Wed, Apr 23, 2003 page10

• UMC plans to invest in chipmaker

  • By Bill Heaney / STAFF REPORTER
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  The world's second-largest manufacturer of made-to-order computer chips, United Microelectronics Corp (UMC, 聯電), plans to invest in local chipmaker Princeton Technology Corp (普誠科技) to strengthen its hand in multimedia chipmaking.

  The move may be part of UMC's plan to partner with rising stars in the chip industry, analysts said yesterday.

  "Most of UMC's customers specialize in the multimedia market, and UMC is looking to invest in companies with growth potential in this field," said Alfred Ying (應宗傑), an analyst at BNP Paribas in Taipei. "Princeton is a consumer integrated-circuit design house that specializes in the multimedia market."

  Ending days of speculation, an official at Princeton confirmed the investment plan, but said that the details had yet to be hammered out by board members at both companies.

  "UMC already decided to invest in our company, but the [dollar] amount has not been decided yet and won't be until our board of directors meets on June 6 to discuss the issue," spokesperson Terry Tsai (蔡昇龍) said.

  Chinese-language media speculated yesterday that UMC's CEO and vice chairman John Hsuan (宣明智) might be elected to Princeton's board in June.

  An integrated circuit is a silicon chip, or microchip, on which millions of tiny resistors, capacitors and transistors are etched. ICs appear in products as varied as computers, mobile phones and answer machines. Multimedia ICs are used in DVD players and stereo systems to create 3D surround sound and clear, crisp video.

  Back in January, UMC chairman Robert Tsao (曹興誠) told investors he planned to invest in strategic companies that had the potential to grow faster than the rest of the industry. The reason for the change in policy is that the current business model of making chips for large customers is failing, he said. Tsao's opening move in the new business strategy was to take control of rival Silicon Integrated System Corp (矽統).

  "Overall UMC's strategy is to invest in IC design houses in Taiwan and overseas to secure orders," said James Huang, (黃建銘), an analyst at SinoPac Securities Corp (建華證券). Huang warned, however, that there may be a conflict of interest for UMC between independent customers and customers in which UMC invests.

  "UMC's priority may be to manufacture for the larger customers during times of tight capacity, which may conflict with the smaller companies it has invested in."

  Rumor-laden Chinese-language media reported in January that the wife of the former president of Princeton, Chen Chuan-shu (陳傳書), accused him of keeping two sets of books at Princeton which led to a Bureau of Investigation visit in March to look into "improper accounting practices." Investors bailed out of the stock as a result of the investigation, which may have made the company's stock an attractive bargain for UMC, Huang said yesterday.

  UMC remained tight-lipped about the possible investment yesterday.

  "I cannot confirm [the plan] at the moment," said UMC spokesperson Alex Hinnawi. "At this point it is just speculation."

  UMC shares fell NT$0.6, or 2.8 percent, on the TAIEX yesterday to close at NT$21.1. Princeton's stock fell NT$2, or 3.5 percent, to close at NT$55.5 on the over-the-counter market in Taipei.
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