Taiwan's SIS reports earnings growth, but capacity issues linger
By Macabe Keliher
Electronic Buyers' News
(02/01/00, 04:31:24 PM EDT)
Taiwan's Silicon Integrated Systems Corp. (SIS) reported strong 1999 sales, putting the company in position to pursue an aggressive investment plan to build two 300-mm-wafer plants in the south of the island.
While rival Via Technologies Inc. is establishing itself as a supplier of chipsets and microprocessors, SIS hopes to differentiate itself by its manufacturing capability, which has increased in significance as wafer supplies at pure-play foundries grow scarcer. "We are trying to rely less on foundries and move in the direction of becoming an [integrated device manufacturer (IDM)]," said president and chief executive S. Sammuel Liu, speaking at the company's investor conference in Taipei.
SIS reported sales of $350 million for 1999, substantially more than the $200 million the company posted in 1998. Profits, meanwhile, jumped to $125 million, a healthy increase over $55 million a year ago. Bolstered by products including its single-chip SIS630 core-logic device, SIS saw its low-cost-PC target market grow about three times faster than a year ago.
The company hopes to achieve a sales goal this year of $650 million, according to Liu. SIS also plans to add additional revenue through the issue of an American Depository Receipt or Global Depository Receipt sometime this year, he added.
Though it reported generally improved fiscal conditions, SIS' fourth-quarter revenue and profit actually fell far short of forecasts due to an inability to secure sufficient wafer-production capacity at its foundry partners-a problem that is expected to dog the company well into 2000, analysts said. "We had orders but could not get guaranteed production capacity," said Ken Huang, senior vice president for SIS.
Fourth-quarter sales were $80 million, slightly up from $70 million a year ago but 72.7% lower than forecasts. Although profits of $23.3 million in the quarter were almost double the $12.8 million reported last year, they were still 86.3% below expectations.
This year, SIS will still rely on foundries for more than half its capacity demands, Huang said, adding that 0.25- and 0.18-micron-based products will account for about half of its product output. Last year, SIS' entire product line was manufactured upon 0.3-micron technologies.
"Our main hurdle last year was the capacity crunch," Huang told EBN in an interview. "We could not get out as many shipments as we had orders for. In the future we hope to rely more on ourselves. As for smaller micron processes, we will keep moving forward but do not feel threatened because our current foundry partners are not even doing 0.18-micron well."
United Microelectronics Corp. and SIS signed a capacity agreement last month, forcing SIS to pay a premium in exchange for a larger number of guaranteed wafers, according to a company spokesman. However, the chipset designer is still embarking on a move to set itself up as an IDM by building its own fabs.
"With a burgeoning year ahead we hope to move closer to our goal of creating a system-on-a-chip platform through the future establishment of a 300-mm-[wafer] plant," Liu said. "Our aim is to first set up a 12-in.-[wafer] research base in Tainan and within three to five years establish a fab."
At this point, however, SIS' 300-mm-wafer fabs remain little more than prospects. SIS applied for land in Tainan and is still waiting for site approval. Liu expects to invest more than $3 billion to build 300-mm-wafer fabs in the Tainan business park, with production topping 20,000 300-mm wafers per month.
Even so, analysts remain skeptical as to how fast the company will move. "SIS is suffering from a production shortage now, and although it has plans to increase output, we have to wait and see," said Paul Yang, analyst at Grand Pacific Securities.
SIS' first 8-in.-wafer fab in Hsinchu will be on line in early March, executives said, transitioning from 0.25-micron to 0.18-micron technology over the course of 2000. Initial estimates call for output of 2,000 to 5,000 wafers per month in the first half of 2000 and 5,000 to 10,000 per month in the second half of the year, although company representatives said that they hope to exceed these estimates.
Liu added that although SIS would not classify itself as a foundry, the company could conceivably take on some chip- subcontract orders from other companies.
|
