Wed, Aug 09, 2000 page17

• Outlook for chips strong, US firm says

  SEMICONDUCTORS Reports of the chip industry's demise are greatly exaggerated, according to equipment maker Rockwell

  • By Dan Nystedt / STAFF REPORTER
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  Reports that tough times lay ahead for the semiconductor industry are wrong, say executives at one of the world's largest supplier of chip manufacturing equipment.

  And that's good news to companies in Taiwan, as the nation's semiconductor manufacturers are increasing equipment purchases faster than any other nation in Asia.

  A growing number of investment analysts have cautioned that the semiconductor industry's current growth cycle has hit its peak, as too many companies are building manufacturing facilities or adding capacity at a rate faster than growth in demand.

  But executives from US-based Rockwell International Corp disagree. "We think there is significant growth potential for the industry," said Timothy Garland, semiconductor and technology manager at Rockwell Automation, a maker of factory automation equipment. "A number of companies have continued making significant investments" in semiconductor manufacturing equipment.

  Worldwide spending on new semiconductor plant equipment is projected to hit US$60 billion this year, helped by demand for by mobile phones and consumer electronics sales, according to Strategic Marketing Associates, a market research firm.

  According to Gregory Geiger, Asia-Pacific president of Rockwell, although Asia accounted for only 6 percent of his company's worldwide sales, the order rate from the region hit 20 percent in the most recent quarter.

  He said that Taiwan leads the pack with the most equipment purchases, followed by South Korea.

  While much of that plant equipment is going to wafer fabs such as Taiwan Semiconductor Manufacturing Corp (TSMC, 台積電) and United Microelectronics (UMC, 聯電), a portion is also being sold to producers of liquid crystal displays (LCD), which are used in computers and mobile phones.

  According to Andrew Teng (鄧安瀾), semiconductor analyst at Taiwan International Securities Corp (金鼎綜), that Taiwan leads Asia in manufacturing equipment purchases should come as no surprise.

  He said some of the nation's biggest players -- including TSMC, UMC and Winbond (華邦電子) -- are currently trying to build capacity for 12-inch wafers.

  According to Teng, worldwide semiconductor sales have continued to increase, beating expectations each quarter. In the past month, VIA Technologies (威盛) and UMC both reported July sales increased more than fourfold over the same time last year to NT$2.79 billion (US$90 million) and NT$9.33 billion (US$300 million), respectively.

  Production increases to keep up with such demand have kept TSMC's foundries in overdrive, spinning out a projected 41 percent more ice-wafers than last year. The company expects to make 3.4 million ice-wafers this year compared to 2.4 million last year.

  Increased orders are also coming from LCD manufacturers, which use similar plant equipment as semiconductor makers for the first phase of a three-stage production process.

  Technology transfers and agreements between Taiwanese and Japanese companies have increased exponentially over the past few years in the area of LCD displays.

  According to EnTrust Securities (永昌綜合證券) LCD industry analyst Tim Chen (陳建光), the production value of locally made LCD displays is expected to grow by more than 400 percent this year.

  The huge increase in LCD production, he said, can be attributed directly to Japanese outsourcing.

  "The Japanese began outsourcing LCD production to Taiwan about five years ago due to intense competition from the Koreans, who were able to make the same quality products as the Japanese for a fraction of the price," Chen said.

  To regain a piece of the lucrative LCD market, Japanese companies have licensed technology for low-end LCD displays to Taiwanese manufacturers and collect royalties on those licenses.

  Chen listed Acer Digital Technologies, Chung Hwa Picture Tubes and Chi-Mei as the nation's top three LCD display makers. But, he predicted sluggish profit growth over the next few years due to oversupply.
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