Taiwan likely to fill half of Asia's chip demands in three years

This article was published by the Taiwan Headlines on April 7, 2006. It reports that Taiwan is expected to fill half of Asia's demand for silicon wafers by 2009. According to market research organization In-Stat's recent forecast, Taiwan and China will be the major force behind the sharp growth of silicon-foundry capacity in Asia.

The Taiwan Semiconductor Manufacturing Co. (TSMC) and the United Microelectronics Corp. (UMC) are currently the world's top two silicon-foundry suppliers. The two Taiwanese chipmakers have an absolute advantage over rivals in the 300-mm wafer foundry market, especially in Asia. Indeed, in recent years, Asian demands for 300-mm wafers have posted the highest growth rate in the world.

Both TSMC and UMC began volume production at 300-mm factories in 2004, in order to further consolidate their leadership in the Asian foundry market. It is expected that the two companies will take 50 percent of the Asian market for silicon-foundry service. In 2005, TSMC earned NT$93.5 billion (US$2.9 billion) and was the world's most profitable silicon-foundry provider.

Meanwhile, in the 200-mm wafer foundry market, both TSMC and UMC were forced to reduce their prices in their attempt to compete with China's cheap products. In 2005, most second-tier pure-foundry suppliers also suffered losses as a result of the collapse of their 200-mm wafer foundry prices.

China's Semiconductor Manufacturing International Co. (SMIC) is currently the world's No.3 pure-foundry supplier. The company specializes in tailor-made memory chips. It is expected that the company's operations will turn profitable in the second half of 2006.

According to In-Stat's market analysts, China's silicon-wafer foundry industry has grown sharply in recent years, mostly thanks to the rapid rise of fabless houses there. For instance, China's Central Semiconductor Manufacturing Co., Ltd. (CSMC) plans to boost its output capacity at its 150-mm wafer fab to 80,000 wafers per month in early 2007. The company also plans to open a 200-mm wafer fab in Beijing. In 2005, CSMC's domestic customers accounted for 67.8 percent of its revenues.