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Regulations may hinder UMC's China foundry buyout

Posted: 18 Aug 2009 ?? ?Print Version ?Bookmark and Share

Keywords:foundry? UMC He Jian buyout? Taiwan IC market?

United Microelectronics Corp.'s acquisition of Chinese foundry He Jian Technology Co. Ltd could be in jeopardy because of Taiwan government regulations.

This is according to a report by the U.S.-Taiwan Business Council on the Taiwan semiconductor market states that Taipei is standing in the way of the deal because investment regulations stipulate that there can be no more than three Taiwan chip fabs in China, and that all three are spoken for.

UMC said in April that its board of directors voted to pay $285 million to acquire the 85 percent of He Jian that UMC did not already own.

The three Taiwan wafer fabs in China include one each by ProMOS Technologies and UMC's larger rival, Taiwan Semiconductor Manufacturing Co. Ltd. The third fab has not actually been built, but belongs to Powerchip Semiconductor by virtue of an application filed a few years ago, according to the report.

"What Taipei is really saying is that China chip investment regulations have not changed one iota since 2003, when rules enacted by the previous Chen Shui-bian administration determined that only three chip plants using older technology, 8-inch wafers, could be built by Taiwan chipmakers in China until the end of 2005," the report argues.

The report is critical of the stance of the Taiwan government, saying they bar Taiwan companies from building factories in China that companies from other countries are able to build. Taiwan fabs in China are among the least advanced technologically, according to the report.

The report maintains that the only minor change to the government's policy since 2003 has been to allow TSMC to use 0.18-micron process technology in its China fab. The report notes that other companies in China use far more advanced process technology, including the 45nm technology employed by Semiconductor Manufacturing International Corp.

UMC said in April that it was considering building its own fab in China but decided to acquire He Jian because it already had a facility up and running.

The report from the U.S.-Taiwan Business Council also criticizes the Taiwanese government's plan to bail out DRAM makers through the creation of Taiwan Memory Co. and maintains that broader issues of consolidation and high levels of debt among Taiwan's DRAM players remain unresolved.

- Dylan McGrath
EE Times

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