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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: TI2, TechInvestorToo who wrote (18436)	7/11/1998 5:00:00 PM
From: Ian	Read Replies (2) \| Respond to of 25960

More bad news: TAIPEI, Taiwan - Taiwan, until now an island of tranquillity in the Asian economic typhoon, is putting up storm flags. In recent weeks, virtually all of Taiwan's fabs have cut their capital expenditure budgets in the face of falling demand for ICs. As fab plans are scaled back, current equipment utilization rates in Taiwan's existing factories are running anywhere from a poor 70 percent to an anemic 50 percent. The situation threatens not only to alter the country's aggressive grab at worldwide semiconductor market share in recent years, but to worsen the global electronics-business outlook. "In the last month, the change in the attitude of Taiwan's DRAM makers has been dramatic," said Charles Kao, vice president at Nan Ya Technology Corp., a DRAM vendor. "We have gone from reserved to panicked regarding the market's health." Analysts estimate Taiwan's total semiconductor capital spending will decline 5 to 10 percent this year from the $5 billion the island nation spent in 1997. That's a reversal from earlier forecasts that predicted Taiwanese companies would increase spending 10 to 15 percent in 1998, to as much as $6 billion, in the view of some analysts. Now it appears that total Taiwanese capital spending this year could be as low as $3.9 billion. George Burns, president of Strategic Marketing Associates (Santa Cruz, Calif.), a fab-research firm, noted that Taiwan Semiconductor Manufacturing Co. alone has just cut $400 million from its capital spending budget, lowering expenditures to $920 million from its original goal of $1.2 billion. The company has delayed groundbreaking on Fab 7 and postponed Fab 6. Macronix International Co. recently announced plans to nearly clear-cut its new equipment purchase budget for 1998, chopping a whopping 73 percent off initial projections. It will spend $87 million, not $319 million as originally planned. A lack of demand for its current production capability is the main reason for the cutback. Macronix said equipment utilization this year is 70 percent for its 6-inch line and only 50 percent for its 8-inch line. The Macronix announcement of equipment cutbacks was the third from Taiwan in as many weeks. TSMC and United Microelectronics Corp. (UMC) both also said that they will be pare spending. Even more stunning, UMC said it has given up on yearly capital expenditure budgets and is now looking at the market on a short-time frame model. "We adjust our capital expenditure program each month now in order to meet our near-term market demand," said John Hsuan, chief executive officer for domestic operations at UMC. "We definitely are getting more conservative, though, with our expansion plans." Other companies that aren't device manufacturers, such as trade conglomerate Tatung, Sincerity and Pacific Semiconductor, planned to build fabs and get into the foundry business this year, but with the current industry climate, analyst Burns said he doubts this will happen. Vanguard, a DRAM company, planned to break ground on a fab in June, but has also delayed its plans. The pullback is a disappointment for analysts who, from the start of the industry downturn, have looked from Japan to Korea to the United States and finally to Taiwan for the bulwark that could weather the storm and lead the way out. For a while it seemed Taiwan would do it.