Despite rising optimism in some parts of Taiwan's semiconductor industry, analysts said yesterday that local firms might not see an upswing until as late as next year.
The semiconductor industry worldwide has always been cursed by its high profit potential, whereby companies chase dollars and try to outshine each others' building projects.
They create their own downturns by building too many chip manufacturing plants when times are good, until over-production causes inventory gluts. In classic semiconductor industry downturns, it takes up to two years for demand to catch up with supply.
According to Gartner/Dataquest semiconductor analyst Ben Lee, the current industry downturn has only just begun, and signs the bad times might let up are a year away.
"The current over-capacity started at the end of 2000," he said, and may continue through 2002.
Taiwan's top semiconductor producers, Taiwan Semiconductor Manufacturing Co (
UMC officials refused to speculate on when the current situation might improve at an investors' conference last month, saying that visibility is not good enough to do so.
When the last semiconductor industry cycle bottomed out at the end of 1997, chip manufacturers were producing only 70 percent of the semiconductors they had the capacity to make -- similar to the situation for Taiwan's top producers today. Lee believes this utilization rate will "go even lower" before things pick up again.
A number of electronics and communication device manufacturers worldwide are still trying to use up semiconductors bought at the end of last year -- and show little appetite for new shipments.
UMC's Communications Director Alex Hinnawi said the biggest difference between the current downturn and the last one is that in 1997 semiconductor manufacturers were completely dependant on sales of chips made for personal computers. A full 65 percent of all semiconductor production at the time went to computers.
Now, production is more or less evenly spread between chips for computers, electronics and communications devices -- so a swing in demand for any of these products should bring the industry some relief.
To help ease the current chip glut, and stop the building of unwanted plant capacity, Taiwan firms have already cut back drastically on new building projects.
Semiconductor firms operating out of the Hsinchu Science-based Industrial Park (新竹科學園區) cut plans to build new manufacturing facilities by 50 percent, and reduced purchases of semiconductor equipment and materials to zero for the first two quarters of the year.
UMC alone opted out of a number of building projects, revising planned spending on new plants and equipment from US$2.9 billion down to US$1.5 billion in order to help weather the current downturn. They chose to keep all projects focused on improving technology and streamlining manufacturing.
"We are not expanding any 8-inch wafer capacity ... we don't see the demand being strong enough. However, we have a lot of 12-inch projects on the way and those will continue, so most of our spending is on the more advanced technology, 0.13 micron and also copper-related equipment," Hinnawi said.
UMC also expects to win more business from Japanese companies when the industry revitalizes. Japanese firms have been more conservative about building new plants -- companies there slashed their building plans by 27 percent from a year ago.
The recent earthquake in Japan also brought the possibility of good news to UMC. Japan's NEC Corp announced yesterday it would shut a Hiroshima chip plant for 10 days in order to clean and make repairs. Analysts say UMC could win chip orders from NEC during the time its plant is closed.
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Huawei Technologies Co’s (華為) latest smartphones carry a version of the advanced made-in-China processor it revealed last year, results from an independent analysis showed. This underscored the Chinese company’s ability to sustain production of the controversial chip. The Pura 70 series unveiled last week sports the Kirin 9010 processor, research firm TechInsights found during a teardown of the device. This is a newer version of the Kirin 9000s, made by Semiconductor Manufacturing International Corp (SMIC, 中芯) for the Mate 60 Pro, which had alarmed officials in Washington who thought a 7-nanometer chip was beyond China’s capabilities. Huawei has enjoyed a resurgence since
purpose: Tesla’s CEO sought to meet senior Chinese officials to discuss the rollout of its ‘full self-driving’ software in China and approval to transfer data they had collected Tesla Inc CEO Elon Musk arrived in Beijing yesterday on an unannounced visit, where he is expected to meet senior officials to discuss the rollout of "full self-driving" (FSD) software and permission to transfer data overseas, according to a person with knowledge of the matter. Chinese state media reported that he met Premier Li Qiang (李強) in Beijing, during which Li told Musk that Tesla's development in China could be regarded as a successful example of US-China economic and trade cooperation. Musk confirmed his meeting with the premier yesterday with a post on social media platform X. "Honored to meet with Premier Li