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Chartered cuts spending as foundry market slows

Posted: 01 Apr 2001     Print Version  Bookmark and Share

Keywords:chartered semi  foundry  asian fabs  wafer demand  semiconductor slowdown 

Chartered Semiconductor Manufacturing has released a strong year-end sales report but is bracing for a much weaker first quarter by cutting its capital budget and delaying the opening of its newest fab by a year. The company's actions reflect the findings of a new report on the foundry market, which shows demand for wafers is slowing dramatically, impacting Asia's foundries.

"We see end-market demand slowing down," said Kevin Meyer, vice president of business development for Singapore-based Chartered. Besides slipping PC demand, he expects fewer customers to line up for networking gear and handsets—trends that will eventually translate into lower orders and dropping revenues for foundries. Chartered posted respectable revenue of $318.7 million for the fourth quarter, and $1.1 billion for the year 2000.

With lower revenue on the horizon, Chartered has pushed out the planned ramp of its Fab 7 production facility. Rather than begin pilot production this year with 200mm tools, Meyer said, the company now plans to make the site a 300mm fab, with pilot production in mid-2002 and a ramp into full production in 2003.

Other foundries also expect a weak year. UMC Group has cut its 2001 capital budget by about 10 percent, from $2.9 billion to a more conservative $2.6 billion. UMC spent $2.8 billion on capital equipment last year.

UMC saw its revenues increase sequentially every quarter from the start of 1999 through the end of 2000, but Jim Ballingall, UMC vice president of worldwide marketing, said that by the end of last year they were watching the picture shift. With customer inventory building up, UMC is expecting the entire first half of this year to be slow. "But, as that inventory gets burned off, we believe that demand will pick up again in the second half," he said. "In this industry it is hard to predict anything more than three or four months ahead."

This year predictions are especially hard. "It is going to be a foggy year," said Chuck Byers, director of communication at foundry giant Taiwan Semiconductor Manufacturing Co. Ltd.

How bad will the quarter get and how long will it last? Joanne Itow, senior analyst at Semico Research Corp., is cautiously optimistic: Demand will likely remain soft through next year, and her company's big-picture forecast calls for a global chip slowdown toward the end of this year moving into next year. A key part of that slowdown involves new fabs coming online by next year, pushing the industry into an overcapacity situation.

But that situation is not going to replicate the worldwide electronics meltdown seen in 1998, primarily because several fab projects—like the Chartered facility—have been shelved or delayed, Itow said. "A major reason for the collapse in 1997 and 1998 was overbuilding, and I do not see that kind of building happening now," she said.

Will Wade

EE Times





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