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Poor IP record inhibits development

If Taiwan wants to develop a semiconductor equipment manufacturing industry, it needs to clean up its record on intellectual property (IP), international equipment makers said yesterday.

"We are very much concerned about IP protection in Taiwan," Werner Rust, an executive vice president at the California-based equipment manufacturer Genus Inc, said during the second day of Semicon Taiwan 2003.

Semicon Taiwan is the nation's largest exhibition of computer chip-making equipment. The three-day event, finishing today at the Taipei World Trade Center Exhibition Hall, is not open to the public.

"The machine components by themselves are not unique, but how you put them together is. I don't see a reason not to do some stand-alone component outsourcing in Taiwan, but we will continue to assemble the machines in the [San Francisco] Bay area," Rust said.

The comments come after Vice Premier Lin Hsin-yi (林信義) spoke at the Monday opening of Semicon Taiwan and encouraged Taiwanese manufacturers to do more to supply the US$3.5 billion local market for equipment and materials.

Taiwan's world-leading made-to-order chip-making industry relies on imports for 90 percent of its equipment and materials each year, Lin said.

A prolonged slump in the computer chip industry has forced many equipment makers to downsize, as chip makers delay buying new machines.

Closing expensive and bulky manufacturing departments has allowed equipment makers to cut costs and concentrate on new technology.

"Equipment manufacturing is simply too expensive in Silicon Valley," said Kenneth Leung, president of Asia-Pacific operations at automation experts Asyst Technologies Inc.

"But one thing high on the list of considerations for the outsourcing of manufacturing is IP. If we outsource the manufacturing of our equipment, we only have our technology left," he said.

Taiwan is not winning the outsourcing orders as its IP environment is not ideal. "Taiwan through Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has told the world that they can be trustworthy, but this has to permeate the whole industry," Leung said.

Last year, Leung farmed out the manufacture of Asyst's equipment to Solectron Corp in Singapore.

Another manufacturer is equally wary of outsourcing equipment manufacture in Taiwan: "We make our equipment predominantly in Europe," said Kurt Lackenbucher, executive vice president of Austria-based SEZ AG, which expects 41 percent of its sales this year to go to chipmakers in Taiwan.

"IP is a major concern. You need to find the right partners," he said. "We may outsource to Taiwan in the future, but not yet."

Analysts are predicting a sustained rebound in the US$16 billion semiconductor equipment market this quarter, after growth in the third quarter last year failed to carry through into this year.

US-based research firm Gartner Inc reported at the beginning of the month that chip makers spent 30 percent less on equipment last year than they did in 2001. This year, Gartner predicts growth of 11 percent by year end, most of it concentrated in the second half of the year.

The industry representatives are all taking part in the eighth annual Semicon Taiwan. There are 589 exhibitors at the show, up from 507 last year, according to the organizer, Semiconductor Equipment and Materials International (SEMI).
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