Fri, Dec 31, 1999 page6

• Local tech firms ready for the bug

  PREPARATION The nation's high-tech firms say they are confident they'll survive the Y2K bug, but the reliability of the electricity supply remains a concern

  • By Simon Burns and Stuart Young / STAFF REPORTERS
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  Having learned the bitter lessons of September's earthquake and after two years of planning, leaders of Taiwan's major high-tech companies say they have nothing to fear from any potential Y2K computer malfunctions.

  "TSMC is the gold standard for Y2K," said Quincy Lin (腿坤狶), vice president of Taiwan Semiconductor.

  TSMC (掌鴨掎) is the world's biggest chip foundry and manufactures chips to order for the major global computer companies. Production lines at the Taiwanese firm and other chip manufacturers were badly hit by power failures caused by the 921 earthquake, which devastated Nantou County in central Taiwan.

  

  Following the disaster, computer conglomerates -- including PC giants Dell and Hewlett Packard -- said revenues and share prices were affected by a shortfall in production by Taiwanese chip manufacturers, who supply more than half of the world's silicon chips.

  Ironically, the high-tech industry's highly advanced business processes -- such as just-in-time delivery and single sourcing -- have made it particularly vulnerable to possible shortages and disruptions caused by the Y2K bug.

  The government's Directorate General of Budget, Accounting and Statistics (主計處) reported in March that just 9 percent of Taiwan's 80,000 plus manufacturers were prepared for Y2K. However, industry reports indicate that the high-tech sector is more prepared than other industries.

  "All of the big high-tech companies got the hint after the quake. They've all got contingency plans, although the process took time to develop," said Hander Chang, vice president of DRAM producer Winbond (粟盈).

  Chang added that Winbond has a comprehensive contingency plan in place to ensure a steady supply of raw materials and products.

  "We have emergency power ready to supply up to 80 percent of normal demand and also have ample stockpiles of raw materials such as gases, silicon and gold. And we've made sure that all of our installations and our critical suppliers are Y2K compliant," Chang said.

  The government has offered tax breaks of up to 20 percent and other financial incentives to companies, coupled with mandatory inspections to ensure Y2K compliance.

  Winbond has spent NT$0.6 billion (US$20 million) preparing for Y2K, the company's Y2K project manager Lee Yuan-fang said. All computerized equipment with the exception of non-automated, stand-alone antiquated models have been ratified Y2K compliant, he said.

  The firm also has prepared bank accounts with several different banks in the event of malfunctions in financial systems, Lee added.

  While Taiwan's larger high-tech firms seem ready to ride out a possible Y2K storm, observers and officials say smaller firms are less prepared.

  An official at the Institute for Information Industry (資策會) said many smaller firms have signed Y2K compliance declarations but have taken no action.

  Taiwan's Y2K compliance procedures are also believed to be less rigorous than those in force in Europe or the US.

  Another area of concern is Taiwan Power Co's (掌掎) electricity supply to Hsinchu Science Park -- Taiwan's Silicon Valley and home to firms such as TSMC and Winbond. TaiPower supplies the industrial zone with up to 70 percent of its electricity.

  TaiPower deputy director Charlie Xu said Monday he could not guarantee there would be no Y2K failures in the national power production system.

  This year has seen three major power cuts due to a power station explosion in May, a distribution grid failure in July and the September quake. The May 29 fire and explosion at Long Shan substation cost manufacturers an estimated NT$300 million (US$10 million).

  The high-tech industrial zone also suffered through more than a thousand minor power outages during the past year and manufacturers also complain of poor quality supply, as even relatively minor variations in voltage can seriously affect production.

  The September quake and TaiPower's lapses have prompted local firms to begin construction of the zone's second gas-fired co-generation power plant, due to be completed in 2001.

  Industry analysts expect Y2K to have already affected sales and revenues for high-tech firms. As computerized organizations in Taiwan and across the world replace old equipment rather than try to cure Y2K problems, a global rise in demand and prices was expected at the end of this year, with an accompanying slump in demand early next year.

  Another major worry for Taiwan's high-tech sector is the fate of China, where hundreds of manufacturers have invested in factories in recent years. An official of China's Y2K department said recently that power failures were expected despite official statements to the contrary.

  "It's possible, but they will be very limited," he said.
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