Fri, Feb 14, 2003 page12

• Chartered decides to shut chip fab

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  Chartered Semiconductor Manu-facturing Ltd (特許半導體), which racked up losses of US$801 million in the last two years, said it will shut its oldest chipmaking factory and fire about 14 percent of workers to cut costs.

  The company, the world's third-largest provider of made-to-order chips, will close Fab 1 by March 2004 and focus on more advanced chips. The closure will lead to 500 job cuts, costs of as much as US$22 million and annual savings of US$25 million, Chief Executive Officer Chia Song Hwee said in statement.

  Chia said a slump in chip demand does not show any signs of letting up. With sales of personal computers yet to recover from their worst decline since 1985, the company used only two-fifths of its capacity in the fourth quarter and had to turn to shareholders for more cash in October.

  "Every penny counts right now for Chartered," said Warren Lau, an analyst with HSBC Securities, who has a "sell" rating on the shares. The company still needs to convince investors that it can increase sales by winning new orders, he said.

  Shares of Chartered Semiconductor, which is about 60 percent owned by a Singapore government agency, have fallen about 81 percent in the past year.

  Chartered Semiconductor, which has five plants in Singapore, trails industry leader Taiwan Semiconductor Manufacturing Co (台積電) and United Microelectronics Corp (聯電) and faces increasing competition from new entrants in China such as Semiconductor Manufacturing International Corp (中芯國際集成電路).

  Chartered Semiconductor ``still looks relatively unattractive given the strong competition from Taiwanese counterparts,'' said Andrew Gillan, a money manager with Aberdeen Asset Management, which doesn't own Chartered Semiconductor shares. "It's hard to see any clear positive signals."

  Chia, the former chief financial officer at Chartered, took over the top job in June, cut 300 jobs in October and struck a chipmaking alliance in November with International Business Machines Corp which allowed him to delay the opening of a new factory by a year. He also led a rights offering that raised about US$620 million in October.

  "The industry remains depressed as it continues to slowly recover from the worst downturn in its history and the global economic outlook remains clouded," Chia said in the statement.

  Chartered Semiconductor, which now employs 3,500 workers, will record about 75 percent of the expenses for the plant closure this year, starting with about US$4 million in the first quarter.

  "The cost-cutting is going to continue for a while," said Lloyd Ong, a fixed-income analyst with Barclays. "They've got a fair bit of catching-up to do."

  Fab 1 cost accounts for 20 percent of the company's capacity, Chia said. It opened in 1989 and uses older chipmaking equipment to produce wafers that are 150-milimeters in diameter.

  The rest of Chartered Semiconductor's factories make wafers 200mm in diameter.

  Chartered Semiconductor will probably further pare its capacity for manufacturing less-advanced chips and add equipment for more-advanced semiconductors, which provide more sales and profit, Chia told analysts on a conference call.

  The company is aiming for 50 percent of its manufacturing capacity, or 50,000 wafers a month, to be geared for chips with transistors that are 0.18 micron or less in width by the end of next year, compared with 15 percent currently.

  Computer chips with smaller transistors can perform calculations at a faster rate.

  Publication Notes

  Slump in demand

  * The world's third-largest provider of made-to-order chips, will close Fab 1 by March 2004. * The closure will lead to 500 job cuts, costs of as much as US$22 million and annual savings of US$25 million.
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