Wall Stree Journal Article from the Asia Section
TAIPEI, Taiwan -- Chip maker Mosel Vitelic Inc. said Monday that it was considering making a US$1 billion investment in a North American chip plant, possibly within two years,
illustrating how Taiwan companies are pouring funds into expanded capacity as the volatile semiconductor industry recovers this year.
In the past several weeks, Taiwan's industry leaders, Taiwan Semiconductor Manufacturing Co., a 27%-owned affiliate of Dutch electronics company Philips Electronics NV, and United
Microelectronics Corp., have said they'll increase their investments in 1999 to take advantage of industry growth. And smaller island chip makers that piled into the industry since the mid-1990s plan new investments, too, despite large losses last year. Among them, Nanya
Technology Corp., the chip unit of Taiwan's big Formosa Plastics Group, said Monday that it raised five billion New Taiwan dollars (US$151.1 million) this month in a stock sale to help finance expansion.
Besides Nanya, companies such as Mosel, Winbond Electronics Corp. and others have raised, or are planning to raise, a total of more than US$1 billion through stock sales this year, executives say. Mosel, which says it may not settle on an overseas site or a specific investment amount until next year, also said that it plans to try to raise about US$150 million in the next
few months through an overseas stock sale.
'Outsourcing Is Increasing'
"One of Taiwan's strengths right now is companies' ability to raise money at home and overseas, and they are taking advantage of that to raise their global market share," says Matt Cleary, a technology industry analyst at ABN Amro in Taipei. "More broadly, the rise of the Taiwanese in the global industry is part of a trend in which outsourcing is increasing," he added.
Taiwan stock investors are persuaded the industry's a winner. Gains by chip makers have led a rally at the Taiwan Stock Exchange this year. The exchange's weighted price index rose 0.7%, or 49.85 points, on Monday to a three-and-a-half month high of 7043.23. The index is up about 10% so far this year, one of the best performances in Asia.
Taiwan has come from out of nowhere in the past few years to become the world's fourth-largest semiconductor maker by focusing on contract production and relying heavily on
licensing of foreign technology. That's different from the approach followed by the industry's multinational heavyweights like Intel Corp., which developed their own technology and mostly made their own chips. That model is changing as profit pressure forces multinational
companies to concentrate where they can make the best returns. They're increasingly turning over production to contract manufacturers, such as Taiwan's, and focusing their efforts where
they can make the most profits, such as design.
Prices Have Recovered
Even though contract orders to Taiwan makers picked up last year, low prices amid a global chip glut led to huge losses at local specialized chipmakers, which as a group lost more than NT$20 billion. Nevertheless, they are anteing up with new investments this year because prices have recovered, and they expect continued growth in outsourcing by overseas companies, especially from Japan. The Semiconductor Industry Association, a U.S. industry
group, forecasts the industry's global sales this year will increase 9% to US$133 billion, after declining 11% in 1998.
"The industry is recovering, prices are better, and larger international companies will slow investments in their own plants," says Connor Liu, an analyst at Jardine Fleming Taiwan Securities. "All of that benefits for Taiwan and is stimulating new investment," he said.
Rather than build new plants, chip makers here are using most of their money this year to buy equipment for existing ones, in order to take advantage of new technology that allows manufacturers to squeeze more chips out of a single silicon wafer. "It's necessary to upgrade our technology or we can't be competitive," says Jesse Chou, a spokesman at memory-chip maker Vanguard International Semiconductor Corp. The board of directors at the company, which lost NT$4.9 billion last year, on Friday approved plans to raise NT$3.6 billion in a local stock sale. Worldwide Semiconductor Manufacturing Corp., a contract manufacturer, is trying
to raise NT$7.5 billion this month to purchase equipment.
Macronix International Co. said Friday that it would raise capital spending by US$20 million to about US$420 million this year and increase the number of eight-inch wafers it processes.
Powerchip Semiconductor Corp., an affiliate of Japan's Mitsubishi Group, said this month that it plans to raise US$200 million in an overseas stock sale this year, partly to add
production lines or build a new facility. |
