Companies that package and assemble pieces of silicon into finished computer chips are benefiting from a global trend in the hard-hit technology industry toward farming out work to cut costs, industry experts said yesterday.
"We have seen growth in outsourcing to dedicated packaging and testing companies," said Chris Hsieh (
The traditional model of independent design manufacturers (IDMs) such as Intel Corp who design, manufacture, assemble, package and test their own chips has been replaced by companies specializing in each of these steps.
Taiwan has been the major beneficiary of this trend. The world's largest independent designers of computer chips, Via Technologies Inc (威盛電子) and Mediatek Inc (聯發科技), and the top two manufacturers of made-to-order chips, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) are located here, as are many packaging and testing companies.
In recent weeks, industry watchers have seen tentative signs that the chip industry is finally emerging from a two-year slump.
"The next recovery is likely to be more muted than the last," said Dan Heyler, head of technology research at Merrill Lynch & Co in Hong Kong.
Heyler was speaking at Taiwan's largest semiconductor equipment exhibition, Semicon Taiwan, in Taipei yesterday. Rebounds of over 30 percent year-on-year are no longer possible, he said, predicting growth of around 10 percent in the semiconductor industry this year, rising to 18 percent into next year.
Exhibitors at the conference agreed.
"We are seeing signs of an upturn in the third quarter this year going into the fourth quarter and beyond," said Bruce Freyman, an executive vice president at US-based Amkor Technology Inc, which operates a packaging, test and assembly plant in Longtan, Taoyuan County.
"We see 18 to 20 percent growth next year, but we will outpace that by 4 or 5 percent because of the increasing trend towards outsourcing," he said.
Amkor has invested between US$40 million and US$50 million in Taiwan in the last two years and employs 1,500 people at its Longtan site. The investment has paid off, netting the company US$125 million in revenues last year, almost double its performance in the previous year.
"The IDMs simply cannot keep up with the new packaging technologies," Freyman said.
There's plenty of work for everyone, Freyman added. Statistics from Amkor and research firm Prismark Partners show that the global outsourcing market for packaging and testing will almost double from US$5.7 billion last year to US$10.5 billion in 2005.
Foreign equipment makers are doing well out of Taiwan's semiconductor success story.
"Forty-one percent of our sales revenue is from Taiwan," said Kurt Lackenbucher, executive vice president of European equipment maker SEZ AG.
"By year end 100 systems will have been shipped to Taiwan," he said.
"The IDMs in Europe such as Infineon Technologies AG are not willing to ramp up in Europe," Lackenbucher said. "This is definitely driving business to Taiwan and other areas in Asia."
SEZ's order books for the third and fourth quarters are looking much healthier as local chipmakers invest in new machines for their most advanced 12-inch plants.
Taiwan's success at cutting costs for others while maintaining quality has led to its success in the chip industry, and equipment makers have to offer machines that help the Taiwanese improve efficiency even further, another expert said.
RSS