TSMC says it will raise investment

Rising demand for chipmaking services have prompted Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to increase spending on new equipment by US$1 billion this year, to a total of US$2.6 billion (NT$90 billion), company chairman Morris Chang (張忠謀) said yesterday.

Analysts said TSMC's announcement is another sign the chip industry is on the mend after suffering its worst year ever last year. The company had originally planned to invest only US$1.6 billion (NT$56 billion) this year, after spending around US$2.2 billion (NT$77 billion) on new equipment last year.

Since last November, demand for chips made at higher technology process levels, 0.18 microns and smaller, have seen strong demand. Analysts estimate TSMC and rival United Microelectronics Corp (UMC, 聯電) are producing as many chips as they can at that level right now. The only way to take on more customers is by adding new production lines able to produce chips etched at 0.18 microns and below, they said. Chips made at these levels command higher prices.

"Taiwan's contract chipmakers are positioning themselves for next year's growth. The general consensus is next year will be a growth year ... up to 25 percent to 30 percent," said John Leong, a chip industry analyst at Deutsche Bank in Taipei.

He also said the government will likely make chip investment in China contingent upon investment in Taiwan for local chipmakers.

TSMC officials said the NT$90 billion investment is part of a multi-year spending plan mapped out late last year worth a total of NT$700 billion. At that time, the company said it would build six new state-of-the-art 12-inch semiconductor wafer fabrication plants over the next several years, five in the southern city of Tainan and one in Hsinchu.

The company already has one 12-inch fab up and running in Hsinchu. If all goes as planned, Taiwan could end up home to seven TSMC-owned 12-inch wafer fabs in all.

A public relations manager at TSMC, Tzeng Jinnhaw (曾晉皓), said the company will move equipment into its second 12-inch plant, which is currently under construction in Tainan, this summer and commence production in the fourth quarter.

He also said that the NT$700 billion forecast "is just an estimate and not necessarily a very accurate one."

Over the past month, Taiwan's semiconductor industry has been at the heart of a heated political debate over fears that as companies move to China, local industries will be hollowed out.

Some chipmakers want to sell some of their old equipment used for etching chips at 0.25 microns on eight-inch silicon wafers to upstart Chinese companies.

TSMC shares roseNT$2.5 yesterday, or 2.7 percent, to NT$95.