Best International Stock: Taiwan Semiconductor
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All the opportunity of high-tech gadgets -- but none of the risk.
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(InfoWorld) - For years, two South Korean giants have dominated the LCD (liquid crystal display) panel industry, but a recent merger in Taiwan has propelled AU OptronicsÂ into the running for the top spot. Fresh competition at the top should ensure LCD makers continue to find new ways to lower prices so they can lure users to buy new LCD TVs, larger desktop displays, and laptop computers with bigger screens. In fact, the big three all continue to invest in new LCD factories designed to lower costs, and they unanimously forecast falling LCD panel prices during the first three months of this year. AU, the world's third largest maker of LCD (liquid crystal display) screens,Â merged with Quanta DisplayÂ late last year, raising its share of the global LCD panel market to nearly match that of Samsung Electronics and LG.Philips Co.Â  Although the company remains in third place, it is just a sliver of market share away from the top, and on Thursday, AU said its work to integrate the new factories acquired in the Quanta Display deal is running smoothly. The company has already turned Quanta Display's operations profitable after two money-losing quarters previously, said Max Cheng, chief financial officer at AU, at the company's fourth-quarter investor conference Thursday. The smaller LCD maker had been suffering against its larger rivals because it couldn't compete as well on cost. In general, larger makers can offer volume discounts to big customers, and gain other cost advantages through mass production. The merger helped propel AU's LCD panel shipments past Samsung Electronics for the first time ever during the fourth quarter. The Taiwanese company shipped 16.6 million large-sized LCD panels in the fourth quarter, and 24.5 million small and medium sized panels, it said. Samsung shipped 15.5 million large-sized panels and 24.8 million small and medium sized panels, according to information on its Web site. The Samsung figures do not include output from S-LCD Corp., aÂ joint venture between Sony and SamsungÂ that produces large-sized LCD panels used by both companies. Large-sized LCD panels are described as those 10 inches in size or bigger, such as panels used as the screen part of a laptop computer, desktop monitor or LCD-TV. Small and medium-sized panels are the screen parts of devices such as mobile phones, and GPS (global positioning system) navigation devices. The shipment figures don't mean AU is already number one in LCDs. The top company, LG.Philips LCD Co., does not break down panel shipments, choosing to give its figure in millions of square meters because the size of panels differs so much. LG shipped 2.3 million square meters of panels in the fourth quarter. Neither AU nor Samsung provide shipment information in square meters. According to market researcher DisplaySearch, part of the NPD Group, LG.Philips ranked first in panel shipments last year, followed closely by Samsung, and then AU Optronics. There are only a few percentage points of market share separating the three. The next competitor listed, Chi Mei Optoelectronics of Taiwan, is nearly 10 percentage points away from first place. By other popular measures used to rank companies in an industry, such as revenue, Samsung comes out on top, with LG.Philips second, and AU Optronics in third. Samsung's LCD business posted fourth quarter revenue of 3.18 trillion Korean won (US$3.48 billion as of Dec. 31, the last day of the reporting period), while LG.Philips' revenue came in at 3.06 trillion won (US$3.34 billion) and AU's was NT$94.65 billion [B] New Taiwan dollars (US$2.91 billion). The nearest competitor to the top three was Japan's Sharp Corp., which posted revenue at its LCD component business of Â¥241.4 billion (US$2.03 billion) for the three months ending Dec. 31. Going forward, Taiwanese companies appear to be more aggressive in their capital spending (capex) plans for this year. In fact, AU Optronics plans to spend more on new factory production lines this year than any other LCD maker, between NT$90 billion and NT$95 billion (US$2.92 billion). The top end of that range is nearly double Samsung's estimate of 1.41 billion won (US$1.52 billion), which excludes spending on S-LCD. Chi Mei has said it will spend NT$75 billion (US$2.30 billion), making it the next biggest spender after AU Optronics. Â
