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SCMP Reporter

The concentration of wafer fabrication and assembly plants in the Asia-Pacific region is set to rise with attempts by Singapore, Hong Kong and Chinese Government agencies to convince semiconductor companies to move into their industrial parks.

  The image of wafer fabrication in Asia is typically associated with high-volume DRam plants in Japan, Taiwan and Korea, with some activity in custom chips and microprocessor assembly in Malaysia and Singapore.

  While semiconductor stocks in North Asia and North America have been hit hard by falling DRam and microprocessor profit margins, semiconductors are not a risky business for all, despite the gloomy outlook coming from many stock analysts.

  The competitive campaigns of various Asian cities to entice semiconductor investment is evidence of the perceived growth potential of this important technology industry segment.

  The central processing unit within a personal computer, while the most visible example of a semiconductor at work because technological advances and high volumes have brought it to the attention of PC buyers worldwide, is not a good example of a typical semiconductor.

  There is much more than just a microprocessor or memory chip inside a PC these days.

  Rising semiconductor content is not only evident in PCs but telecom devices, car parts and televisions, as new technology gives system designers the freedom to compact many more functions on to a piece of silicon. 'Systems on silicon' are the new industry buzzwords.

  This rise in the percentage of silicon content is fuelling demand for more manufacturing capacity and acts as a buffer against the likely margin drop and reduction in sales growth that has been experienced in DRam.

  Singapore's Economic Development Board has assisted a Japanese consortium, led by the world's fourth largest IC (integrated circuit) manufacturer, Hitachi, to secure land, labour access and water rights for a new wafer fabrication plant in Singapore. The European group SGS-Thomson last week confirmed a major expansion at its Asia-Pacific corporate, marketing, manufacturing, testing and assembly and logistics headquarters, also in Singapore.

  SGS-Thomson's investment plans in the Ang Mo Kio Industrial Park will dwarf its previous capital investment in the city, labelled by vice-president for strategic planning, Alain Dutheil, as 'the electronics hub of Asia', and will almost double its total investment in the region since it first set up in Singapore almost 30 years ago.

  It had previously invested S$770 million (about HK$4,229.61 million) in Singapore and S$1.4 billion in the region. The new wafer fabrication plant will cost about S$1 billion when it ramps up to full production over the next five years.

  Motorola, ranked by Dataquest as the fifth largest semiconductor company worldwide, is advertising on the World-Wide Web for project engineers and technical staff for a new wafer fabrication plant expected to operate alongside the current facility in Hong Kong's Tai Po Industrial Estate.

  This concentration of wafer fabrication engineering expertise is what Hong Kong and Singapore - and eventually southern China - hopes will result in a perpetuation of high-technology manufacturing investment.

  Singapore's EDB calls it clustering and is bold enough to say it wants to accommodate 25 new wafer fabrication plants within its borders in the next five years. Singapore's overseas industrial estates, such as the Chinese Suzhou project, would also be likely venues for the promotion of clustering.

  SGS-Thomson, which will commission a joint venture test and assembly plant and circuit design centre in Shenzhen within the next three months, acknowledges that Singapore was the easy choice for wafer fab investment. Mr Duthiel cited the dynamic Asia-Pacific market, the availability of trained engineering staff in Singapore and the fact that vacant land was available adjacent to its existing plant as the major reasons for the decision to choose Singapore for the next wafer investment.

  However, a wafer development in southern China could still be a long way off, even though Intel and SGS-Thomson have committed to test and assembly operations in the PRC.

  'It took SGS-Thomson 15 years to commit to a wafer plant after first setting up a back-end operation in Singapore,' Jean-Claude Marquet, regional vice-president for SGS-Thomson, said.

  He said the emergence of the Asian electronics industry in the last half decade from a 'cheap and dirty' reputation had contributed to SGS-Thomson's emphasis on its Asia-Pacific business.

  'There has been a very rapid change in product complexity in the last six years,' Mr Marquet said. 'Companies in Korea, Taiwan and Singapore are as sophisticated as the North American, Japanese and European producers.'   He said the new Singapore factory would be able to look after between 10 and 12 per cent of the company's capacity once established. A second eight-inch wafer plant in Europe, also likely to be commissioned within two years, would take a similar percentage of production capacity.

  'But this is not enough to absorb the anticipated growth in the semiconductor market,' Mr Marquet said. 'On paper, it looks as though we would need to build two new wafer plants every year just to keep up with a growth of 25 per cent.'   He said there were no immediate plans in selecting a new batch of wafer fabrication sites but said it would make sense to consolidate in existing areas.



Governments of Hong Kong, Singapore and China all competing for semiconductor