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To: Tsaen Wang who wrote (22246)	6/15/1999 7:56:00 AM
From: TechHunter	Read Replies (1) \| Respond to of 25960

The race is on for foundry capacity in Taiwan..... By Alice Hung TAIPEI, June 15 (Reuters) - United Microelectronics Corp's internal streamlining is heating up a race between Taiwan's two microchip giants in their scramble to lay in new capacity and lead global foundry chipmaking. United Micro, second only to rival Taiwan Semiconductor Manufacturing Corp in the world market for made-to-order foundry chips, said on Monday it was merging with four of its subsidiaries to forge a single powerhouse with T$70 billion (US$2.15 billion) in sales. Taiwan Semicon had 1998 sales of T$50 billion. Both firms seem to have been caught off-stride by a brisk resurgence of demand after a cyclical slump in 1998 that deepened as Asia's recession hammered Japan and South Korea. The core rivalry is for access to wafer fabrication capacity. ''Recent moves by both companies tell a lot about the bullishness of foundry chipmaking,'' said Nomura Securities electronics analyst Chris Hsieh. ''Everyone is scrambling for more capacity. The most effective approach is to consolidate resources and buy capacity in the form of existing fabs,'' Hsieh said. United Micro bought a stake in Japan chipmaker Nippon Foundry Inc in February and has hinted that other acquisitions might be in the works. Taiwan Semicon also has been active. A week ago, it bought a controlling interest in Acer Inc's microchip unit, Acer Semiconductor, and said it might buy a chipmaking plant in Maine from National Semiconductor Corp (NYSE:NSM - news). Taiwan media have said Taiwan Semicon was in acquisition talks with Powerchip Semiconductor , a unit of Umax Data Systems . All parties have declined to comment. Analysts say the microchip market recovery appears to have come more quickly than expected, especially in foundry work as ''fabless'' design companies dream up ever more devices that require specially made microchips. U.S. research house Dataquest, which predicts 10 percent growth in the integrated-circuit industry in 1999, estimates that foundry production will command 25-40 percent of global production in the sector in 2001, up from just eight percent now. Together, Taiwan Semicon and United Micro account for over 60 percent of global foundry production in sales terms. With demand so brisk, analysts said the Taiwan rivals were already running at or near full capacity and both have embarked on aggressive capacity expansion plans. Taiwan Semicon has boosted its 1999 capital spending by 36 percent to US$1.13 billion. Not to be outdone, United Micro said on Monday it would spend US$1.3 billion on capacity expansion in 1999 and the same again in 2000, aiming for 45 percent annual capacity growth. ''In this industry, only the top makers can survive. They have to be bigger and bigger,'' Nomura's Hsieh said. ''I am bullish for both.'' Not everyone shares that view. ''I am more optimistic for Taiwan Semiconductor's further gains because of the firm's sound profit outlook,'' said Joseph Chiou, vice president of Taiwan Securities Investment Trust. ''For United Micro, although the reorganisation surely will help upgrade its efficiency and competitiveness, the impact will not be seen until next year. So the plan should only be a short-term bullish factor for United Micro,'' Chiou said. On Tuesday, Taiwan Semicon surged T$6.5, or 5.9 percent, to T$117 as it went ex-dividend with a T$2.3 per share payout. United Micro rose by the market's daily volatility limit of seven percent to T$67.5. Barra's The Estimate Directory consensus showed a net profit forecast of T$20.2175 billion or earnings per share of T$3.3 for Taiwan Semicon for calendar 1999, compared with T$7.737 billion or earnings per share of T$1.3 at United Microelectronics in 1999 (corrects). According to Reuters Securities 3000, Taiwan Semicon's stock is up 91.55 percent in 1999 to date, compared with United Micro's 58.81 percent gain. (US$ equals 32.36)