Measures Implemented to Boost Two Trillion NT Dollar Industries Plan

This year, the Ministry of Economic Affairs (MOEA) will focus on boosting the local-production ratio of Taiwan's chip-making and display-panel-making equipment as the key point of its strategy to boost the production value of the island's chip and display-panel industries to new highs.

This is a follow-up to the plan, announced several years ago, to increase the value of each of the two industries to NT$1 trillion by 2006. The plan was dubbed the "Two Trillion NT Dollar Industries Plan." It was formulated in response to the need to support Taiwanese industries that retained technological and production advantages in the face of rising competition from mainland China in traditional industries. Chips and display panels were chosen because Taiwan was already a leading supplier worldwide in these two areas.

The MOEA points out that although the island's chip and display panel makers have spent NT$300 billion to NT$400 billion (US$9.1-12 billion) in each of the past several years on production equipment, only about 7% of the chip-making equipment and 9% of the display-panel equipment that the money paid for was made by local companies. Most of it came from American, Japanese, and European suppliers.

The MOEA's target is to boost the local-production ratio to 12% for chip-making equipment and 15% for panel-making equipment next year.

The ministry's effort will begin with the development of key components and subsystems for display-panel processing equipment, which officials say require less complicated technology than does the manufacturing of chip-making equipment. Parts for chip-making equipment will come later.

The MOEA's Industrial Development Bureau (IDB) suggests that local equipment suppliers should focus on the development of 12-inch fab processes as well as fifth-generation and beyond liquid crystal display (LCD) processes so as to keep pace with those industries. The Bureau also urges local producers to leave space for the upgrading of their products, so that they can be retrofitted with such advances as nanometer processing and micro-electro-mechanical systems in the future.

Size Matters

The massive size of the machines needed for making sixth-generation display panels offers an excellent opportunity for Taiwanese suppliers to co-produce the machines on the island together with foreign suppliers, the Bureau believes, since the weight and size of the equipment poses a severe burden if the products have to be shipped over long distances.

On the other hand, the IDB is pessimistic about the ability of local companies to develop chip-making machines on their own because of the extremely complicated technology involved in front- and back-end processing. However, local suppliers can carve out a niche for themselves by developing parts and peripherals for those machines.

There are more opportunities in back-end than in front-end processing equipment, the IDB feels; and in fact, the increasing acceptance of their packaging and cleaning machines by local chipmakers proves that local manufacturers are capable of rendering the necessary quality.

In the electronic materials sector, local manufacturers of chip-making materials have done much better than makers of LCD materials, with the former supplying 42% of domestic demand last year and the latter only 17%. The IDB hopes to boost the domestic production ratios to 75% for LCD materials and 50% for chip-making materials by 2008. The MOEA wants foreign suppliers to help meet that goal by moving in to produce materials on the island, lured by such incentives as relatively low production costs.

LCD materials heavyweights such as Corning Inc. of the U.S. and Asahi Glass of Japan have already opened glass substrate plants in Taiwan.

In addition, the local Gallant Precision Machining Co. (GPM) and FoxSemicon Technology Inc. have responded to the MOEA's call by expanding production this year. FoxSemicon poured NT$200 million (US$6 million) into an expansion project last year and plans more in the years ahead, boosting its total investment in the industry to NT$5 billion (US$151.5 million). GMP acquired technology from a Japanese equipment supplier last year, and plans to inject NT$300 million (US$9.1 million) into the production of IC packaging equipment in 2004.

Lobbying for Investment

The MOEA is vigorously lobbying ASML of Holland and Unaxis of Switzerland, along with other equipment suppliers, to invest in Taiwan. ASML, a leading world supplier of photolithography equipment, is assessing the feasibility of investing NT$17.5 billion (US$530 million) in a Taiwan plant to develop equipment and processes for making seventh-generation flat-panel displays; and Unaxis, Europe's largest supplier of vacuum solutions, plans to invest NT$530 million (US$10.6 million) in a technology development and production facility here.

Many leading international equipment suppliers, impressed by the booming development of the chip-making and LCD industries in Taiwan, have themselves opened facilities on the island. For instance, Applied Materials, the world's No. 1 supplier of chip-making equipment and materials, set up an international logistics center here last year; and the Japanese company ULVAC, the world's second-biggest producer of LCD-making equipment, has opened a technology and maintenance center in southern Taiwan through its local branch.

Applied Komatsu Technology of Japan, the world's top supplier of chemical vapor deposition (CVD) equipment for making LCD panels, recently licensed its technology and contracted Taiwan's Aerospace Industrial Development Corp. to manufacture flat-panel display parts for it. The Japanese company has also worked with the island's government-backed research body, the Industrial Technology Research Institute (ITRI), in the development of maintenance equipment and process technology.

Japan's YAC and Taiwan's Chinese United Semiconductor Equipment Manufacturing Inc. forged an alliance for the production of chip-making and plasma-display equipment last year. Also in 2003, SET of the U.S. teamed up with ITRI and a local private company to produce silicon-wafer etching and cutting equipment.