As markets zoom, Philips strengthens Asia presence

06/01/2000

Just 12 months ago, investing in a wafer fab in Asia was considered too risky. That's changed dramatically. Philips Semiconductors, Eindhoven, The Netherlands, is beefing up its Asia presence to address the surge in demand for communication and consumer ICs. The big project is Systems Silicon Manufacturing Corp. (SSMC), a $1.1 billion wafer fab 48% owned by Philips, 32% by Taiwan's TSMC, and 20% by the Singapore government's Economic Development Board.

"What's noteworthy about the fab is the speed with which it's being built," says Peter Yates, CEO of SSMC in Singapore. Stuttgart, Germany-based Meissner & Wurst Zander is building the foundry, which Yates says will go from laying pilings to completion in 12 months. Production is expected to begin in December.

The ballroom-style fab will be a scanner-only operation, Yates adds, with a monthly capacity of 30,000, 200mm wafers. Equipment sets are still being ordered, so he wouldn't provide details about the machines.

Theo Claasen, CTO of Philips Semi, says Philips will get 60% of capacity, TSMC the remainder, and both companies will run their own technology. Design rules will begin with 0.25mm and quickly move to 0.18mm with 0.15mm capability, Claasen says. Chips produced will be ASICs and ICs for digital video and wireless applications.

"The semiconductor market is very hot and will probably grow more than 25% this year," adds Arthur van der Poel, CEO of Philips Semi. "The timing for the fab is right."

Philips studied the region for a wafer fab site and drew up a short list. China, the company concluded, wasn't ready yet for a wafer fab, even though Japan's NEC has been running a 64Mbit DRAM plant in Shanghai since November 1999.

Thailand, where the government is close to accepting up to 26% equity in a wafer fab, and where Philips has an IC-packaging plant, was under serious consideration. Malaysia, which is constructing two foundries, also made the short list. Taiwan was ruled out, said van der Poel, because there are enormous numbers of wafer fabs in Taiwan already. "For that reason, we wanted it on neutral grounds, and Singapore was high on our list as well as TSMC's list."

Philips chose Singapore because of government support for training employees, the existing equipment and supply infrastructure, and a financial package that helped fund the venture, according to van der Poel.

Despite Singapore's labor crunch, the country seems to be getting a windfall of investment activity. Local foundry Chartered Semiconductor is building Fab 7, a $2.1 billion addition expected to be running by mid-2001. Design rules will be at 0.15mm and the factory is 300mm compatible, although the first equipment sets will be 200mm, says CEO Barry Waite.

Also in the city state, STMicroelectronics has restarted a $1 billion 200mm wafer fab that was postponed in 1997 during the Asian economic crisis. The new fab, expected to turn out 500,000 wafers annually, should begin production in 2Q01, according to company officials. ST is also adding a $200 million 150mm fab expected to be in production by October. Expected capacity is one million wafers/year.

Altogether, "ST's chip-manufacturing capacity in Asia will more than double," says Jean Claude Marquet, ST's Asia Pacific CEO.

Philips Semi has a growing stake in Asia. In addition to packaging all its chips in the region, the company owns 27% of Taiwan's TSMC, a relationship that brings it capacity and the latest process technology, as well as the shareholder payoff.

Philips also holds a 38% stake in ASMC, a Shanghai-based foundry turning out low-end telecom chips on 200mm CMOS lines. ASMC's other main partner is Shanghai Belling with a 38% stake. Although ASMC is profitable and earned about $60 million last year, the foundry has only recently broken the submicron level with a 0.08mm process, according to company officials.

CEO van der Poel adds that Philips also sees China as a key chip design site. The company recently announced plans to open R&D houses in Shanghai and Xi'an, China. Together with a Taiwan R&D operation, the three labs form Philips Research East Asia (PREA). With an estimated staff of 200 engineers, PREA expects to develop local standards in digital television, wireless communication, optical storage, and user interfaces, according to company officials.

Things look good in 2000, Philips Executive VP Walter Conrads says. Wireless ICs are replacing consumer ICs as the new driver in Asia. The world's mobile phone market is expected to grow 45% to 410 million units in 2000, according to Dataquest. Domestic mobile-phone-manufacturing industries are blossoming in Taiwan and China, and Philips' new Singapore foundry will allow the company to address some of the demand.

Asia Pacific semiconductor growth is expected to reach 35% in 2000, outpacing worldwide growth of 27%, according to the World Semiconductor Trade Statistics organization. Conrads says his company's goal is to become the number three chipmaker in Asia by 2001.

Drew Wilson, SST Asia correspondent