rather than chip manufacturing. "I think it's a foolish company that distracts themselves and worries about a fab.", he added.

So far this year, the world's-largest chipmakers including Motorola, Hewlett- Packard, Toshiba, and Kawasaki LSI have already made announcements ranging from technology and manufacturing alliances to outright outsourcing the manufacturing of their products... everything from the chips used in cellular phones to DRAM chips.

Although most of the chipmakers are still cautious about a 1999 recovery in the chip business, Mr. Chang announced that the silicon foundry business will increase at a 22 percent compounded annual growth rate during the next 10 years, reaching $39.4 billion in revenues compared to $5.4 billion in 1998, according to Electronic News.

There are sufficient reasons for Mr. Chang to be overly optimistic. As reported by Reuters, Mr. Chang is planning to break ground on a new US $1.2 billion foundry fab in Singapore. 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. His company presently has two foundry fabs under construction in Taiwan and an over 67 percent interest in WaferTech, a US $1.5 billion newly constructed foundry fab in Camas,Washington.         

Although TSMC 200 mm wafer fabs are now running at 90 percent capacity according to Mr. Chang in Electronic News, TSMC net sales are still  descending. All bets are on and stakes are high for Taiwan Semiconductor with such a large excess manufacturing capacity. If the chip business turns around this year as speculated, Taiwan Semiconductor could end up to be one of the big winners. Taiwan Semiconductor, with an estimated 16 percent of the Taiwanese IC market share in 1998, is followed by United Microelectronics Corp. (UMC) Group, and Windbond Electronics Corp with approximately 6 and 5 percent market share, respectively.

Tough Competitors from Abroad - Key direct competitors to the Taiwan semiconductor foundry business are the US's IBM Blue Logic Technology, Singapore's Chartered Semiconductor Manufacturing Ltd., the world's third largest dedicated chip foundry and Tower Semiconductor which was established as a joint venture of Data Systems & Software Inc., The Israel Corporation Ltd., and National Semiconductor Corporation.

IBM Blue Logic Technology, which offers a broad range of proprietary state-of-the art designs and manufacturing to their customers such as copper wiring, interlayer low-k dielectric and silicon-on-insulator (SOI) technologies, is considered to be the most advanced semiconductor foundry in the world. In comparison to Taiwan's foundry companies, which only have a low-labor cost advantage, IBM could cut down wafer manufacturing costs and prices charged to their customers by switching to silicon-on-insulator technology. 

The SOI technology allows IBM to cut chip processing steps by one-half, compared to the conventional process. Dell Computer, the world's largest direct PC manufacturer, recently signed a long-term purchasing pact, valued at over $US 16 billion, with IBM. Customized microchips with IBM's copper, SOI, and other advanced technologies were included in the purchasing pact. Other "fabless" component manufacturers and chipmakers who seek leading-edge chip technology could follow soon.

The announcements by Motorola, Hewlett-Packard (HP) and Chartered Semiconductor Manufacturing, to form a technology and manufacturing alliance and the startup of the Chartered Semiconductor Partners (CSP), a joint-venture company between Chartered and HP could send a signal to Taiwan's foundry companies that a tough time might be ahead. According to Reuters, Chartered and CSP will receive the next three generations of the HiPerMOS technology roadmap from Motorola, beginning with 0.15-micron. 

Mr. Barry Waite, president and CEO of Chartered Semiconductor Manufacturing stated in a Reuters report that as part of the agreement, a new facility in the northern part of Singapore with a 35,000 wafers a month capacity will start production of chips in the second quarter of 2000. The agreement could advance Chartered to become Motorola's key supplier ahead of Taiwan Semiconductor and UMC in the next few years.

At the present time, Chartered already has a joint venture with Lucent Technologies, the communications equipment giant. Silicon Manufacturing Partners (SMP), the Chartered and Lucent joint-venture 200 mm wafer fab in Singapore, is capable of producing 26,000 wafers a month, according to Electronic News. The "wannabe" DRAM supplier strategies developed by Taiwan's foundry companies could face strong competition from South Korean Samsung and Hyundai Electronics as the South Korean chip business begins to recover. Micron Technology, who previously complained to the U.S. government about the "DRAM chip dumping practice" by foreign chipmakers, could again raise a similar issue with Taiwan's foundry companies.