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(InfoWorld) - Fairchild Semiconductor and Himax TechnologiesÂ both completed steps this week that finalize, or nearly finish, their bids to buy Taiwanese chip makers. Fairchild received regulatory approval from the Taiwan government toÂ buy System General Corp., which specializes in chips that manage power in digital devices. A Fairchild subsidiary will now be allowed to remit $197.2 millionÂ into Taiwan to complete the purchase, according to a report by the Taiwan Investment Commission. Fairchild expects the deal to be completed by the end of the second quarter of this year. Himax, a Taiwanese maker of chips for LCD (liquid crystal display) screens, announced Thursday that it closed its acquisition of rival Wisepal Technologies in an all-stock deal valued at around $50 million. The purchase gives Himax a better position in the small-to-medium sized display market, the company said. The transactions highlight the large number of chip deals made over the past year, and follows closely on the heels of aÂ high profile $5.5 billion offerÂ made for the world's largest chip assembly company, Taiwan's Advanced Semiconductor Engineering (ASE), in November. The biggest chip deals have been made in the U.S. and Europe. Last year, a group of private equity investors agreed to payÂ $17.6 billion for Freescale Semiconductor, while Koninklijke Philips ElectronicsÂ sold a majority stakeÂ in its chip unit to another group for around $10.6 billion. Fairchild, of South Portland, Maine, was born from the ideas and investments of several chip titans, including Gordon Moore and Robert Noyce, both later of IntelÂ fame, and was incorporated in 1957. System General, of Taipei, opened in 1983, focusing on power management chips from the start. Fairchild cited System General's strong power products and sales in China and Taiwan as key reasons for its interest in the company. Himax will gain a few new large customers as part of its deal. Wisepal supplies LCD chips to Taiwan's Compal Electronics, the world's second largest contract laptop manufacturer, as well as handset maker Compal Communications and handset display maker TPO Displays. Compal Electronics and TPO Displays were the two largest shareholders in Wisepal prior to the acquisition by Himax. Â
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Taiwan's Powerchip Semiconductor Corp and Japan's Elpida Memory Inc have announced a $1.23 billion dollar joint venture with plans to invest almost 14 billion dollars over five years.
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HONG KONG (Dow Jones)--Hong Kong-based New Star International Investment Products (Asia) Ltd. is all set to expand its operations to Taiwan and Singapore next
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(InfoWorld) - The head of Japanese memory chip maker Elpida Memory held talks with Taiwanese officials last week about incentives for building a chip factory on the island. Yukio Sakamoto, Elpida's chief executive officer met with the company's foundry partner in Taiwan, Powerchip Semiconductor, as part of his visit to the island, but Elpida says it has made no decisions yet, a spokeswoman for the company said Tuesday. Elpida is considering an investment in either China, Japan, Singapore, or Taiwan, and could work with a partner in a joint venture or go it alone, said Tomoko Kobayashi a spokeswoman at Elpida. Powerchip declined to comment. Such a deal would be huge for the winning location, because modern DRAM (dynamic RAM) factories cost around $3 billion and employ thousands of workers. China and Taiwan both have advantages because Elpida already works with partners in both places, Semiconductor Manufacturing International Corp. of Shanghai and Powerchip. Singapore would also rate highly since it's been labeled one of the best locations in the world for a chip plant investment due to its tax breaks and other incentives. Japan would have home field advantage. The DRAM industry is also ripe for new factories. Most companies in the business have invested in non-DRAM production lines in recent years, mainly NAND flash memory, popular in digital cameras, mobile phones, and iPods. But DRAM prices have surged recently due to strong PC sales, and prices are expected to remain strong over the next several months onÂ anticipated PC demandÂ from the launch of Microsoft Windows Vista. In fact, the spot price of the most popular chips, DDR2 (double data rate, second generation) chips, hasÂ surged 15 percentÂ over the past three days, according to DRAMeXchange Technology Inc., an online clearinghouse for the chips.
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Asia shows biggest growth over last year Worldwide sales of semiconductors totalled $20.6bn for the month of July, a jump of 2.2 per cent on the previous year, according to new figures.â¦
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Twenty-one Taiwan Semiconductor Manufacturing Co. (TSMC) employees were taken to the hospital on Wednesday because of a gas leak at a chip fabrication plant in Hsinchu, Taiwan, a company spokesman said. The leaked gas was arsine, a highly toxic and flammable gas that is used exclusively in semiconductor manufacturing. The gas leak occurred inside TSMC's Fab 7, a fab that produces chips using 200-millimeter silicon wafers. The gas leak did not require TSMC to halt operations at Fab 7 and the facility is operating normally, according to the company spokesman. The 21 TSMC employees are expected to be released from the hospital by the end of the day.
