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Taiwan foundries to cut chip production this quarter

Posted: 12 Jan 2005 ?? ?Print Version ?Bookmark and Share

Keywords:semiconductor? wafer? 300mm?

The number of chips rolling out of Taiwan's foundries will continue to decline this quarter, as the demand picture turns cloudy and fables customers try to eat through excess inventory.

One hopeful source of higher selling prices - the 0.13?m node -- is also at risk of taking a hit, some analysts said, as United Microelectronics Corp. (UMC) and Chartered Semiconductor Mfg lower prices to grab more wafer starts from market leader Taiwan Semiconductor Mfg Co.

"We are getting more conservative about ASPs as we see pricing pressure across the board, not just in mature geometries," said Rick Hsu, semiconductor analyst as Nomura Securities in Taipei.

Yet any but the largest firms looking to switch horses for their 0.13?m products will find it harder to do so, locked in by the high cost of mask sets. Taiwan's top foundries also use different low-k materials, making a change more challenging.

Pricing pressure is greatest at 0.25?m and 0.18?m, as a host of foundries across the region scramble to win orders in the traditional low season. Singapore's Chartered Semiconductor may also emerge as a source of price erosion for 0.13?m, as it looks to increase volumes.

At the end of last year, the foundry secured more than $1 billion in loan commitments to finance equipment purchases for its Fab 7, which will use 300mm wafers to make chips based on 0.13?m, 0.11?m and next-generation 90nm process technologies.

Analysts do not see China's Semiconductor Mfg Int. Corp. as a significant source of price competition for 0.13?m -based logic chips. "SMIC is trying to undercut but they don't have the volume to do so," Hsu said. Nor do they have the comparable yields.

UMC is also likely to turn more aggressive. Analysts estimate first-quarter utilization at UMC could drop into the 55 percent to 65 percent range, with its 300mm wafer utilization dipping below that. First-quarter estimates for utilization at TSMC range between 75 percent to 80 percent. That contrasts with a little over 90 percent for TSMC last quarter and 70 percent to 75 percent for UMC, according to analyst estimates.

In November, TSMC Chairman Morris Chang said first-quarter wafer shipments would "not be very strong" because he expects customers to wrestle with inventory reduction through at least then. He also noted his belief that the industry wasn't headed for a major downturn.

"Visibility is short," said Hsu "But we take the view that recovery should start to kick in during the second quarter."

Some analysts expect this quarter to be the trough for TSMC, but believe UMC may take another quarter until it feels a moderate recovery. "TSMC is doing better because of good execution This year the gap will widen between the two companies," said Warren Lau, semiconductor analyst at Macquarie Securities in Hong Kong.

UMC is being weighed down by a high concentration of customers on its advanced technology - namely Xilinx and Texas Instruments. Xilinx will probably hand over some orders to Toshiba starting this quarter. And TI is reportedly seeing better yields at TSMC, sources said.

- Mike Clendenin

EE Times

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