Earlie, It looks like the taiwanese are doing there part to try to top up the tank on the chip glut. -g- Any thoughts on this article.
john
March 23, 1999
Mosel Considers Investment in Plant
Amid Signs of Chip-Sector Rebound
By RUSSELL FLANNERY
Staff Reporter of THE WALL STREET JOURNAL
TAIPEI, Taiwan -- Chip maker Mosel Vitelic Inc. said Monday that it
was considering making a US$1 billion investment in a North American
chip plant, possibly within two years, illustrating how Taiwan companies
are pouring funds into expanded capacity as the volatile semiconductor
industry recovers this year.
In the past several weeks, Taiwan's industry leaders, Taiwan
Semiconductor Manufacturing Co., a 27%-owned affiliate of Dutch
electronics company Philips Electronics NV, and United Microelectronics
Corp., have said they'll increase their investments in 1999 to take
advantage of industry growth. And smaller island chip makers that piled
into the industry since the mid-1990s plan new investments, too, despite
large losses last year. Among them, Nanya Technology Corp., the chip
unit of Taiwan's big Formosa Plastics Group, said Monday that it raised
five billion New Taiwan dollars (US$151.1 million) this month in a stock
sale to help finance expansion.
Besides Nanya, companies such as Mosel, Winbond Electronics Corp.
and others have raised, or are planning to raise, a total of more than US$1
billion through stock sales this year, executives say. Mosel, which says it
may not settle on an overseas site or a specific investment amount until
next year, also said that it plans to try to raise about US$150 million in the
next few months through an overseas stock sale.
'Outsourcing Is Increasing'
"One of Taiwan's strengths right now is companies' ability to raise money
at home and overseas, and they are taking advantage of that to raise their
global market share," says Matt Cleary, a technology industry analyst at
ABN Amro in Taipei. "More broadly, the rise of the Taiwanese in the
global industry is part of a trend in which outsourcing is increasing," he
added.
Taiwan stock investors are persuaded the industry's a winner. Gains by
chip makers have led a rally at the Taiwan Stock Exchange this year. The
exchange's weighted price index rose 0.7%, or 49.85 points, on Monday
to a three-and-a-half month high of 7043.23. The index is up about 10%
so far this year, one of the best performances in Asia.
Taiwan has come from out of nowhere in the past few years to become the
world's fourth-largest semiconductor maker by focusing on contract
production and relying heavily on licensing of foreign technology. That's
different from the approach followed by the industry's multinational
heavyweights like Intel Corp., which developed their own technology and
mostly made their own chips. That model is changing as profit pressure
forces multinational companies to concentrate where they can make the
best returns. They're increasingly turning over production to contract
manufacturers, such as Taiwan's, and focusing their efforts where they can
make the most profits, such as design.
Prices Have Recovered
Even though contract orders to Taiwan makers picked up last year, low
prices amid a global chip glut led to huge losses at local specialized
chipmakers, which as a group lost more than NT$20 billion. Nevertheless,
they are anteing up with new investments this year because prices have
recovered, and they expect continued growth in outsourcing by overseas
companies, especially from Japan. The Semiconductor Industry
Association, a U.S. industry group, forecasts the industry's global sales this
year will increase 9% to US$133 billion, after declining 11% in 1998.
"The industry is recovering, prices are better, and larger international
companies will slow investments in their own plants," says Connor Liu, an
analyst at Jardine Fleming Taiwan Securities. "All of that benefits for
Taiwan and is stimulating new investment," he said.
Rather than build new plants, chip makers here are using most of their
money this year to buy equipment for existing ones, in order to take
advantage of new technology that allows manufacturers to squeeze more
chips out of a single silicon wafer. "It's necessary to upgrade our
technology or we can't be competitive," says Jesse Chou, a spokesman at
memory-chip maker Vanguard International Semiconductor Corp. The
board of directors at the company, which lost NT$4.9 billion last year, on
Friday approved plans to raise NT$3.6 billion in a local stock sale.
Worldwide Semiconductor Manufacturing Corp., a contract manufacturer,
is trying to raise NT$7.5 billion this month to purchase equipment.
Macronix International Co. said Friday that it would raise capital spending
by US$20 million to about US$420 million this year and increase the
number of eight-inch wafers it processes. Powerchip Semiconductor
Corp., an affiliate of Japan's Mitsubishi Group, said this month that it plans
to raise US$200 million in an overseas stock sale this year, partly to add
production lines or build a new facility. |