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The founder and former chairman of the world&#39;s second largest contract chip maker was found not guilty of investing in and transferring technology to a Chinese chip maker, a Taiwanese court said Friday.Taiwan&#39;s Hsinchu District Court said there wasn&#39;t enough evidence to prove wrongdoing in the government&#39;s case against Robert Tsao. A former vice-chairman of United Microelectronics Corp. (UMC), John Hsuan, and the head of a venture capital firm, Cheng Tun-chien, were also found not guilty in the case, the court said in a statement.The trio were&#160;indicted last year&#160;for allegedly investing in and transferring chip technology to Chinese chip maker He Jian Technology (Suzhou) Co. The executives and UMC repeatedly denied wrongdoing in the case. They have admitted to advising He Jian during its startup phase, but maintain that all help was within legal bounds. Prosecutors plan to appeal the verdict.Taiwan carefully controls chip investments to China, fearing it could lead to job losses on the island or that its technology could be used to bolster Chinese military might. The two separated in 1949 amid civil war, and Beijing has long threatened the use of force to take the island if it moves towards formal independence. Due to their strained relationship,&#160;Taiwan chip makers are required to receive government approval&#160;before investing in or transferring chip-related technology to China.The verdict is the second setback for the Taiwan government so far this year in its efforts to enforce regulations governing Taiwanese chip investments to China. In July, a Taipei court overturned an NT$5 million (US$154,000) fine against UMC, also citing a lack of evidence that it invested in He Jian.The court actions underline a rift among Taiwanese in their dealings with China. Some people on the island, which share linguistic and cultural ties to China, are working towards independence as a way to safeguard democratic reforms that have taken hold in Taiwan over the past two decades. Others view China as their homeland, and are working to ensure Taiwan unites with the mainland and takes part in its economic boom.Last year, UMC said a 15 percent stake in He Jian that the Chinese chip maker offered as payment for help establishing the company was put into a trust. The payment was part of UMC&#39;s efforts to make sure its shareholders benefitted from the growth of He Jian.UMC Chairman Jackson Hu has repeatedly referred to He Jian as UMC&#39;s partner in China, and said UMC will refer its customers to He Jian when they&#39;re looking for some chip work to be done in China.&#160;
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(InfoWorld) - Industrial computer maker AdvantechÂ is doing so well in China that it plans to build a sprawling research, development and marketing campus there to make the country its second "home base," despite opposition by Taiwanese officials. The Taiwan government has urged local companies for years to keep their global headquarters, R&D and marketing in Taiwan, even as theyÂ rushed to set up new manufacturing facilitiesÂ in China. Advantech exemplifies an aggressive new attitude among Taiwanese companies that are looking across the straits to their neighboring giant as a way to achieve dramatic growth. Advantech heeded the government at first, but an increase in its profits from China and the possibility of turning the country into a vast, second "domestic" market have proved too alluring. "We're Chinese, no matter what the politicians might say. Building China as a home market is imperative for our growth," said Dora Chang, chief financial officer of Advantech, during an interview with reporters in Taipei. Investing in China is a sticky issue for Taiwanese companies, due to political differences between Beijing and Taipei andÂ excessive regulations. In recent years, Taipei has sought to avoid being swept up into China's economy even as its growth has fuelled profits for technology companies on the island, both by lowering costs and providing a much wider market. The hesitance to open the investment floodgates to China has been caused by years of political bickering and a bloody civil war. Taiwan split from China in 1949, and Beijing has viewed the island as a renegade province ever since. The two have never reconciled, and Taiwan's move towards democracy has increased calls for outright independence, an idea China has vowed to crush, violently if necessary. But the opening of China's economy has created new opportunities for Taiwanese companies. It's Taiwan's favorite destination for overseas investment, to the tune of about $150 billion over the past two decades, despite efforts by Taipei to persuade companies to invest elsewhere in Asia. The shared language and culture between people in the two economies has been key to the investment flow, and has led Taiwanese companies to account for about 60 percent of China's technology output, according to Taiwanese officials. And after profiting for years from the low costs of labor, land rent, taxes and other incentives in China, Taiwanese companies are seeing a huge uptake in demand for their products from the local market. Advantech, for one, has been selling computers in China for major projects such as the massive Three Gorges Dam, as well as for toll roads and other works. The company is also finding ready buyers of its electronic cash registers at Chinese gas stations, another huge market. It is now looking to China as a second domestic market, one far bigger than Taiwan, and one that can help it grow into a far bigger company. Many Taiwanese firms see the success of big U.S. companies as being at least partly due to their huge domestic market. It's an advantage that U.S. companies can use to help them grow into multi-billion dollar behemoths before tackling overseas markets, where strong capital backing is essential. Many Taiwanese hope China can offer them the same advantage. Advantech will start construction of the Shanghai campus, which Chang called it's "second global headquarters," later this year. By the time it's complete and fully staffed, it will employ about 1,000 workers, increasing the size of Advantech by a third. The company stands to benefit immensely from the project. Advantech develops its own products and customizes industrial computers for customers as well, resulting in a gross margin of about 45 percent per year, almost unheard of for a Taiwanese company. The island's contract laptop makers squeak by on a gross margin of around 5 percent or 6 percent. Advantech hopes China will be the key to it growing someday into a multi-billion dollar giant.
