UMC to invest $6.2B in China foundry

United Microelectronics Corp. is entering into a three-way agreement venturing in a new foundry in Xiamen, China. According to the Taiwanese chipmaker, the foundry will be a joint venture with a total investment of $6.2 billion, aimed at producing 50,000 12-inch wafers a month using 55nm and 40nm process technologies.

The two other partners in the foundry are the Xiamen Municipal People's Government and Fujian Electronics and Information Group. UMC expects its funding to progress in installments starting in 2015, pending approval of the Taiwan government.

To date, China has had limited success developing its chipmaking capabilities. For example, the country's largest foundry, SMIC, is just starting to ramp a 28nm process with help from a deal struck in July with Qualcomm.

SMIC's output is dwarfed by the China fabs of SKHynix and Intel. But a fire last year set back production at the SKHynix fab, and a supplier said Intel's Dalian fab is running significantly below capacity.

The Taiwan government prevents its foundries such as TSMC from transferring their latest process technology to China, said Bill McClean of IC Insights. That's likely why the new UMC joint venture will use relatively mature 55 and 40 nm processes.

TSMC is already ramping a foundry in China that IC Insights estimates will have 2018 sales of about $900 million, less than a third of SMIC's projected sales.

China seems to be shifting its semiconductor strategy to fabless companies, said McClean in a talk given in September. Intel agreed to invest $1.5 billion in the Spreadtrum/RDA combination in September. In addition, China has amassed a multi-billion-dollar war chest to support other fabless deals, including the purchase of Omnivision.

Nevertheless, UMC's chief executive Po-Wen Yen praised the Xiamen joint venture and China's growth in chips in a press statement:

China's domestic semiconductor market has become the world's largest. Current levels of domestic semiconductor demand far outweigh China's production supply, with semiconductor import revenue surpassing that of crude oil. As the semiconductor industry is closely monitored by the Beijing government, China has implemented national policies to expedite the development of its domestic IC design and semiconductor manufacturing through a multi-prong approach to support and expand its IC industry.

We believe our decision to establish local manufacturing is our best approach to benefit from this substantial China growth and to gain additional foundry opportunities worldwide. The joint venture not only provides our customers the option to source IC components that are made in China, but also locates us within the Chinese market to enhance UMC's service and support for local fabless customers. We anticipate the joint venture can propel the next round of UMC's foundry business growth...

Xiamen has a well-established infrastructure to supply sufficient local engineering talent to establish a world-class foundry base for the company.

UMC already owns 86.88 per cent of HeJian Technology (Suzhou) Co., Ltd., a foundry that makes 8-inch wafers for customers in China and other Asian countries.

- Rick Merritt
??EE Times