New' consolidated UMC speeds foundry investments, technology rollout
Semiconductor Business News
(01/10/00, 09:10:35 AM EDT)
HSINCHU, Taiwan -- Silicon foundry supplier United Microelectronics Corp. here plans to increase spending on wafer-processing capacity by 41.2% to $2.4 billion in 2000 over last year's $1.7 billion, followed by steady growth in capital expenditures to $3.9 billion by 2003. The aggressive spending targets are set in place after UMC completed its planned consolidation of five joint-venture foundry companies under a single corporate structure on Jan. 1
UMC managers contend that the consolidation will enable UMC to step up its efforts to expand advanced wafer-processing capacity at a faster pace as well as enable it grab the lead in pure-play foundry services from cross-town rival, Taiwan Semiconductor Manufacturing Co. Ltd. But while UMC was finishing its first week under its new structure, TSMC struck an agreement to acquire Worldwide Semiconductor Manufacturing Corp. (WSMC) to its wafer-processing network (see Jan. 7 story).
Based on market data, UMC believes it has closed the gap in foundry revenues between itself and TSMC. UMC says it used its old joint-venture strategy to grow foundry market share from just 5% in 1995 to 30% in 1999, when worldwide foundry revenues nearly reached $6 billion. UMC claims TSMC's share was at 35% in 1999.
How important is it for UMC to overtake TSMC in revenues? "I know that plays well in the press, but our goals are starting to look beyond that as a target," insisted Jim Kupec, worldwide marketing and sales manager who is also president of UMC USA in Sunnyvale, Calif. "I personally don't look at [being No. 1 in revenues] as being enough. We are looking at setting a trend to become the dominate player, independent of size," he added.
To do that, UMC is pushing hard on both the technology front as well as spending on wafer-processing capacity. This week, UMC officially unveiled its WorldLogic technology roadmap, which calls for the start of 0.13-micron IC designs to start in the first quarter of 2000, followed by initial production of those devices in early 2001. The technology will feature a baseline copper interconnect process.
UMC also plans to soon introduce its ASICplus design automation and support program with the initial five companies being named in the first quarter. A new Web-based supply-chain management and tracking solution has been launched which enables quick changes to foundry orders. UMC officials expect 50% of the companies business to be conducted across the Internet in one year.
At their current pace, UMC's revenues are expected to reach $2.5 billion, up 42.9% from $1.75 billion in 1999. UMC expects to drive up its total wafer-processing capacity to 2.4 million 8-inch equivalent wafers in 2000. TSMC says it expects its annual capacity to be at 3.4 million 8-inch wafers after it completes the WSMC merger and acquisition of full ownership of a joint-venture with Acer Group (see Dec. 30 story).
While UMC has moved away from its original joint-venture strategy, it is still willing to consider new agreements to add more capacity. In the last week of 1999, UMC announced a joint-venture with Hitachi Ltd. to set up a 12-inch fab in Japan, and other agreements are still possible, according to Kupec.
"Our historic path has been to partner with companies," he explained. "We see it as a core value in the organization and would still like to partner with companies when the deal makes sense." In the case of the Hitachi joint venture, it did because UMC wants to continue its penetration of the Japanese chip segment as well as accelerate its move into larger diameter 300-mm (12-inch) wafers, Kupec said.
But the old partnerships became cumbersome and were beginning to inhibit UMC's growth potential, according to managers in Taiwan. Last summer, the company announced plans to restructure its joint-venture foundries and streamline its organization. As a result, five ventures with semiconductor suppliers and other customers have been combined into a new corporate structure, making it easier to manage technology as well as report results to financial analysts, said John Hsuan, chief executive officer of UMC during a meeting last fall in Taiwan.
Several U.S-based fabless semiconductor companies had made investments in one or more of UMC's joint-venture foundries in order to ensure themselves of manufacturing capacity. As a result, chip companies such as Lattice Semiconductor, S3, Trident Microsystems, and Xilinx reported large financial gains on the stock merger (see Jan. 5) and Jan. 4 stories)
Today, UMC formally declared the consolidation completed. The joint-venture companies--called United Integrated Circuits Corp., United Silicon Inc., United Semiconductor Corp., UTEK Semiconductor Corp. and another named United Microelectronics Corp.--now report into a single structure. As a single publicly-traded entity, UMC has changed its name from UMC Group to simply "UMC" to emphasize the single structure, said Kupec.
The partnerships were taken with customers and other companies to help UMC to enter and quickly grow in the foundry arena. "We were able to share the equity investments and risks," Kupec noted. "But we have grown to the point where we no longer need financial equity investments to continue the growth rate we want. We're big and now have our own sources of money. The JV organization became somewhat unwieldy. We needed to drive the 'train' faster down the same track," Kupec explained.
Peter Chang, CEO of foundry operations at UMC, said the new structure will improve the company's interface with customers as well as result in "better synergies in our technology development efforts, faster process deployment between fabs, as well as across-the-board improvements in efficiency."
It will also be needed to compete head on with rival TSMC as silicon foundry demand surges.
--J. Robert Lineback
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