Still primarily targeting the semi and semi equip boys, but so far, it has been a frustrating wait.
Here's where NVLS' orders likely came from. It will be interesting to see if the Asians are actually dumb enough to go ahead with these fabs. (I sure hope not)
online.wsj.com
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Raising Chip Capital
By LESLIE P. NORTON
Emerging Markets
Even as the price of dynamic random access memory chips (DRAMS) stayed in the doldrums, Taiwanese producers of memory chips -- key components of personal computers -- are busily preparing to raise capital. Among them are Nanya Technology, the largest of the Taiwanese DRAM manufacturers, with a market cap of $3.3 billion; Mosel Vitelic; ProMOS Technologies (a joint venture between Mosel and Infineon of Germany), and Powerchip Semiconductor, Taiwan's second-largest DRAM maker. Winbond Electronics, another big player, hasn't yet hinted at any stock offering plans, but who knows?
Nanya plans to sell Global Depositary Receipts (GDRs) at the end of May, to fund the first phase of next-generation 12-inch-wafer-fabrication plants, also known as fabs, that will cost $2 billion plus. Nanya needs $288 million this year, and another $780 million next year, says a spokesman. Thus, Nanya hopes to raise as much as 20 billion New Taiwan dollars (US$575 million), by selling around 400 million shares. Last week, Nanya closed at NT$42, up 16% this year, and five times its October low of NT$7.90.
Other manufacturers aim to raise $200-$300 million each, either through convertible bonds, GDRs, or American Depositary Receipts (ADRs), says John Leong, chip analyst at Deutsche Bank in Taipei. True, sentiment is souring amid growing fears that a second-half recovery may fail to materialize. Yet companies must stay competitive. After a disastrous 2001, manufacturers pushed capital spending into this year.
The chipmakers need money to fund the transition to 12-inch wafers from the current, eight-inch wafer that is the industry standard. The larger wafer will give them a competitive advantage over new Chinese rivals and make it easier to compete with behemoths like Micron Technology and Samsung Electronics, the world's largest DRAM manufacturers. But the expansion plans will surely stoke overcapacity at a time of slow demand. More chips can be cut from 12-inch wafers than eight-inch wafers. While a fab to make eight-inch wafers costs $1.5 billion, a fab to make the 12-inch variety costs $2.5 billion.
Says Michael Oh of Matthews Capital Management: "You need 12-inch fabs to stay competitive and stay in the game, but it's bad for the oversupplied DRAM business, because it contains 100% more supply than the current standard." And so far, the only shakeout has been among Japanese DRAM makers. A much-discussed purchase of Hynix Semiconductor's DRAM assets by Micron has yet to take place.
At the moment, only two fabs make 12-inch wafers. One is owned by Infineon, the other one belongs to ProMos. Nanya is in talks with Infineon about an alliance, reportedly to build two 12-inch-wafer-producing plants.
With business conditions so uncertain, the coming glut of DRAM shares gives global investors pause. Says Chris Ruffle, the Taipei-based director of Martin Currie Investment Management and portfolio manager of China Fund: "I'm pretty negative. I see a whole batch of plants coming. It's a [capital-intensive] business, fiercely competitive, and as a longer-term investor, when will they give me my money back?" |
