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UMC picks up SiS fab for $321 million

Posted: 01 Mar 2004 ?? ?Print Version ?Bookmark and Share

Keywords:united microelectronics? wafer? pc chipset? sis?

United Microelectronics Corp. said Thursday it will acquire an 8-inch wafer fab from PC chipset designer Silicon Integrated Systems Inc. in an all-stock deal worth $321 million.

The fab, which is close to UMC's other operations in the Hsinchu Science Park, uses 0.18- and 0.15?m process technology. It is equipped to produce 24,000 wafers per month and is running at about 70 percent capacity, a UMC spokesman said. Its maximum capacity is 35,000 wafers per month.

The transaction will boost UMC's monthly capacity by about 10 percent and provide some minor relief to the foundry's backlog. Even in the traditionally slow first quarter, UMC's current operations are running at 100 percent and demand should remain steady for at least the next few months as the semiconductor industry upturn continues to gain momentum.

"With capacity booked, it's just a great time to do it," said Don Floyd, a Taipei-based semiconductor analyst for Lehman Brothers. "UMC gets very cheap capacity. SiS gets a lot of money so they can invest in R&D, which they should have been doing in the first place, and they can forget about doing manufacturing."

The SiS fab has been something of a ball and chain for the company. Originally a fabless firm, SiS decided to build a fab in the late 1990s, believing that its chipset business would grow at a faster rate if it wasn't constrained by a total reliance on foundries. The company also had plans to build a 12-inch wafer facility, going so far as to break ground and lay out a ramp-up schedule.

But after a loss-ridden downturn, plus criticism about its becoming an IDM, and a lawsuit launched by former foundry partner UMC - alleging process patent infringement - the company's chairman was deposed in a corporate coup that saw UMC take the helm of the chipset maker's board of directors. The foundry promptly spun off the 8-inch fab from SiS' main IC design operation, and the 12-inch fab plans were mothballed. SiS was fabless again.

Thursday's deal brings to an end the boardroom saga between the two companies, with both sets of corporate officers approving the deal. In addition to a capacity crunch, UMC cited an improved economic environment as another reason behind buying the fab, which officially belonged to SiS Microelectronics Corp. (SMC). It was also able to get the fab for just over 1.3x SMC's book value ($240 million), instead of spending more than a billion dollars and over a year to build a new state-of-the-art facility.

UMC will issue 357 million new shares to accommodate the acquisition, the company said. A spokesman said the fab should be rapidly integrated into the UMC operations, but declined to give a timeline. There will be no staff cuts, he said. He also declined to elaborate on whether the company had plans to increase the fab's capacity this year or introduce more advanced process technology.

-Mike Clendenin

EE Times

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