FOCUS-Taiwan chipmaker (UMC)halts T$500 bln plan
By Alice Hung
TAIPEI, Sept 17 (Reuters) - United Microelectronics Corp
(TW:2303), Taiwan's second largest microchip maker, said on
Thursday it had decided to halt a massive T$500 billion ($14.5
billion) investment plan due to oversupply in the industry.
"We have decided to put the T$500 billion Tainan project on
hold for the time being," John Hsuan, co-chief executive
officer of United Micro group, said at a news conference.
In June 1997, United Micro said it would invest T$500
billion over the next 10 years to build several 12-inch wafer
fabrication plants at the Tainan science-based industrial park
in southern Taiwan.
It would have been the island's single biggest industrial
project.
But United Micro said on Thursday that current industry
conditions did not justify such an ambitious plan.
"The whole semiconductor industry is under very serious
oversupply pressure," Hsuan said. "I see no reason to justify
why people should invest in 12-inch fabs now."
Analysts were not surprised.
"The company is making a right decision. It would be
extremely unrealistic for the company to continue its planned
investment plan," said Oliver Fang, National Securities'
institutional sales chief. "The timing is simply not right."
Nomura Securities' research head Jeffrey Liang also praised
the move. "Since over-capacity is still a major concern in the
industry, it makes sense to keep the cash."
United Micro is one of the world's leading makers of
made-to-order semiconductors, a specialist industrial sector
known as "foundry chipmaking."
In Taiwan, it is second in production value only to
microchip powerhouse Taiwan Semiconductor Manufacturing Co
(TW:2330).
United Micro's U.S. division president, James Kupec, said
it would take at least a year for the industry to recover.
"In about a year or a year and a half from now, the
oversupply situation will change," he told the news conference.
But before that, Kupec said he expected to see 10 percent
price erosion in the first half of 1999.
In 1997, upbeat Taiwan's microchip makers shook up the
industry by announcing plans to invest over US$80 billion to
build more than 30 advanced wafer fabrication plants in the
next 10 years.
In addition to United Micro's giant project, Taiwan Semicon
said it would build six advanced wafer-fabrication plants as
part of a 10-year, T$400 billion investment in Tainan.
Several chipmakers followed suit, announcing similar
projects with investment ranging between T$100 billion and
T$200 billion.
As the regional financial crisis started to unfold, many
Taiwan chipmakers were forced to slow down or suspend
originally planned investments.
Taiwan Semicon lowered its 1998 capital spending plan to
US$920 million from US$1.3 billion in late June.
Hsuan said United Micro remained committed to investing in
the industry, but he said not every company would be able to
fulfil pledged investments.
"I would predict about 50 percent of the programmes will be
stopped. This is not a problem just for Taiwan, it's a problem
for the global semiconductor industry," Hsuan said.
Nonetheless, Hsuan said United Micro was in talks to
acquire an eight-inch wafer fabrication plant in Europe, Japan
or the United States.
"We feel buying existing capacity is cheaper than building
a new one now," he said.
Hsuan said the deal would be finalised before the end of
September.
Hammered by a sluggish semiconductor industry worldwide,
prices of Taiwan's semiconductor shares have slumped.
United Micro shares stood at T$34.10 on Thursday compared
with a 1998 high of T$73.64, although the stock closed 30 cents
higher on the day.
In August, United Micro slashed its 1998 pre-tax profit
forecast to by 49 percent to T$5.442 billion and its sales
forecast by 39 percent to T$18.347 billion.
(US$1=T$34.5) |
