(Nikkei BP Group)
(No.1 High-Tech News Site in Japanese)
| Malaysian IC Wafer Fabs Yet to Start Operating
December 17, 1998 (KUALA LUMPUR) -- Two government-backed advanced wafer
fabrication plants at the Kulim Hi-Tech Park in Malaysia have yet to
get off the ground.
|Sources close to the projects said they were affected by the global chip
market downturn and the inability to raise local or foreign funding.
Such delays underline the severity of Malaysia's battered economy and
its souring investment climate. The two fabs, costing over US$2 billion,
were supported by the government investment arm Khazanah Nasional Berhad.
Atmel Corp. and VLSI Technology Inc. of the United States are technology
partners in the fab projects.
Announced amid much fanfare in October 1997, the fabs were expected to
make Malaysia a force in front-end microchip manufacturing. The country's
relatively inexpensive labor costs already make it a popular manufacturing
site for back-end assembly and testing.
Construction had been set to begin in early 1998, and the fabs were planned
to be operational by the third quarter of 1999, with each fab producing
25,000-28,000 units of 200mm wafers monthly using 0.25 micron technology.
However, construction of the fab facilities has yet to begin.
Donald Colvin, Atmel's chief financial officer and vice president, said
the company had not decided to pull out yet, but that financing was
"rather tight" due to the depressed microchip market and worldwide credit
"The semiconductor sector is in the middle of its worst down period in
the last 35 years, and this has pushed out the market need for this
new fab. Atmel does not need to build a fab that the market does not
require," he said.
Colvin explained that a revised plan with joint-venture partner Khazanah
Nasional is still on target to meet expected market requirements, but
that it is subject to obtaining funds.
He did not say when the project is scheduled to begin but suggested that
2000 is not a "drop dead deadline."
Atmel had a 60 percent stake in the venture and Khazanah Nasional the
remaining 40 percent. The joint venture had an initial capital layout
of US$830 million of which US$275 million was to be funded by equity.
The San Jose, Calif.-based Atmel is a producer of nonvolatile memory
chips, microcontrollers and programmable logic devices. It underwent
a restructuring in the middle of this year, and laid off 650 staff.
Also, it cut production at its fabs in France and Colorado Springs,
Sunil Mehta, vice president and treasurer of VLSI Technology, indicated
that a lack of financing also was hampering the other large fab project,
led by local start-up Wafer Technology Malaysia Sdn Bhd (WTM). It is
expected to cost US$1.2 billion.
"One of the conditions of our involvement requires WTM to be able to
obtain third-party financing for the project. Currently, we do not have
any indications that bank financing has been arranged, so no firm contracts
have been drawn up," Mehta said.
WTM CEO and president Cyril Hannon said that the fab remains on course
despite the delay.
"Malaysia's interest in the fab has not deteriorated, but we've taken
time to rationalize the project as we move forward," Hannon said.
Hannon noted that the company is aiming for 0.18 micron technology. He
said the fab is scheduled to start by the latter half of 2000. Hannon
added the projected costs of US$1.2 billion for the fab may have "incremental
rises for equipment and tools."
A source close to the WTM and Atmel projects explained that the fabs
are unlikely to be operational until 2001 because of the time needed
to construct and equip advanced wafer fabs.
WTM had been expected to convert and upgrade an older fab facility to
serve as a pilot line for training, process development and customer
On the collapse of previous fab ventures in Malaysia, Hannon said: "The
market made the decision. There were several irons in the fire and it's
prudent that market forces determined who should survive."
(Julian Matthews, Asia BizTech Correspondent)
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