Philips's Plan to Invest in Chip Plant
In Singapore Suggests Sector Upturn
By MATTHEW ROSE
Staff Reporter of THE WALL STREET JOURNAL
AMSTERDAM -- Philips Electronics NV confirmed longstanding plans to
invest in a new semiconductor manufacturing facility, a move that suggests
the two-year industry slump may be nearing an end.
Philips said it will join with Taiwan Semiconductor Manufacturing Co. and
EDB Investments, the investment arm of Singapore's Economic
Development Board, to build a $1.2 billion facility in Singapore's Pasir Ris
Wafer Fabrication Park.
The Amsterdam-based electronics giant will
own 48% of the venture, which will begin
production in the second half of 2000. TSMC
will own 32% and EDB will take the remaining
20%. Philips, which holds a 27.6% stake in TSMC, has cooperated with
the Taiwanese foundry on projects in the past, helping to defray the high
capital expenditure associated with new chip plants.
The announcement comes after a punishing period for the semiconductor
industry due to overproduction and falling prices. According to latest
figures from Dataquest, an industry-research company, world-wide
semiconductor revenues will fall 6% in 1998. More than $38 billion in
capital expenditure was canceled or shelved this year, said analysts, as
semiconductor manufacturers struggled to rein in production capacity.
In recent weeks, some analysts have been taking a cautiously optimistic
outlook, noting the boom in demand for chip-driven products such as
mobile phones and television set-top boxes, and the reduction in
personal-computer inventories. The investment "is a sign that people think
the market will recover in a couple of years," said Jean-Phillips Dauvin, chief
economist at semiconductor maker STMicroelectonics NV. Mr. Dauvin sees
semiconductor revenues growing between 5% and 8% in 1999. He added
that the consumer applications in which Philips specializes are growing
faster than the average market.
Philips's new plant will produce logic chips -- which manage the flow of data
around electronic products -- using state-of-the-art equipment that can
make lines of circuitry that are 0.18 micron in width. Construction will
begin in early 1999 and production will start in the second half of 2000.
Full production capacity is scheduled for 2003. "Our projections show that
by the time this new facility comes on stream, the market for logic chips
will be strong," said Arthur van der Poel, chief executive of Philips's
semiconductor division.
From the WSJ.
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