Royal Philips Electronics' continuing exodus from the chip-making business -- which led the Dutch giant to announce on Thursday the closure of its second fabrication plant in the US in the past four months -- is expected to lead to increased orders for Tai-wanese manufacturers, analysts said yesterday.
"This is definitely good news for Taiwan," said Ben Lee (李輔邦), a semiconductor industry analyst at the research firm Gartner Dataquest's Taipei office. "Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is first in line to win."
Philips announced Thursday that it was closing a chip production plant in San Antonio, Texas, which came on the heels of a decision late last year to close a plant in Albuquerque, New Mexico.
The move is expected to save Philips US$269 million in savings by year-end, Amsterdam-based spokesperson Jeremy Cohen told the Taipei Times yesterday.
"We hope to move to the break-even point by the end of the fourth quarter," Cohen said.
A total of 1,600 workers will be laid off in the closures.
Philips continues to operate eight semiconductor fabs around the globe, including a joint venture in Singapore with TSMC and the Singapore government. Philips owns 48 percent of that company, System on Silicon Manufacturing Co (SSMC), while TSMC owns 32 percent and the Singapore government 20 percent.
Philips already outsources some of its chip production to TSMC and United Microelectronics Corp (UMC,
Analysts expect orders will shift to Taiwan.
"Philips will increase outsourcing to TSMC and UMC on a gradual basis," said Rick Hsu (徐禕成), a chip-industry analyst at Nomura International in Taipei. "This announcement is further confirmation of Philips' transfer from a fab-heavy to a fab-light operation."
Since Gerard Kleisterlee took over as CEO of Philips in 2001, he has shed one fifth of the company's workforce in an attempt to cut massive losses, which topped 3.2 billion euros (US$3.44 billion) last year.
Kleisterlee has singled out the semiconductor unit, which employs 34,000 out of a total workforce of 170,000 at Philips, as a target for cuts.
New orders will not result directly from the US closures, Cohen said.
"We do outsource, and we have said we will continue to maintain a healthy level of that, but it wouldn't make sense that on the one hand we reduce our own capacity while on the other hand we increase capacity through outsourcing," he said.
The plan is to reduce capacity by closures at unproductive plants and make better use of the capacity at existing plants, he said.
Meanwhile, TSMC may already be gearing up for new high-end orders. Austrian-based chip-equipment manufacturer SEZ Group announced yesterday that it had gained an order for several single-wafer spin processors -- machines used for newer, more advanced chip-making -- from "a major Taiwanese semiconductor foundry."
Fred Kranich, manager of SEZ Taiwan, did not reveal which of Taiwan's two foundries the order was from, but at least one analyst said that only TSMC would need the high-end machines for its number 6 fab located in the Tainan Science-based Industrial Park.
"Fab 6 is more focused on experimental work and more advanced processes and it is the most likely destination for this new equipment," George Wu (吳裕良), an analyst with Primasia Securities Co, said.
It takes at least three months to install chip-making equipment, so an order for machines now indicates that TSMC expects new orders for its more advanced chips next quarter, Wu said.
This is in line with TSMC chairman Morris Chang's (
Goldman, Sachs & Co raised its earnings forecast for TSMC on Thursday, sending the company's shares up NT$2.50 in the last two sessions to close at NT$45.50 in Taipei yesterday.
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