February 12, 1998 (TAIPEI) -- Greater horizontal and vertical integration is being implemented in Taiwan's semiconductor industry, where companies in the upstream and downstream business arenas have traditionally acted separately from each other.

Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) and United Microelectronics Corp. (UMC), for instance, engaged in wafer fabrication, while such companies as Advanced Semiconductor Engineering Inc. (A.S.E.) and Orient Semiconductor Electronics Ltd. handled testing and packaging.

Yet recently, such firms have begun to engage in horizontal and vertical integration, in efforts to win larger orders.

Mosel Vitelic Inc., for instance, an IC manufacturer, invested NT$5 billion in 1997 to establish a testing and packaging plant.

TSMC, Acer Inc. and South Korea's Anam Industrial Co. invested in similar ventures, while UMC, Siliconware Precision Industries Co., Ltd., and Realtek Semiconductor Co., Ltd. cooperated in a similar deal.

Also, DRAM maker Powerchip Semiconductor Corp., and packaging giant Caesar Technology Inc. established a testing venture last year.

Powerchip, which is the DRAM arm of Umax Data Systems Inc., is the only IC company in Taiwan that engages in both upstream and downstream operations (fabrication, testing and packaging).

Because the company gets both equipment and technology from Japan's Mitsubishi Corp., all of its products are built to Mitsubishi's specifications.

TSMC's strategic alliance with Caesar Technology was broken because TSMC transferred the shares that it owned to Macronix International. Industry watchers said that these alliances have proven quite successful.

The industry watchers believe that such integration is an irreversible trend for Taiwan's semiconductor industry.

(Commercial Times, Taiwan)