Nan Ya follows TSMC in Taiwan capital spending cuts
09/01/1998
Nan Ya follows TSMC in Taiwan capital spending cuts
Taiwan foundry Nan Ya Technology has cut capital spending plans this year by 63%, to NT$4 billion (US$116 million), while Taiwan Semiconductor Manufacturing Corp. (TSMC) has finalized its new 1998 spending plan at US$920 million rather than the US$1 billion reported earlier.
Nan Ya Technology VP Charles Kau said his firm`s spending adjustments will result in a NT$7 billion cut from the company`s original NT$11 billion estimate. Local press reports had indicated that the cuts would be more extensive, but Kau said those figures were incorrect.
For TSMC, the revised number represents a US$380 million cut to its original US$1.3 billion estimate. The foundry is also estimating that 1999 spending will be about flat with this year`s revised figures, in the range of $800 million to $900 million, enough to achieve a 25% capacity increase next year. This year`s capital spending cuts will be taken at TSMC`s Fabs 3, 4, 5, and 6, and do not include the US-based Wafertech operation.
Ron Norris, president of TSMC USA, said initial reports of a capital spending reduction to $1 billion had been first-cut numbers, prior to a review of how to most logically implement the cuts. "We`re looking broadly and seeing how much we can cut short term," he explained. "If the market goes up, we will pull in our equipment orders."
TSMC now expects its 2Q utilization rate to be in the 70-75% range, well below expectations of a couple of months ago, due to a combination of slowing orders and about 16% new capacity coming on line. In the 1Q, utilization was 100%, said TSMC. Several other Taiwan chipmakers are also rumored to be cutting capital spending plans this year, according to news reports from the region. The Commercial Times reported that cuts would be seen at a number of foundries, including Mosel Vitelic`s ProMOS Technologies, and UMC Group.
Total capital spending this year in Taiwan is now estimated to be $5.8 billion, essentially flat with 1997`s $5.7 billion, according to the latest numbers from the analysts at Morgan Stanley Dean Witter. Earlier estimates had foreseen a significant year-to-year increase. Overall, worldwide capital spending is expected to fall 17% to $33.8 billion, down from last year`s $40.6 billion, the analysts said. - C.L.