UMC sells stake in venture

Hitachi Ltd, the Japanese electronics giant, plans to buy out United Microelectronics Corp's (UMC, 聯電) stake in a joint venture state-of-the-art 12-inch chip-making plant in Japan due to the chip downturn and disagreements over the management of the plant.

Hitachi, which footed 60 percent of the original cost of the joint venture plant, will purchase the remaining 40 percent from UMC for ?10.7 billion (US$80.3 million). It will take full control of the plant by the end of April.

The plant, dubbed Trecenti Technologies Inc, is the only 12-inch chip-making plant in Japan and one of the first completed worldwide.

Hitachi and UMC were able to keep costs down on the jointly developed plant by opening it in an existing factory owned by Hitachi and leasing the expensive 12-inch wafer equipment instead of buying.

A joint statement by the two companies said the downturn in chip demand prompted them to place more resources into 12-inch chipmaking projects. "Our resources are strained" in terms of R&D resources and engineers, but not capital, said Alex Hinnawi, director of communications at UMC.

UMC operates one other 12-inch chip-making plant in the southern city of Tainan and has already finalized agreements for two more joint venture plants in Singapore, one with the US-based Advanced Micro Devices Inc (AMD) and another with Europe's No. 2 semiconductor maker Infineon Technologies AG and the Singapore Economic Development Board, Hinawwi said.

A joint research project with International Business Machines Corp (IBM) has also kept UMC's chip engineers busy, he said. UMC employees posted at the Trecenti plant will return to UMC's Taiwan operations. Analysts said selling the stake to Hitachi would be a boon for UMC.

"UMC can increase its cash position because Hitachi has to buy back its stake in Trecenti and I think after this event, UMC can concentrate on its joint venture with Infineon and AMD," said Milton Huang, chip industry analyst at National Securities Corp (建弘證券) in Taipei.

Last year, UMC sank NT$1.63 (US$46 million) into Trecenti as part of its ongoing research expenditure to develop the 12-inch chipmaking process. Trecenti was not expected to turn a profit until manufacturing kinks are ironed out, possibly years. Once perfected, 12-inch chip plants will enable companies to cut manufacturing costs by nearly a third compared with today's 8-inch chipmaking plants.

Robert Tsao (曹興誠), UMC's chairman, was quoted as saying earlier this month that Hitachi had impeded UMC's attempts to use its half of the plant to do business with other Japanese firms. Under the original agreement, each firm was entitled to 50 percent of the production capacity of the plant.

As a foundry chipmaker, UMC manufactures microchips designed by customers like AMD, Xilinx, and depends on orders from these clients to recoup the large investment needed to build a chipmaking plant.