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Taiwan's chip industry set to be world's largest in 2011

Posted: 02 Jun 2011 ?? ?Print Version ?Bookmark and Share

Keywords:IC industry? Taiwan manufacturing? semiconductor market?

Taiwan is set to be the world's largest semiconductor materials market in 2011, according to Semiconductor Equipment and Materials International (SEMI). It will overtake Japan in the No. 1 spot as Taiwan's market grew from $6.87 billion in 2009 to an estimated $9.11 billion in 2010, representing a growth rate of 36.2 percent.

Data showed that the global semiconductor material market rose 25 percent last year from the previous year to a value of $43.55 billion. That represented a new high since 2007, when it recorded $42.67 billion.

Amid this growth, Taiwan's government is taking steps to improve the competitiveness of the domestic chip industry, which accounts for nearly half of the market capitalization on the Taiwan Stock Exchange (TSE). Taiwan's National Science Council (NSC) has been fostering ties between universities, research organizations and semiconductor companies to develop new technologies to enhance the island's technological edge in the market.

Taiwan's National Chip Implementation Center (CIC), for one, has announced a new method of fabricating chips that cuts development time by two-thirds, while also slashing costs in half. The new technology stacks chip modules on top of each other, thereby enabling higher density of electronic components on a circuit board. The new method could lead to smaller mobile devices. NSC has called Taiwan Semiconductor Manufacturing Co. (TSMC)the world's biggest chipmakera key investment partner in the new technology, which TSMC Chairman Morris Chang has referred to as a paradigm shift.

TSMC posted roughly $1.2 billion (NT$36.28 billion) in net profit in the first quarter of 2011. Morgan Stanley said the firm's better-than-expected first quarter earnings reflected its efforts in controlling operating expenses and maintaining its gross margin.

"Our thesis for investors is to take a more cautious stance on the foundry sector overall, but to overweigh TSMC on its significant exposure to smartphones and tablets," the brokerage said. "The fact is TSMC is outperforming peers, and communications is outpacing other sectors to give us more confidence in the thesis."

TSMC also recently said that it estimates the company's sales for 2011 will rise 20 percent from 2010 in U.S. dollar terms. In addition, the company said it also expected its sales for the second quarter would rise 3.4 percent to 5.3 percent from the first quarter.

In addition, TSMC has announced that it will double output capacity to an equivalent of over 20 million 200mm wafers in five years. It said that was to meet strong demands likely to be driven by three emerging directions guiding hi-tech industry developments. Those are human-machine interface, digital-media technologies and a quickly diversified environment.

Other major semiconductor firms in Taiwan include UMC (United Microelectronics Corporation) and Mediatek, which is a fabless semiconductor company.

With their focus is on marketing, design, masking, production, testing, and packaging, Taiwan's semiconductor manufacturing firms have had a huge effect on the momentum of vertical disintegration in the global industry. Taiwan exerts a strong influence over the Chinese semiconductor market. Therefore, global upstream materials firms all maintain an active presence in Taiwan, from where they can service the entire Asia Pacific market.

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