| manufacturers, known as
"foundries". Although there are over 200
"fabless" semiconductor manufacturers in the United States alone, there are only
a handful of semiconductor foundry companies, which are based mainly on the high-tech
island of Taiwan.
Leading the pack of Taiwanese semiconductor foundries
is Taiwan Semiconductor Manufacturing Company,
whose American Depository Receipt (ADR) is traded on the New York Stock Exchange under the
symbol of TSM. Taiwan Semiconductor is followed by United Microelectronics Corp.
(UMC) Group, Windbond Electronics Corp. and Worldwide Semiconductor Manufacturing
Co.(WSMC). Other non-Taiwanese major players are the US's IBM Blue Logic Technology,
Singapore's Chartered Semiconductor Manufacturing, and Israel's Tower Semiconductor which
was established as a joint venture of Data Systems & Software Inc., The Israel
Corporation Ltd., and National Semiconductor Corporation.
Although Taiwanese semiconductor foundries, as a group, announced a plan in 1997 to build
some 30 new fabs during the next decade, the
number of semiconductor foundry fabs may not significantly increase in the next few years.
Dataquest, a San
Jose-based research group, characterized the 1998
semiconductor foundry business as in acute oversupply. According to
the Dataquest report, many
semiconductor contract manufacturers cut back spending rates by 50 percent or more from
the first half to the second half of 1998.
Clark J. Fuhs, vice president and director,
Semiconductor Manufacturing Analysis, for Gartner Group/ Dataquest, added "the industry will be in oversupply through at least mid-2000, so we expect
the foundry suppliers to remain at current spending levels or lower throughout 1999,
representing perhaps a 20 to 30 percent cut from 1998 levels."
Despite low times in the semiconductor foundry business, Morris Chang,
chairman of Taiwan Semiconductor, who is upbeat on the prospective of his foundry company, continues
the expansion plan on a global basis. According
to Reuters, Chang is planning to break ground on a new US$1.2 billion foundry fab in
Singapore within a few months. The new manufacturing plant, which is part of the joint
venture between Taiwan Semiconductor, Philips Electronics, and EDB Investments of
Singapore, is expected to begin production in December 2000.
Taiwan Semiconductor
currently has two foundry fabs under construction in Taiwan and has over 67 percent
interest in WaferTech, a US $1.5 billion newly constructed foundry fab in Camas,
Washington. In our viewpoint, such massive expansion by Taiwan Semiconductor could ignite
other foundry companies to follow expansion, which in turn could prolong the glut in
foundry services. As pointed out by Dan
Hutcheson, San Jose based VLSI Research Inc, "If you find yourself in a hole, stop
digging".
Taiwan Semiconductor, now holding a
leading position in the semiconductor foundry business, could be under intense competition
from their domestic arch-rivals, UMC and WSMC, particularly in the 0.18 µm technology
arena. According to EE Times, Toshiba has already
begun to produce initial quantities of CMOS logic and SRAMs at Taiwan Semiconductor rival,
WSMC. Toshiba expects that by 2001, roughly 40 percent of its semiconductor revenue will
come from chips made by WSMC, Winbond and Chartered Semiconductor foundry partners and
Dominion subsidiary, a joint-venture fab with IBM, in Virginia. |
