Taiwan struggles to cope with downturn
By Faith Hung
EBN
(07/06/01 17:39 p.m. EST)
TAIPEI--Taiwan's electronics industry is feeling the pain it had hoped to avoid through healthy PC sales, as several leading companies in the sector reported this week that computer and foundry sales continue to soften.
Warning of "the worst downturn in the last 30 years," foundry United Microelectronics Corp. said it will soon shut at least one of its wafer fabs, while the island's two largest PC chipset vendors--Via Technologies Inc. and Silicon Integrated Systems Corp.--posted significant sales declines.
Chip sales for Taiwan's electronics industry this year are expected to fall for the first time in about a decade, dropping 12%, to $17.9 billion, according to the Industrial Technology Research Institute in Hsinchu.
Via, Intel Corp.'s biggest rival in the chipset market, said its sales last month sagged 25% from May, to $58 million, dragged down by decreased shipments and lower chipset prices. SiS said June sales also fell by 25% from May, to $17.6 million.
Acer Laboratories Inc., Taiwan's third largest chipset maker, actually saw June sales rise 4.9% sequentially due to increased shipments of chipsets used in DVD players and an uptick in orders from parent company Acer Group. However, the sales gain should not be seen as a sign that the PC market is about to pick up, said Lin Zhu-yi, chief auditor of ALi in Taipei.
"Demand from our downstream clients remains weak, indicating motherboard and system makers are conservative about the outlook in the second half of this year," said William Lee, a spokesman for Taipei-based Via. "Visibility for the whole PC industry is very low."
A spokesman for Asustek Computer Inc., Intel's biggest motherboard supplier, said the company is hoping to ship a million motherboards in July, about flat from June.
"It's difficult for us to see how the third quarter will turn out," he said. "Intel is slated to introduce its 845 SDRAM version for the Pentium 4 CPU in August, delaying the buying momentum from consumers probably until then."
Dismal market conditions have been exacerbated by the fact that ALi, SiS, and Via lack a chipset for the Pentium 4, which is expected to build sales momentum as the year wears on and as Intel cuts processor prices further.
"[None of the three] has introduced P4 chipsets," said Barrio Liou, an analyst at Prudential Securities Investment & Trust Co. in Taipei. "They're missing out on the rally."
In the first six months of its fiscal year, Via's sales totaled $530.4 million, representing only 40% of its 2001 forecast. First-half sales for ALi totaled $58.9 million, meeting only 33% of its 2001 forecast. SiS' sales were $142.6 million. The company did not disclose a target.
Looking ahead, the companies are counting on sales of double-data-rate SDRAM-enabled chipsets. "The DDR-supporting SiS635 and SiS735 chipsets are continuing to grow, strengthening the overall competitiveness for 2H '01," said SiS in a statement.
Via demonstrated its Pentium 4 chipset last month during a briefing at the Computex 2001 trade show in Taipei. The company is slated to introduce DDR-enabled chipsets that support the P4 in the third quarter, though it still has not obtained a license to Intel's processor bus.
"Launching the product as scheduled is important for us to increase our sales," Via's Lee said.
To take a lead in the DDR market, Via plans to begin shipping its Pentium 4 chipset before Intel delivers either its 845 Brookdale SDRAM version during the current quarter or its DDR chipset in the first quarter of next year.
Meanwhile, UMC, the world's second-largest silicon foundry, said last week that it will shutter an unnamed fab to counter falling demand.
"Apparently, the demand for ICs is falling faster and lower than anyone expected," UMC chairman Robert Tsao said in a memo to company employees. "This could be the worst downturn in the last 30 years. We must be very cautious."
The move wasn't unexpected. Declining orders at UMC and rivals Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and Singapore's Chartered Semiconductor Manufacturing Ltd. have caused the companies to idle 50% or more of their production lines in recent months.
"UMC has to reduce costs," given that customers, particularly those in the telecom market, are working off bloated inventories, said Alfred Yin, an analyst at BNP Paribas Peregrine Securities based in Hong Kong.
UMC declined to specify which facilities it will shut down, although it said the move will not result in layoffs. Some analysts speculated one of the potential targets would be Fab 8F, an 8in.-wafer fab in Hsinchu that started to ramp up last year. Only a small portion of the plant's capacity has been booked.
A company executive declined to reveal when the shutdown will begin, saying only that it will happen "soon." Currently, UMC operates six 200mm-wafer fabs in Hsinchu and is building 300mm-wafer plants in Singapore and the southern Taiwan city of Tainan. UMC also has a 300mm-wafer venture in Japan with Hitachi Ltd.
Last month the foundry warned that it expects to post an operating loss in the June quarter and may continue to lose money in the current quarter.
TSMC, on the other hand, said it isn't planning to close any of its facilities.
"We're going to run operations at every fab as usual," said Jesse Chou, a spokesman for the Hsinchu-based company, which runs two 100mm-wafer and six 200mm-wafer fabs in Taiwan.
TSMC's utilization rate will rise to 50% in the third quarter, from 45% in the prior quarter, mostly on the strength of increasing orders from Santa Clara, Calif., graphics chip maker Nvidia Corp., according to analysts. |
