[MOSLF]* MOSEL VITELIC INC CO LTD FOREIGN Taiwan
[MOSXF] MOSEL VITELIC INC SPN REG S GD ADR
[MOSLY] MOSEL VITELIC SN 144A ADR I
Mosel of Taiwan's Canada plant to help it move to custom chips
By Bloomberg, Singapore.CNET.com
Thursday, December 14 2000
OTTAWA--Mosel Vitelic Inc, Taiwan's third-largest chipmaker by market value, said it expects to start building a semiconductor plant in Canada next year to help diversify production away from memory chips.
The project, a US$2.5 billion, silicon-wafer plant, will help Mosel move away from the commodity memory chips used mostly in PCs to more profitable custom-designed semiconductors used in phone equipment and other products, the company said.
"For custom-made design of chips, communication with the customer is vital," Thomas Chang, a Mosel vice president, who sees a need to move production out of Taiwan, said in an interview. "Companies will dictate the specifications, and we will do the implementation."
Mosel hopes to supply the so-called system chips, which include memory and processing functions, to potential customers including Nortel Networks Corp. of Canada from the new plant which will be in close proximity to most buyers.
The company wants less exposure to the computer memory chip business as it is subject to market price changes that can leave manufacturers unprofitable for years. The spot market price for one 64-megabit dynamic random access memory chip that Mosel makes fell from $8.96 on July 13 to currently 3.18, which Chang calls "a disaster."
Mosel shares traded at NT$22.3 today, down 73 percent from their annual peak of NT$83.5 on June 14.
Negotiations
The plan to build the factory in Canada was delayed by the recent federal elections that led to the appointments of new ministers, Mosel said. The company expects to hold final talks on approval of the project with the federal government in Ottawa after the Christmas and New Year holidays, said Chang.
"The original schedule for the groundbreaking was in April or May," said Chang. "That's getting pretty tight."
Still, most of the obstacles, such as environmental assessment and importation of labor, have been solved, he said.
Mosel is "within days" of a decision by the Canadian government to provide as much as C$500 million (US$329 million) in subsidies to build a factory outside Montreal, Industry Minister Brian Tobin said yesterday.
Quebec's provincial government pledged as much as C$400 million in tax breaks for the proposed project. Attracting technology-related businesses was a key part of the Liberal government's recent election campaign.
"We think attracting this kind of technology to Canada is important," Tobin said.
singapore.cnet.com
China demand boosts Taiwan chipmakers
By Bloomberg, Singapore.CNET.com
Monday, December 11 2000
HSINCHU, Taiwan--Richard Chang, president and chief executive of Semiconductor Manufacturing International, doesn't share the pessimism of many investors and analysts regarding the chip business: He's setting up production in China.
Semiconductor Manufacturing is building three chip factories in Shanghai, the first of which is slated to start production in the fourth quarter next year.
"We can't see any recession in the semiconductor industry in China," Chang said at an industry seminar in Taiwan this week. He sees "many business opportunities" to make chips in China as domestic demand grows at a faster rate than the local supply.
The Taiwan government prohibits technology investments in political rival China on the grounds that they would erode the island's industrial base. Nevertheless, Taiwanese chipmakers are finding ways to skirt the ban as their industry slumps at home.
On Nov 20, Shanghai Grace Semiconductor Manufacturing broke ground in the local Zhangjiang High-Tech Park for a semiconductor plant, the Shanghai Daily reported. Winston Wang, the son of Taiwan's Formosa Group chairman Wang Yung-ching, and Jiang Mianheng, son of Chinese President Jiang Zemin, are backing the project, the report said.
Mosel Vitelic, one of Taiwan's largest makers of memory chips, this year acquired a chip-design unit in Shanghai from Nortel Networks, Canada's largest telecommunications company. Mosel will design chips for Nortel customers in China, said Thomas Chang, a Mosel vice president.
The Taiwan government allows chipmakers to set up design operations in China. Chip fabrication is prohibited. Taiwanese manufacturers circumvent restrictions by setting up offshore holding companies in locations such as the Cayman Islands, which then invest in China.
While China's labor and land costs are low compared with those of many Asian nations, the domestic chipmaking industry is still not ready to compete with the rest of the world in chip manufacturing, where labor accounts for about 8 percent of total production costs, Mosel's Chang said.
"It's not very urgent to move to low labor-cost areas," said Chang. "We've visited those places in China, but they're not very efficient."
While multinational companies Motorola and NEC have built chip factories in China, some analysts see few compelling reasons to do so.
"China's value-add is in design," said Daniel Heyler, an analyst with Merrill Lynch Taiwan. "In China, you can buy most of the semiconductors you need on the open market."
Andrew Lu, a semiconductor analyst with Salomon Smith Barney Securities in Taipei, disagrees.
"Chipmakers in Taiwan are disappointed in the local government," he said. "They expect more stability in China's infrastructure--labor and power generation--and there's a strong end market."
Growing at a rate no one can afford to ignore Richard Chang of Semiconductor Manufacturing, speaking at a chip industry seminar in Taiwan this week, said that China's semiconductor market, now accounting for 6 percent of world demand, is growing at a rate that no one can afford to ignore.
In the last six months, 61 new chip-design companies opened in China, he said. "If chip customers are going to the mainland, they want chipmakers to go, too," said Chang.
China's barriers to imports such as taxes are not the main reason why companies want to start manufacturing locally, said analyst Lu. Cycle time--the period between taking an order and shipping it--is much shorter for chips that can be designed, fabricated and packaged locally, he said. That helps local consumer electronics designers get their products to market more quickly.
Most of the demand in China is for chips that go into consumer electronics such as karaoke music systems and other home entertainment equipment. While margins for such chips are not high compared with those of computer processors or cell phone semiconductors, ignoring the business now could haunt Taiwanese companies in the future.
Morris Chang, chairman of Taiwan Semiconductor Manufacturing, said last week that Taiwanese companies "may find themselves at a disadvantage" if companies from other countries use China's talent and resources earlier than Taiwan.
Richard Chang hopes to get a head start on the Taiwanese companies, still held back by a government ban. Semiconductor Manufacturing will compete with Taiwan Semiconductor in the made-to-order chip business.
"We know we have to compete with benchmark companies in Taiwan," Chang said. "When we recruit, we can only afford to offer people 30 percent to 50 percent of what they make in the US," he added, referring to senior Chinese managers he plans to hire away from companies in Silicon Valley.
Chang said that more Chinese engineers are returning from abroad to work in China, much the same as happened in Taiwan 20 years ago when the island built a chip industry from scratch.
singapore.cnet.com |
