SEH raises stakes in 300mm wafer race

September 20, 2006 – Shin-Etsu Chemical Co. Ltd. has announced a new expansion plan to add another 30% to its monthly output of 300mm wafers, in a bid to keep its market lead in a white-hot silicon wafer market where several companies are raising the stakes.

SEH recently completed an accelerated ramp-up to achieve of 700,000 wafers/month production capacity, up from 300,000 wafers/month in 2004 and 400,000 wafers/month in 2005. But in response to semiconductor customers’ plans to build or expand their 300mm lines, SEH has laid out new plans to spend another 120 billion yen (US $1.02 billion) to boost total output to 1.0 million wafers/month by the fall of 2007. That would bring SEH’s total investments in 300mm expansions to about 400 billion yen ($3.40 billion), all of it funded internally. (As of August 2006, the company reported cash reserves of about 530 billion yen/$4.50 billion).

The new plan will expand production lines at SEH’s plant in Shirakawa, Fukushima Prefecture; SEH America in Vancouver, WA; and Mimasu Semiconductor Industry Co. Ltd., in which SEH nearly doubled its ownership stake (40%) earlier this year at a cost of $125 million. SEH also plans to make new investments in group company Nagano Electronics Industrial Co. Ltd., and will begin producing single crystal ingots at Shin-Etsu Handotai’s Takefu Plant in Fukui Prefecture.

Top wafer suppliers have been ratcheting up production and investments over recent months amid soaring demand, in an effort to grab and maintain marketshare. A report from analyst firm The Information Network pegged SEH as the leader in the wafer market with a 33% share, followed by Sumco (19.9%) and MEMC (13.5%). Recent data from SEMI indicates worldwide silicon area wafer shipments rose 24% year-on-year in 2Q06 to nearly 2000 million sq. inches (MSI), more proof that wafer suppliers are enjoying robust sales and heavy demand.

SUMCO, which launched a $1.3 billion (158.4 billion yen) IPO in late 2005, is in the early stages of a plan to double its total 300mm wafer capacity to 700,000 wafers/month by April 2009, with investments at its facility in Imari, Saga Prefecture, estimated at roughly $1 billion. Earlier this summer SUMCO made a splash by taking a 36.9 billion yen ($321.8 million) majority ownership in Komatsu Electronic Metals Co. Ltd. (KEM). KEM, which has wafer plants in Nagasaki and Miyazaki (including a 300mm pilot line established in 1997) and a 10-year-old 200mm wafer facility JV in Taiwan with Formosa Plastics Group, will now expand development through both an acceleration of capital investment in 300mm as well as leverage synergies in technology development, the companies stated.

Meanwhile, also this summer, Samsung Electronics Co. Ltd. and Siltronic AG have finalized plans to build a $1 billion, 300mm wafer fab in Singapore, with peak output of 300,000 wafers/month by 2010. Siltronic Samsung Wafer Pte. Ltd. is slated to open in mid-2008, with 300,000 wafers/month capacity by 2010. Late last year Siltronic announced plans to nearly double output from its operations in Burghausen, Germany and increase capacity by 33% at its Freiberg operations, to a combined total of roughly 335,000 wafers/month.

In addition, this July MEMC signed a 10-year supply contract for solar grade silicon wafers with Beijing-based Suntech Power Holdings Ltd. beginning in 1Q07, a deal expected to generate $5-$6 billion in revenues for MEMC.

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