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Technology Stocks : Alliance Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: Scotsman who wrote (6779)	1/10/2000 1:42:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

umc closed @115.00 + 3.00 vol 142,963,904; 2nd most active

To: Scotsman who wrote (6779)	1/10/2000 9:26:00 AM
From: DJBEINO	Respond to of 9582

ANALYSIS-Taiwan Semi mergers' price impact minor By Michael Kramer TAIPEI, Jan 10 (Reuters) - Taiwan Semiconductor Manufacturing Co fortified its commanding lead in the made-to-order microchip business with a recent pair of mergers, but analysts say they see little threat to rival foundries. Analysts said Taiwan Semicon's buyout of rival Worldwide Semiconductor Manufacturing Corp on Friday -- its second major acquisition in eight days -- was more of a scramble to cope with insatiable foundry demand than a shrewd grab for market share. ''People talk about pricing power and it seems as if TSMC is on the offensive with this consolidation. But I think this is more of a defensive consolidation,'' said Peter Tsao, a leading microchip analyst and head of research at ING Barings in Taipei. ''Their customers are knocking down their doors for capacity. ... This is a necessary move that TSMC has to make,'' Tsao said. Taiwan Semiconductor, the world's top dedicated producer of custom-made chips, said on Friday it would swap one of its shares for every two in unlisted Worldwide. On December 30, it said it would buy out its microchip venture with computer maker Acer Inc , exchanging one share for every five in TSMC-Acer. ING's Tsao has estimated the mergers' value at US$6 billion. Taiwan Semiconductor has declined to disclose details. STILL STRAPPED FOR CAPACITY The tie-ups swell Taiwan Semicon's capacity to 3.4 million 8-inch wafer equivalents from 2.8 million, but the foundry admits it is far from able to meet scorching demand for the specialised chips that form the innards of almost every electronic device, be it mobile phone, computer or ''intelligent'' toy. Nomura Securities analyst Chris Hsieh quoted Taiwan Semicon as saying even now it could meet only 73 percent of existing customer demand, up from 60 percent before the mergers. ''This is very good for Taiwan Semiconductor itself, but from the point of view of global supply and demand for foundry, it will not have any major effect,'' Hsieh said. It's an open question whether foundry prices will rise. While Taiwan Semicon's pricing power has grown, analysts say the two mergers have caused no net change in global foundry capacity, which takes billions of dollars and years to build. Hsieh says Taiwan Semicon's service-oriented culture makes it reluctant to charge more, recalling how a 1999 decision to cope with brisk demand by raising prices for new contracts and ad-hoc orders sparked an internal debate even though capacity reserved for favoured long-term customers was left untouched. ''A lot of employees said, 'We can't take advantage on price and put pressures on customers','' Hsieh said. Taiwan Semicon spokesman J.H. Tzeng said corporate strategy was to compete on service, not price. ''Our company is a price leader because customers consider that TSMC can provide premium services. That's why we can charge premium prices,'' he said. Chairman Morris Chang has said the surest path toward ample capacity is to build it. Taiwan Semicon expects to spend US$2 billion in 2000 alone, focusing on a plant in southern Tainan. RIVALS STILL HAVE ROOM Rivals like Taiwan's United Microelectronics Corp , ranked No.2 in global production volume, have fewer qualms about raising rates and could now boost margins, said Nomura's Hsieh. The foundry market has been an ever-expanding pie -- Goldman Sachs sees the US$5.5 billion to $6 billion global business swelling to $9 billion in 2000 -- and stock market investors seemed to expect United Micro to claim a significant slice. Shares in United Micro, apparently abandoned at the altar by Worldwide after a long courtship, dropped T$3 in early trade on Monday but quickly recovered to close up T$3 to T$115. Taiwan Semicon shares rose T$6 or 2.4 percent to T$179. Analysts cautioned that Singapore's Chartered Semiconductor Manufacturing , the world No.3, would have less room to raise prices as it strives to engineer a return to profit in 2000. Its shares rose S$1 (U.S. 60 cents) to S$11.20 on Monday. ''Chartered is another story because they are in a recovery stage,'' said Nomura's Hsieh. "Its capacity and technology level is closing the gap with TSMC and United Micro, but not quite yet. They still need customer support. EXPANDING CUSTOMER BASE The customer base for dedicated foundries has grown rapidly as a worldwide boom in mobile phones has led telecommunications firms to farm out chip production they once handled themselves. Even giants known for producing everything in-house, such as International Business Machines (NYSE:IBM - news) and Motorola (NYSE:MOT - news) have farmed work out to foundries to focus their energies on product design. ING analyst Tsao said the foundry sector's boom, far from a mere cyclical upturn in the semiconductor cycle, was ''clearly very secular.'' ($ = T$30.7) biz.yahoo.com