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Corporate reshuffling at two Taiwanese electronics companies met with investor praise in Taipei.
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(InfoWorld) - Japanese memory chip maker Elpida MemoryÂ and Taiwan's Powerchip SemiconductorÂ have announced a broad plan to invest $13.9 billion over five years to build four new DRAM factories in Taiwan. The investment, announced Thursday, will go into a new joint venture company that does not yet have an English name. The new company will open early next year in an advanced 12-inch chip factory Powerchip started building in central Taiwan earlier this year. In coming years, the joint venture company will build three more DRAM (dynamic-RAM) factories on the island, with output reaching 60,000 silicon wafers per month each, for total planned capacity of a massive 240,000 wafers. Thousands of DRAM chips can be made on each wafer. The investment means the companies are confident in the future of the DRAM industry and in their ability to compete against market leader Samsung Electronics. In fact, Elpida Chief Executive Officer Yukio SakamotoÂ pledged to surpass SamsungÂ in terms of DRAM market share within three years. The DRAM industry isÂ ripe for new factories. Most companies in the business have invested in non-DRAM production lines in recent years, mainly NAND flash memory, which is popular in digital cameras and iPods. ButÂ DRAM prices have surgedÂ recently due to strong PC sales, and the launch of Microsoft Windows Vista is expected to keep DRAM prices strong over the next several months due to strong anticipated PC demand and the greater memory content required by Vista compared to Windows XP. The two companies intend to marry Elpida's technology prowess with Powerchip's low cost manufacturing know-how, said Frank Huang, chairman of Powerchip. The companies will be even partners in the venture, each putting in their half of the value of investment, and each deriving half of the production from the new company. Elpida had beenÂ looking at four possible investment locationsÂ before deciding to partner with Powerchip in Taiwan. The company's CEO traveled to China to visit manufacturing partner Semiconductor Manufacturing International Corp. (SMIC) of Shanghai, in addition to scouting locations in Japan and Singapore. Despite better incentives offered by the Chinese government, Sakamoto said his company's relationship with Powerchip and Taiwan's superior infrastructure swayed Elpida's final decision. "Yesterday, Powerchip and Elpida had a very friendly relationship, but today we became a family," said Sakamoto. The two companies have been working together for over four years. Elpida will continue to use SMIC as a manufacturing partner in China, he said. Elpida and Powerchip will initially invest NT$40 billion to get the first DRAM factory up and running. They expect to move production line equipment into the factory by May 2007 and start mass production in August. The joint venture company will begin life with the latest production technology thanks to Elpida, etching transistors and other parts on silicon at the tiny size of 70-nanometers. A nanometer is a billionth of a meter. Powerchip will take charge of daily operations and staff the factory. By the time the fourth plant is finished, Powerchip reckons it will have hired 8,000 new workers for the joint venture. Elpida and Powerchip will also co-invest in research and development, they said. Their technology pact will ensure joint development down to the 50nm level and beyond. The companies plan to sign a final agreement on the joint venture in January.
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The top executive at Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world&#39;s biggest contract chipmaker, offered a mixed message Thursday about prospects for the global chip industry in 2008.Speaking at the company&#39;s third quarter investor conference, President and CEO Rick Tsai predicted that the chip industry will strengthen in 2008, but he also said TSMC will spend &quot;significantly less&quot; on new plants and equipment next year.TSMC announced net sales of NT$88.96 billion&#160;(US$2.73 billion) for the July to September period, up nearly 8 percent over the same time last year. Its net profit fell 6.5 percent to NT$30.37 billion, nearly in line with analyst&#39;s expectations.&quot;The third quarter was better than expected, not just for TSMC, but for the whole electronics industry,&quot; Tsai said. Sales of chips to the PC sector, mobile phone segment and consumer electronics products group were all brisk, he said.But many analysts considered TSMC&#39;s forecast to be more important than its third-quarter results. That&#39;s because of&#160;uncertainty about economic growth in the U.S.&#160;due to the housing loan problems there, high oil prices, and other troubles that could ultimately impact spending on electronics.TSMC is considered a&#160;bellwether for the tech industry&#160;because of the wide range of chips it manufactures, which end up in products including Xbox 360s, iPhones, PCs, and automobiles.&quot;We&#39;re expecting 2008 to be a better year than 2007 for the semiconductor industry,&quot; Tsai said. The chip industry will grow by a mid-to-high single digit percentage in 2008, the company forecast, compared to expected growth of 4 percent in 2007.Despite the rosy outlook, TSMC will reduce its 2008 capital spending from the expected US$2.6 billion in 2007. Spending cuts often indicate that a company isn&#39;t very bullish about business prospects, but TSMC said it wants to reduce spending next year because it spent heavily on production lines in 2007 that won&#39;t begin producing chips until next year.The change in spending plans is significant, said Eric Chen, research director at BNP Paribas Securities (Taiwan). If TSMC&#39;s capital spending drops by about 30 percent, as many analysts have predicted, it won&#39;t be a surprise, he said. But if the company reduces spending by a lot more, it suggests that TSMC may be more concerned about future economic growth than it is letting on.Tsai said TSMC hasn&#39;t determined a specific figure yet for its 2008 capital spending.BNP believes Europe and the U.S. may both face slowing economic growth next year.
