The world's second-largest contract chipmaker, United Microelectronics Corp (UMC, 聯電), is seeking management control of a chip plant it launched two years ago in Japan with partner Hitachi Ltd, the EE Times, a US-based engineering journal, reported yesterday.
The move is being made in an effort to provide UMC customers with better access to its services, the report said.
Citing UMC chairman Robert Tsao, the report said UMC will drop out of the joint venture if an agreement cannot be reached.
Hitachi, the electronics giant, has not allowed Japanese rival firms access to the state-of-the-art 12-inch chip making facility, stymieing UMC's ability to make money on its contract chip making services. UMC manufactures chips for customers on a contract basis. The company currently counts Advanced Micro Devices, Xilinx and Nvidia among its customers.
"We think that if we have a majority share and can control the [plant], it will be easier to do business with others. So we proposed that. If we cannot get control, it will make it more difficult to do foundry work for others. Either we take over or we sell the shares back," the EE Times quoted Tsao as saying. Hitachi put up 60 percent of the original plant investment, versus 40 percent by UMC.
The joint venture plant, dubbed Trecenti, cost UMC NT$1.63 billion (US$46 million) in losses last year, though much of this was expected. Twelve-inch chip making technology is new, and companies investing the technology need time to fully work out production processes before the plants will turn a profit.
Although Hitachi offered to provide more cash for the plant investment, UMC is supposed to have rights to half of the production lines under the original agreement. Apparently, UMC is unable to sign on customers Hitachi views as rivals.
The new chip making plants can produce microchips at 30 percent cheaper than current, 8-inch chip making technology, making it an attractive choice for customers.
Many companies are partnering on 12-inch plants instead of building on their own due to the excessive cost of a single plant.
The older technology chip making plants cost only US$1 billion to US$1.5 billion, around half the cost of a 12-inch plant. The recent joint venture announcement by UMC and AMD is one example.
Under the original agreement, Hitachi was to cede management control of the joint venture plant to UMC, but changes in management at Hitachi have cast doubts on whether this will happen, the EE Times reported.
The Hitachi-UMC joint venture helped propel both firms to the leading edge of chip manufacturing technology.
UMC operates one other 12-inch chip making plant in the southern Taiwan city of Tainan and has already finalized agreements for two more 12-inch plants in Singapore, one with AMD and another with Infineon Technologies AG and the Singapore Economic Development Board.
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