Semis will come back faster than expected. The current conditions are as much to blame on demand for cheap PCs, and an industry movement to Dell's just in time model; as the economic slow down. So says C-Cube's Tiawan fab. They are moving to .18Micro next year, semi chips will get cheaper............................
scmp.com
DENNIS ENGBARTH in Hsinchu
Taiwan Semiconductor Manufacturing (TSMC), the island's flagship integrated circuit (IC) wafer fabricator, is working to meet the challenges of shrinking product life-cycles, more stringent customer demands and rising uncertainty in the global semiconductor market.
TSMC, the world's largest dedicated IC wafer foundry and the island's 11th-largest manufacturer, has suffered far less from the regional financial crisis than many of its competitors.
Most of TSMC's wafer output goes to IC design houses which lack their own fabrication facility (or "fab"), and integrated device manufacturers based in the United States, or indirectly sells to the US market.
"Relatively few of our final customers are in Southeast Asia, or even Japan, so the Asian financial crisis has not directly impacted our sales, which are more influenced by the US market," said Huang Yen-chun, TSMC vice-president and assistant to chairman Chang Chung-mou.
"More than 50 per cent of our direct wafer sales go to the US, and most of our clients among Taiwan-based IC design houses sell to the US," he said.
Mr Huang said TSMC's financial results this year had been dragged down by overcapacity, and a subsequent readjustment, in the global semiconductor market.
This was despite the fact that its relatively small output of DRam (dynamic random access chip) wafers had helped the foundry escape the most glutted segment of the semiconductor market.
After booming by more than 100 per cent early this year, net sales suffered a contraction of nearly 13 per cent in June and 16 per cent in July.
Though net sales in the first seven months rose 48 per cent year on year to NT$30.37 billion (about HK$6.80 billion), the slide seems certain to make TSMC's year-end results rather less attractive than was hoped.
TSMC executives believe this year's semiconductor slump is the result of the onslaught of low-cost personal computers and the ongoing shift to "build-to-order" production management by key computer firms, which has left many chip vendors with large inventories.
"Before this year, we realised that life-cycles were progressively shrinking, but in 1998 the market was also affected by the transition in the computer industry to 'build-to-order' management, and the resulting need by vendors to adjust inventories, which in turn shrank orders to IC makers," Mr Huang said.
But after vendor inventories had run down in August, "very urgent orders" began to come in to TSMC, Mr Huang said. "We now suddenly need to schedule and separate production for different customers very tightly, a goal which is difficult to achieve."
TSMC chairman Mr Chang said late last month the semiconductor market cycle had hit bottom in the third quarter.
Mr Chang said TSMC's revenues would rebound 10 per cent in August from July's $3.03 billion, and rise another 20 per cent in September, a forecast that has been echoed by executives of other Taiwan IC makers.
A continuation of this trend through the peak fourth quarter would leave TSMC with net sales close to $55 billion, up nearly 25 per cent over last year's $43.94 billion, and allow the firm to close the year with a respectable 29 per cent growth in pre-tax earnings to $20 billion, according to a forecast by Wealth daily.
"Recent customer response shows that next year should be somewhat better, and we hope the first quarter in 1999 will show results similar to those in the fourth quarter this year," Mr Huang said.
Meanwhile, TSMC has acted to ease short-term financing pressure by reducing capital expenditure this year from a planned US$1.3 billion to $920 million. TSMC had intended to invest the funds to buy equipment to expand production capacity by 40 per cent over last year to a level of 167,000 eight-inch wafers a month in its five existing plants in Hsinchu.
Mr Huang said the project was almost complete, but management had delayed the replacement of equipment for 0.35-micron production with more advanced 0.25-micron equipment in some of the firm's factories. TSMC was operating at 75 per cent capacity, so the company had "slowed the process upgrade until we can evaluate market conditions next year".
However, TSMC would complete the construction of its sixth wafer factory in the new Tainan Technological Industrial Complex on schedule by year's end, Mr Huang said. The new NT$66 billion plant would have two modules. Module "A" would enter production early next year with a monthly capacity of 30,000 eight-inch wafers.
