Thu, Jan 19, 2006 - Page 10 News List

Powerchip to buy idle Macronix plant

SEMICONDUCTORS The firm will double capital spending to outfit the plant in a deal it said will enable it to expand capacity quickly amid strong demand for memory chips


Powerchip Semiconductor Corp (力晶半導體), Taiwan's biggest maker of memory chips for computers, yesterday said it plans to buy a vacant chip plant from a local chipmaker for NT$5.3 billion (US$165 million), mostly in cash, to rapidly boost production amid growing demand.

The announcement came amid tight supply of memory chips, which market researcher DRAMeXchange attributed to brisk computer demand in emerging markets during the traditionally slow first quarter, as well as reduced supply from the world's top memory chipmaker Samsung Electronics Co.

"The purchase will solve the urgent need for capacity expansion. We are facing mounting pressure to meet [customer] demand," Powerchip president Brian Hsieh (謝再居) told reporters during a press conference to announce the deal.

The new plant, purchased from Taiwanese flash memory chipmaker Macronix International Co (旺宏電子), will be able to make a maximum of 35,000 chips a month using advanced process technology on 300-millimeter wafers, Hsieh said.

Powerchip also signed a memorandum of understanding with Macronix to buy a clean room and a vacant building, as well as other related equipment. Powerchip will supply chips to Macronix under the deal.

Macronix chairman Miin Wu (吳敏求) said the deal would help the company expand production in a less costly way.

"It's a win-win situation," Wu said.

To complete the Macronix plant, Powerchip will more than double capital expending for this year to more than NT$60 billion from NT$30 billion estimated previously. Last year, Powerchip spent roughly NT$50 billion on new equipment.

Powerchip, which operates an 8-inch and two 12-inch factories in Taiwan, had planned to build a third advanced plant in central Taiwan by the end of last year, but it postponed this to March because of a land acquisition problem.

The company told investors last year that it aimed to build six cost-efficient 12-inch facilities within five years.

"It is time-saving for Powerchip to buy a factory instead of taking more than one year to build a new one. Now the company will only need at the least three months to move in equipment," said Wang Wanli (王萬里), who tracks the memory chip industry for Credit Suisse First Boston in Taipei.

"Besides, the offer is quite reasonable," said Wang, who rates Powerchip shares as "outperform" with a 12-month target price at NT$24.

Powerchip shares fell 2.35 percent to NT$20.2 yesterday on the nation's over-the-counter Gretai Securities Market, in line with a similar decline on the benchmark TAIEX.

Powerchip, the first local computer memory chipmaker to enter the flash memory chip market, plans to manufacture higher-margin flash memory chips for customers at the plant purchased from Macronix, Hsieh said.

Flash memory chips are used in a wide range of consumer electronics gadgets, including Apple Computer Inc's popular digital music player i-Pod series, as well as mobile phones and digital cameras.

Powerchip currently makes around 5,000 chips per month with a storage capacity of 1 gigabit for Japanese technological partner Renesas Technology Corp.

It initiated pilot runs for the high-capacity chips late last year.

The company hopes to boost flash memory chip output to account for 10 percent of its total production by the end of this year, from less than 5 percent of output currently.

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