NT$300 million and will be capable of generating 1 million kilowatts, he said.
UMC also said it is looking at the power supply issue.
"The earthquake damage wasn't as severe as the power (outage)," UMC's Chang said. "So we're thinking about a long-term contract with a local power supply company."
Despite revenue lost because of the quake, both companies remained upbeat about the outlook for the global foundry business.
"Foundry will be in short supply next year," TSMC's Tso said. "We believe 2000 and 2001 will be very strong years."
Taiwan, the world's fourth largest chip manufacturing center, comprises about 50% of the global foundry market.
TSMC said it still expects to spend about NT$2 billion in capital expenditure in 2000, while UMC estimates capex next year to come in around the same level.
UMC also raised the prospect it may ease its capacity shortages through an acquisition.
"I wouldn't rule it out," Chang said.
-By Dermot Doherty
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