TSMC and UMC Step up Investment Plans in China

Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC), reportedly the world's top-two makers of built-to-order chips, are stepping up production investment plans in China.

Capital-equipment vendors say UMC has informed them of tooling a 300-mm wafer fab to be invested in Xiamen, southern China in March 2016, prompting expectations that the factory will start up in H2, 2016.

TSMC is still assessing the plan to set up a 300-mm wafer fab in China, looking to Chinese authorities to agree to its proposal to fully own the factory as precondition to go ahead with the investment.

UMC has been approved by the Taiwan government to indirectly invest in the Xiamen factory after pledging to increase investment in its 300-mm wafer fab in the Southern Taiwan Science Park, to add 3,000 jobs and invest over US$1.3 billion on the island each of the next three years beginning 2015.

Construction of the Xiamen factory will begin in 2015 with initial capital of US$710 million, to compose of US$450 million paid by UMC and the remainder by its Chinese subsidiary, Hejian Technology Corp.

UMC, in addition to capital investment, will license its 40-nanometer and 55-nm process technologies to the factory, which will produce chips designed on these specs initially.

Although the equipment that UMC has ordered from the vendors for the Xiamen factory is for 40-nm and 55-nm production, UMC has asked the suppliers to make the machines scalable to 28-nm process to be in line with China's semiconductor industry policy.

Beijing is offering incentives to investors to  develop the 28-nm process technology in China, with UMC expected to apply for such benefits to purchase equipment.

Ambition to Build Homegrown ICs 

China, recognized as the world's biggest IC-chip market that depended on imports to meet US$232.2 billion in 2013 demand, plans to cultivate its homegrown semiconductor industry by investing RMB120 billion (US$19.6 billion) initially.

However UMC, required by the Taiwan government, must put 14-nm process technology to pilot production this year and volume production next year before the Xiamen factory starts making 28-nm chips.

Compared with UMC, TSMC has an edge in applying for China's incentives for 28-nm tooling investment once it decides to set up a 300mm wafer fab there. TSMC will put its 16-nm process to volume production in Q3, 2015 at its Taiwan factories and end Q4, 2014 with 21% of output on 20-nm process.

TSMC Chairman Morris Chang recently said its decision to set up a 300mm wafer fab in China hinges on the mainland's industry policy, conceding that TSMC has little choice if China will only use chips made locally, adding that TSMC plans to set up 28-nm process capacity to account for sub-10% of its total capacity there.

 

TSMC's spokespeople said the investment plan is still on the drawing board without having budgeted for such capital expenditure in 2015.

Capital equipment suppliers predict TSMC to set up such a facility in China by 2016 for the Taiwan government only permits the island's chipmakers to invest in wafer fabs in China that is two generations behind their latest technologies in Taiwan.

Industry executives say TSMC may still choose Shanghai for its 300mm wafer fab because its 200mm fab is in the same city, where semiconductor industrial clusters have developed, also reiterating  Chairman Chang's statement, emphasizing TSMC would lose the huge market to Samsung and Intel by forsaking such opportunity. (KL)