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A&#160;sharp decline in DRAM prices&#160;has caused some Taiwanese DRAM makers to cut back on their capital spending plans this year in a bid to shore up the market.&quot;Right now, there is a huge supply in the market,&quot; said Charles Kau, president of Inotera, during a news conference in Kuei Shan, Taiwan.Prices have dropped so much that its hard for DRAM companies to make money. On Tuesday, Inotera Memories reported an NT$3.7 billion (US$114.3 million) loss for the fourth quarter of 2007. Nanya Technology reported an even larger loss, of NT$8.2 billion, for the same time period.To combat falling prices, Inotera slashed its 2007 spending and will spend far less on new factories and production lines this year. The company spent NT$44 billion last year to install production lines at a new factory in Taiwan. But the spending figure ended up less than the NT$51.4 billion it had proposed to spend earlier in the year. For 2008, Inotera&#39;s spending will drop even more, to NT$30 billion, as it refits production lines with newer technology that makes chips smaller and more powerful.Nanya Technology reduced its 2007 capital spending to NT$47 billion from a projected NT$60 billion. The company started building a new state-of-the-art factory last year, a plant that will increase production throughout this year. In 2008, Nanya plans to spend NT$40 billion.&quot;This year, capital spending discipline is very important,&quot; said Kau. Spending less can help companies shore up their finances. DRAM factories are expensive, costing around US$2.2 billion or more each, depending on the size and projected output. Companies in the industry depend on strong cash flow as well as loans to pay for the factories.A glut has sent DRAM chip prices tumbling. The contract price of 1Gb DDR2 chips that run at 667MHz fell to US$1.81 each as of Jan. 21, according to DRAMeXchange Technology, which operates a clearinghouse for the chips. Prices of the chips were at $3 at the start of October, when the current price slump hit.Executives at Inotera and Nanya Technology&#160;forecast a rebound in prices&#160;in the second half of this year, as PC demand rebounds.&quot;Currently, we&#39;re optimistic about the second half because our customers are optimistic about the second half,&quot; said Pai Pei-lin, a vice president at Nanya Technology. He said he hopes the new service pack for Microsoft&#39;s Vista OS, which is due out shortly, will further spur PC buying and help the DRAM industry rebound. More DRAM chips go into PCs than any other product.
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Frank Hsieh, the candidate of Taiwan&#39;s ruling Democratic Progressive Party in next March&#39;s presidential election, pledged Tuesday to loosen regulations covering the transfer of Taiwanese technology to China.Taiwanese companies face various hurdles in moving their operations to China and typically have to receive government approval before making chip investments on the mainland. The two nations separated in 1949 amid civil war, and Beijing has long threatened the use of force to take the island if it moves towards formal independence.Intel and other non-Taiwanese chip-makers investing in China face fewer administrative barriers.&quot;The degree of regulation is a problem so in terms of technology transfer I would like to loosen it if I become president and make it as loose as Intel,&quot; Hsieh said at a news conference at the Foreign Correspondents&#39; Club of Japan in Tokyo.The exchange of chip-making technology to China is a hot issue in Taiwan, whose economy is influenced by major semiconductor makers.In October the founder and former chairman of United Microelectronics Corp. (UMC), the world&#39;s second largest contract chip maker, were found not guilty of investing in and transferring technology to a Chinese chip maker. Earlier in the year a Taipei court overturned an NT$5 million (US$154,000) fine against UMC over the same deal with He Jian Technology (Suzhou) Co. Ltd.Taiwan&#39;s presidential election is scheduled to take place on March 22, 2008.
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Chinese companies will be welcome to exhibit at Taiwan's annual Computex IT next year, the show's organizers said Saturday. The announcement came as organizers revealed a 10 percent increase in the number of foreign visitors at this year's show compared to last year.