CSMC plans US$1bn China plant as demand grows

CSMC Technologies Corp (華潤上華科技), a supplier of made-to-order chips to China in which Singapore-based Chartered Semiconductor Manufacturing Ltd (特許半導體) has an 11-percent stake, plans to build a US$1 billion factory in eastern China to meet rising demand.

The plant, planned for 2007, will make standard 8-inch chip wafers, adding to the company's three less-advanced, 6-inch wafer manufacturing lines in Wuxi, west of Shanghai, Chief Financial Officer Frank Lai said. This year, CSMC will double capacity on those lines to 55,000 wafers a month.

The news comes as Taiwanese rivals, leaders in the so-called foundry business, run factories at capacity amid a global recovery in chip demand after a near three-year slump. China's foundry capacity will jump 75 percent to the equivalent of 2 million 8-inch wafers this year, Gartner Inc. has forecasted. That will account for 12 percent of the world's total, compared with 4.6 percent in 2002, the company said.

CSMC's customers include Japan's Fujitsu Ltd and China's Hangzhou Silan Microelectronics Co (杭州士蘭微電子).

United Microelectronics Corp (UMC, 聯電) and Taiwan Semiconductor Manufacturing Co (台積電), the world's top two suppliers of made-to-order chips, said they were running at capacity. UMC said yesterday it plans to triple spending on expansion this year to US$2.1 billion.

Founded in 1997 by Peter Chen, the former chief executive of Taiwanese chipmaker Mosel Vitelic Inc (茂矽), CSMC said it was China's first "pure open foundry" to make customized chips. It attracted investors including China Resources Logic Ltd, a unit of China's trade ministry, 3i Group Plc and Mark Mobius's Templeton Asset Management Ltd.

CSMC focuses on making silicon wafers six inches in diameter, two generations behind the most advanced equipment used today to produce 12-inch wafers. Chinese companies, which enjoy lower wage and land costs, can sell the chips at cheaper prices.

Last year, CSMC bought a 6-inch wafer production line from Agere Systems Inc, a spin-off from Lucent Technologies Inc, and one from Chartered Semiconductor.