Sat, Mar 27, 2004 - Page 10 News List

Chip testers and packagers considering China move

By Lisa Wang  /  STAFF REPORTER

Taiwanese chip testers and packagers are feeling increasing pressure to move their operations to China to keep pace with the recent high-tech upturn and locate near their local foundry customers, industry insiders said yesterday.

The exodus will be the latest wave, if approved by the government, after the nation's semiconductor giant Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) began building a less-advanced 8-inch fab in China.

TSMC has one more hurdle to clear before opening its first Chinese plant, but the world's largest made-to-order chipmaker is sticking to its schedule of starting small-volume production during the fourth quarter this year.

"In addition to TSMC, Taiwan's chip-testers and packagers including Advanced Semiconductor Engineering Inc (日月光半導體) are eyeing Chinese semiconductor start-ups," said Wang Buo-li (王博立), a semiconductor analyst at Polaris Securities Group (寶來證券).

"We believe Advanced Semiconductor's buying into NEC Electronics Corp's plant is its first step" into the Chinese market, Wang said.

Advanced Semiconductor, the world's biggest semiconductor chip-tester and packager, signed an agreement with NEC last month. Advanced Semiconductor plans to increase capital expenditures to US$700 million this year, up 65 percent from US$420 million last year.

"They hope to capture the business opportunity in time. The semiconductor sector is expected to enjoy a strong recovery this year before a slowdown in 2005," he added.

The companies have sufficient capital, have already scouted out factory sites and need only the government's approval to go ahead, Wang said.

Semiconductor Manufacturing International Corp (SMIC, 中芯國際集成電路), China's No.1 chipmaker, and Grace Semiconductor Manufacturing Co (宏力半導體) are expected to benefit from China's voracious appetite for consumer electronics such as mobile phones and digital cameras, he added.

Chinese semiconductor demand is expected to accelerate to make up half of the Asia-Pacific region's US$60 billion market this year, market researcher IDC Corp forecast in December. IDC also projected the global semiconductor industry would report healthy growth of 18 percent this year to US$160 billion.

"The time is almost ripe for local chip-testing and packaging service providers to start the exodus," said Gordon Chen (陳文咸), president of Taiwan Semiconductor Industry Association (台灣半導體協會).

Chen, who represents the association's 175 members in discussions with the government, said he was optimistic about further relaxation.

To maintain Taiwan's edge in advanced technologies, the government has restricted the way the nation's semiconductor sector can invest in China.

Patrick Wang (王文宏), a semiconductor analyst at Yuanta Core Pacific Capital Management (元大京華投顧), however, said that he did not see moving to China as a pressing issue for local chip testers and packagers as long as most foundries are still in Taiwan.

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