February 9, 1998 (TAIPEI) -- Hsinchu-based United Microelectronics Corp. (UMC) reiterated its plan to become the world's largest foundry service provider.

At a UMC-sponsored technical workshop held recently in Santa Clara, CA, UMC Chairman Robert H.C. Tsao restated the company's intention to be number one. "UMC is determined to excel globally in foundry service," he said.

In terms of current foundry service volume, UMC is second only to Taiwan Semiconductor Manufacturing Co. (TSMC), also located in the Hsinchu Science-based Industrial Park, which is known as Taiwan's Silicon Valley. The world's third largest is believed to be Singapore-based Charter Semiconductor.

"Our short term goal is to surpass TSMC within two years," Tsao said.

Historically, Taiwan has shouldered a substantial portion of manufacturing tasks for innovations brewed in California's Silicon Valley since the Hsinchu Science-based Industrial Park was established in late 1980.

"While most design work is still concentrated in Silicon Valley, Taiwan is highly competitive in manufacturing management. 'Designed in Silicon Valley and made in Taiwan' is a very sensible way to divide the labor," Tsao said.

Semiconductor industry statistics show that 1996 revenue of fabless firms (design houses) totaled US$6.8 billion, accounting for 4.8 percent of the total earnings by the semiconductor industry worldwide. The amount will reach US$22.8 billion, or 7.8 percent of the industry total in 2001, a 27.4 percent average annual growth rate.

Demand for foundry service to make newly-designed chips is likely to escalate proportionally.

UMC's foundry clientele is primarily composed of U.S.-firms. Among them are ESS Technology Inc. of Fremont, Advanced Micro Devices Inc. of Sunnyvale and Trident Microsystems Inc. of Mountain View, all in Silicon Valley.

The UMC-USA office is strategically based in Sunnyvale, CA to spearhead sales efforts. UMC started 8-in. services in 1995, and currently offers 0.25-micron resolution technology with 0.18-micron resolution slated for the second quarter of 1999.

UMC was founded in 1980 as the first semiconductor manufacturer in Taiwan. After 15 years of designing and making its own-brand IC chips, UMC successfully transformed itself into exclusively a foundry service by forming strategic alliances with 11 U.S.- and Canada-based IC design firms.

In order to concentrate on its foundry business, UMC has spun off its divisions in design, consumer electronics, multimedia and communications.

At the same time, UMC is expanding horizontally to form the UMC Group, with three new foundry companies inside the Hsinchu Park: United Integrated Circuits Corp. (UICC), United Semiconductor Corp. (USC) and United Silicon Inc. (USI). UICC, in which UMC holds a 38.7 percent share, suffered a major fire in October, with estimated damage of US$430 million.

But the orders committed by UICC were not lost. UMC and the new USC, along with Holtek Microelectronics Inc., another Park neighbor, took over while UICC engages in recovery construction, which will take about one year.

UMC also has committed US$2.4 billion to construct two more 8-in. fabs, one in Hsinchu Science-based Industrial Park and the other in Tainan Science-based Industrial Park, starting the end of 1997 and the first quarter of 1998, respectively.

The UMC Group aims to have six 8-in. fabs coming online by 2000. The plans underscore the optimistic outlook held by the UMC Group about the long-term market for foundry services, experts said.

(Charlene Huang, Asia BizTech Correspondent)