Module "B" might be devoted to more advanced 12-inch technology if the appointed vendor could deliver necessary production equipment. "If the equipment does not arrive promptly and we need the capacity next year, Module B will also be devoted to eight-inch wafer production," Mr Huang said.
In any event, TSMC's seventh plant ("Fab 7"), which was also now under construction in the Tainan zone, would be dedicated to 12-inch wafer production.
Mr Huang said the next generation of 0.18-micron wafers would be available from TSMC in the first quarter of next year, and that "enhanced" 0.15-micron and 0.18-micron wafers (with embedded circuitry made with copper instead of the standard aluminium) would be offered from the fourth quarter.
Also, TSMC's 51 per cent-owned WaferTech joint venture in Camas, Washington, began shipments of 0.35-micron static random access memory wafers in July, a month ahead of schedule. The US$1.2 billion project not only represented TSMC's first offshore capital investment, but marked a landmark reverse flow of semiconductor technology back to the US and the first foreign investment in an IC manufacturing facility in more than a decade.
Mr Huang said TSMC had no direct business as yet with the mainland, saying it was premature to consider investing there.
scmp.com
Tuesday September 22 1998
Taiwan
Clients in control as new 'virtual fab' role builds link to future
DENNIS ENGBARTH in Hsinchu
TSMC wants its clients to consider the company as their "virtual fabricator" under their control, says Quincy Lin Kun-hsi, the company's senior vice-president for corporate development.
In response to the growing uncertainties of the global semiconductor market, from accelerating process and product life-cycles to the onslaught of low-cost computers, TSMC is redefining its role from a technology-driven "pure integrated circuit [IC] foundry" to a customer-orientated "virtual fab", building chips designed by its long-term business partners.
"A semiconductor foundry thrives on long-term partnerships, not short-term co-operation or cut-throat commodity pricing," said Huang Yen-chun, assistant to TSMC chairman Chang Chung-mou.
To support this, TSMC wants to forge long-term alliances with IC design houses which lack their own manufacturing facilities.
Such "fabless" IC design houses accounted for 64 per cent of TSMC's NT$43.94 billion (about HK$9.84 billion) in net sales last year. About 33 per cent was destined for integrated device manufacturers and 2 per cent to more downstream "systems companies".
Mr Lin said demand for TSMC's manufacturing capabilities would rise as low-cost PCs continued to become more popular.
"The low-cost computer will squeeze profit margins of all participants in the value chain and require greater efforts to cut the cost of components through improvements in manufacturing technology and lower development costs," he said.
Mr Lin said TSMC's "management challenge" would be to lower costs and boost quality and technology.
Design houses could directly place and track orders in real time through the Internet, instead of by fax.
This gave the customer as much control over the production as if it were his own factory, Mr Lin said.
He said TSMC had introduced several layers of security to block contagion of its information system by computer viruses and unauthorised access to TSCM's or its clients' data or intellectual property.
TSMC's shift away from a pure foundry role was also evident in two new initiatives which aimed to promote the use of TSMC's technology and facilities, and to assist its clients reduce design costs and cycle time, vice-president for marketing Yang Ping said.
"The pace of technology life-cycles in semiconductors is now scaling up from three-year generations to generations as short as one year, and thus leading to very rapid expansion in capacity, productivity and complexity," Mr Yang said.
In mid-June, the firm announced the formation of the TSMC Silicon IP program for 0.25-micron wafers and the formation of 14 TSMC Si IP partnerships.
This program offers an early verification of its partners' products in TSMC production technology, as well as free customer access to such "verified", or standardised, core IC design data to help them finish designs faster and get their products to market in time.
In September, Mr Yang also announced TSMC would be the first IC foundry in the world to let different designers share the rising costs of testing system chips for 0.25-micron wafers.
This "can considerably reduce design-cycle time and potentially slice development mask and wafer costs for customers by 90 per cent, compared to the cost if they had to order similar tests on their own", Mr Yang said. |
