Taiwan's semiconductor industry is on track to produce more chips than their South Korean rivals this year, making the nation the world's third-largest producer after the US and Japan, a local newspaper reported yesterday.
Taiwan's total semiconductor production is expected to exceed US$1 trillion this year, pushing South Korea into fourth place. In addition, Taiwan is expected to produce 20 percent of the world's computer chips by 2002, the paper said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Co (UMC, 聯電), which make semiconductors to order for the world's biggest computer vendors, are considered the driving force behind Taiwan's ascension to third place.
Both companies have been rapidly expanding domestic production, TSMC spokesman JH Tzeng (
"Our capacity this year will be equivalent to 3.4 to 3.5 million eight-inch wafers, compared to 1.9 million last year," Tzeng said. In addition, he said, with UMC's 240 million chip capacity, Taiwan will be home to the world's largest contract foundries, which churn out 70 to 80 percent of the world's semiconductors that are manufactured on a contract basis.
Despite recent acquisitions and alliances, Taiwan's two foundry giants will likely be building more capacity rather than looking to buyouts to meet excess demand, company officials said.
"We have no plans buy out any more local chipmakers," Tzeng said.
UMC, the world's second-biggest contract foundry, halted plans to expand locally in the wake of TSMC's World Semiconductor Manufacturing Co (WSMC) deal, a UMC official said.
"We won't be buying any domestic fabs after what happened to WSMC," the offical said. "Major WSMC shareholders ramped up the price before it came to negotiating the share swap deal with TSMC ... we don't want the same thing happening to us."
China Development Industrial Bank, (
TSMC agreed in December to raise its 30 percent stake of Acer Group's (
UMC announced on Wednesday it will work with IBM and German firm Infineon Technologies to develop 0.13 micron chips by the end of this year aimed at a growing market share in low-cost devices for connecting to the Internet.
TSMC companies have earmarked US$4.7 billion for capital expenditure this year, close to US rival Intel's planned US$5.2 billion costs, while UMC may increase its planned US$2.2 billion capital expenditure budget for 2000.
Taiwan's biggest overseas competitor in the foundry market was Singapore's Chartered Semiconductor Co, which this year will have a capacity of over 100 million eight-inch wafers, the UMC official added.
UMC raised its eight-inch wafer prices by 10 percent last week and TSMC is also expected to increase its prices in the second quarter.
The price rises would not shrink demand from computer giants such as Dell, Compaq and IBN, Indosuez WI Carr Securities electronics analyst George Chang (
"It won't affect demand but will have a major effect on the revenue of downstream players. Even last year they were getting increasingly squeezed by higher raw materials prices," he said.
"The shares of raw materials suppliers are now outperforming by far downstream computer sellers," he added.
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