STATS-ChipPAC's Mainland Chinese Project Unnerve Taiwanese IC Assemblers

Taipei, Nov. 9, 2005 (CENS)--The Singapore-headquartered IC assembler STATS-ChipPAC Ltd. Has recently rattled Taiwanese IC assemblers' nerves with its plan to open a 200mm wafer bumping operation in mainland China to handle gold bump services for liquid-crystal display (LCD) drivers.

Taiwanese industry insiders point out that the project suggests the Chinese mainland's nascent IC packaging and test market is expanding rapidly, straining the supplies.

Executives of the Singapore-headquartered chip assembler pointed out that the mainland's leading LCD panel suppliers including BOE Technology Group Co., Ltd. And SVA Information Industry Co., Ltd. Have kicked off volume productions at their fifth-generation factories. The mainland's silicon-foundry providers including Semiconductor Manufacturing International Co. (SMIC), He Jian Technology (Suzhou) Co., Ltd., Taiwan Semiconductor Manufacturing Co.'s (TSMC's) mainland Chinese factory and SinoMOS have begun targeting LED-driver market and tapping orders from major suppliers including Solomon Systech Ltd., Novatek Microelectronics Co., Ltd., Himax Technology Inc. and Samsung Electronics.

Taiwanese industry watchers point out that most of LCD-driver suppliers in Taiwan and Hong Kong like Novatek, Himax and Solomon mostly have their chips made at Taiwanese foundry suppliers before the third quarter. But since last quarter, these suppliers have delivered a large amount of their contracts to mainland Chinese foundry suppliers.

Nevertheless, the foundried wafers have been mostly sent back to Taiwan for packaging and test processing on grounds that the service capacities in the mainland remain short. STATS-ChipPAC's recent expansion plan in the mainland suggests that it will soon lure the orders away from Taiwan's chip assemblers.

Despite the mainland's lucrative demands for packaging and test service for LCD drivers, none of Taiwan's assemblers are even able to share a slice there due to the Taiwan government's ban on their investments in mainland China on the pretext of national security.

The mainland-bound investment taboo has become a windfall to Taiwanese suppliers' major international competitors like STATS-ChipPAC, currently the world's fourth-largest chip assembler. Advanced Semiconductor Engineering (ASE) Inc. of Taiwan is ranked as the world's No. 1 player.

The Singaporean chip assembler's new wafer-bumping and wafer-test factory is near TSMC's mainland factory, inspiring the speculations that the company is targeting TSMC's orders. STATS-ChipPAC procured TSMC's solder-bumping production lines early this year. The company plans to begin volume production at the new factory in mid-2006.

Taiwanese industry insiders are worried that STATS-ChipPAC will soon add tape carrier packaging (TCP) and chip-on-flex (COF) packaging and test to its manufacturing capability. Taiwan's International Semiconductor Technology Ltd., Chipbond Technology Corp. and Siliconware Precision Industries Co., Ltd. Have specialized in the two categories.

Siliconware Chairman W.P. Lin recently commented at his company's institutional-investor conference that everything is not too late for the Taiwan industry if the government lifts the mainland-bound investment ban by the end of this year. Otherwise, local manufacturers will have to face the reality of losing orders to mainland Chinese competitors.