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Microchip shelves China assembly plans

Posted: 05 Mar 2004 ?? ?Print Version ?Bookmark and Share

Keywords:microchip technology? 8-bit microcontrollers?

Microchip Technology Inc., the world's top seller of 8-bit microcontrollers, has temporarily shelved plans to build a test and assembly plant in China, its second largest market after the U.S.

Microchip CEO Steve Sanghi said the project would take too long to bring online, risking the possibility of cranking up its lines just as the current semiconductor cycle starts winding down. Instead, the company will expand its Asian manufacturing presence at an established facility in Bangkok, Thailand.

Last year, Microchip had hinted that it would spend $50 million to $70 million on a plant in China, where companies like Intel Corp., Motorola Inc, Philips Semiconductors and Infineon Technologies have committed more than $2 billion to build up back-end production lines.

But Sanghi said he was unable to find an existing site that was suitable for a quick ramp-up. "We'll have to build it to our specification from green field and that's a year to a year-and-a-half long process to establish the infrastructure. We felt that the plant will come too late to meet the current surge in demand," Sanghi said.

Other countries that had been contenders for the new facility included Thailand, the Philippines, India, and Vietnam. Microchip will expand its Thailand operations enough to handle about three years worth of growth.

Sanghi said he was still committed to a China factory and would return there next year to continue his hunt for a location. Microchip currently has a small, 10-year-old joint venture facility in China, but may need a greater presence if the market keeps ringing up double-digit sales growth for the company.

"For such a large growing market it's important to have a [manufacturing] presence, but not absolutely necessary. It's not hurting us. But if we want to expand our business and do business with lots of local customers and sell to them in local [currency], then you need to have some cost in renminbi to be able to offset that and so a manufacturing presence becomes more of a need," Sanghi said.

Asia is Microchip's largest sales region, accounting for about 42 percent of its business. Although the U.S. is by far the company's largest market, China comes in at No. 2 and Taiwan No. 3.

During the past several years, China has grown at least 30 percent annually for Microchip - sometimes pushing 50 percent. It's not surprising, given that China is a major producer of consumer white goods, and is increasing its global share of PC- and industrial-related goods, such as electrical meters and automotive parts.

Yet even with China's rapid growth, the U.S. will continue to dominate for some time. "I do not think it will close the gap entirely," Sanghi said.

But other Asian markets, particularly India, will start to increase in importance. Sanghi ranked India second after China for growth potential, saying its pace of technology development has been "incredible" during the past 10 years.

The company is expanding its design center in Bangalore by several people and opening new offices in Mumbai and New Delhi. Across the region, Microchip is also adding sales offices in Thailand, Malaysia, and the Philippines.

- Mike Clendenin

EE Times

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