Chipmaker UMC set to build third wafer facility

United Microelectronics Corp (UMC, 聯電), the world's second-largest contract chipmaker, yesterday said it plans to spend US$5 billion to build a third cost-saving 12-inch wafer facility to cope with future demand.

The new plant will have maximum output of 50,000 wafers a month, UMC said in a statement. The chipmaker said it is scheduled to move in equipment in the first quarter of next year but did not set a timetable for mass production.

"UMC remains strongly committed to continuing its growth and development in Taiwan," UMC chairman Jackson Hu (胡國強) said.

UMC operates a 12-inch factory in Tainan's Science Park and another in Singapore. The company also has six 8-inch plants and one 6-inch factory in Taiwan.

UMC said it planned to invest U$1 billion in new equipment and facilities this year.

Bigger rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) now operates two 12-inch plants and seven 8-inch plants, including one in Shanghai.

"UMC absolutely has to expand its capacity in order to create a greater economy of scale and generate more profits," said Eric Chen (陳慧明), a semiconductor analyst with BNP Paribas Securities in Taipei.

UMC's decision was a sensible one, Chen said, as the new production line will be ready to meet growing demand next year.

Chen said next year would be better for semiconductor companies as demand for new-generation electronics such as third-generation (3G) handsets and Vista-enabled computers goes up.

UMC is set to have completed by March the construction of a research and development center for advanced nanometer processing technologies in the Southern Taiwan Science Park, it said yesterday.

Shares of UMC dropped 1.5 percent to NT$19.7 yesterday, while TSMC shares dropped 1.64 percent to NT$65.8.