Taiwan fabs resume production, race to add capacity
By Will Wade and David Lammers
EE Times
(10/21/99, 5:59 p.m. EDT)
SANTA CLARA, Calif. ? Taiwan's semiconductor foundries have resumed full production and are back in the race to expand capacity to meet sharply higher demand, less than one month after the Sept. 21 earthquake and resulting power outages that shut down the country's entire technology sector for more than a week.
A quick recovery is critical because the outlook for the foundry industry shows strong growth in the next few years as more chip companies look to outsource production to dedicated foundries.
The Taiwan Institute of Economic Research (Tier) has estimated chip-industry losses from the quake at $300 million. "No buildings were damaged, and fortunately no people there were injured," said Richard Chang, president of the Worldwide Semiconductor Manufacturing Corp., in a keynote speech at the Taiwan Semiconductor Day '99 conference. "However, every company has suffered some damage to its fab equipment and work in progress."
Overall, Chang said, about 10 percent of the wafers in process at the time of the quake had to be scrapped. That alone could mean a loss of up to $25 million at every fab, where some 80,000 wafers are in production at any given time, at a total value of about $250 million, according to Dan Hutcheson, president of VLSI Research Inc. (San Jose, Calif.). The decline in chip revenue will be a factor in a revised 1999 GNP growth figure for Taiwan, which has been scaled down a scant 0.1 percent, to a 5.24 percent rise, according to Tier.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) projects a quake-related loss in revenue of $84 million but said that production at the foundry is now well above 90 percent of pre-quake levels. Rival UMC Group expects losses of $30 million but said it has returned to full production.
Both companies will need to return to full speed, and then some, to gear up for the increased demand for foundry services that some observers are predicting.
Not only will demand for manufacturing continue to swell from fabless chip companies, but chip companies with their own fabs will triple the amount of manufacturing that they choose to outsource, said Jim Hines, principal analyst for semiconductor manufacturing at Dataquest Inc. (San Jose). "Within the next few years, [the latter] will represent about a third of the total foundry market," Hines said.
Fab ownership continues to be justified for those companies manufacturing devices with very high-volume production runs, such as DRAMs, and for those dealing in technologies for which manufacturing prowess is a competitive advantage, such as microprocessors, Hines said. But as costs soar for the multibillion-dollar facilities, chip companies will flock in growing numbers to dedicated foundries. Motorola is one of the leaders of that trend, having already stated plans to shift half its production to foundries within the next few years.
"By 2020, half of all chips will be made at foundries," Hines predicted.
To accommodate the expected demand, TSMC is rapidly adding capacity around the world. Fab 6, in Tainan, Taiwan, is being "moved into accelerated introduction, and we are starting wafer output in the first quarter," said Magnus Ryde, president of TSMC North America. "Pulling [the schedule] in by one quarter has not been easy, given the equipment lead times, the demands on the construction schedule, and Taiwan's earthquake, even though the earthquake had no real impact on the Tainan project."
TSMC had planned to spend $640 million on new equipment this year. The figure has since doubled, to $1.377 billion.
TSMC also has leveraged capacity from four different joint venture partners: a joint venture with Philips in Singapore; a former DRAM fab owned by Acer Group; capacity leased from DRAM manufacturer Vanguard Semiconductor, of which TSMC is part owner; and expansion of its WaferTech joint venture in Camas, Wash.
TSMC bought a 30 percent stake in Acer Semiconductor this summer and has access to all of that fab's capacity, expected to come in at 250,000 wafers (8-inch equivalents) next year.
At WaferTech, TSMC expects production to increase from about 128,000 wafers this year to 173,000 next year.
At Vanguard, TSMC last spring decided to lease space in an older fab that is no longer competitive for memory production but that can be used for foundry production.
Technology shifts also will help to wring out more dice per wafer. TSMC will process about 500,000 total wafers this year at 0.25-micron design rules. That will increase to 900,000 wafers next year. If 0.18-micron wafers are included, half of all the company's wafers will be processed at quarter-micron and below design rules; two-thirds will be at 0.35 micron and below.
By early 2002, TSMC and Vanguard Semiconductor will begin pilot production of 300-mm wafers at a fab planned for what is now a parking lot in the Hsinchu Science-based Industrial Park. By the latter part of 2002, full commercial production with 300-mm wafers is planned at a Fab 7 in Tainan, said Ryde.
"We have plans for fab clusters, so that each site gets to critical mass. At Camas, WaferTech has space for several more fabs. Long range, we can also build three more fabs at Tainan, so there will be four there when we are finished. The joint venture in Singapore won't produce much at all in 2000, but we have plans for more fabs in Singapore," Ryde said.
Asked about pricing, Ryde said that TSMC is taking "pricing actions" but that "those were started before the earthquake occurred."
Also, TSMC is enticing customers to move production to the newer fabs. "When you bring on a new fab, you need customers to bring on production early, so you can get production and yield experience [at the location]. That is a little riskier [for customers], so we have incentive programs in place to help ramp the fab.
"The early adopters may take more risk than those that follow. But as a general rule, we are not raising prices," Ryde said. |
