TSMC is Ranked 5 in Global Semiconductor Sales

IC Insights just released their May update to the Maclean Report. According to them:

"[The May update]...describes the big shakeup in the 1Q08 top 20 semiconductor supplier ranking (Figure 1). There are eight U.S. companies in the top 20 (including three fabless semiconductor suppliers), six Japanese, three European, two South Korean, and one Taiwanese company (IC foundry supplier TSMC) in the ranking. As shown, it required at least $1.0 billion in first quarter sales to make the top 20 ranking. Although the top four ranked companies remained the same, there were a number of "movers and shakers" up and down the remainder of the 1Q08 ranking as compared to their full-year 2007 positions."

TSMC was ranked fifth and listed as the fastest growing of all 20 companies in the list. The top four companies remained unchanged and were listed as Intel, Samasun, Texas Instruments and Toshiba. TSMC was the only pure-play foundry on the list.

According to the China Economic News (CENS),

The market-research organization ascribed the significant growth of TSMC mostly to outstanding sales at Nvidia and Qualcomm, the world`s top two fabless houses depending on TSMC for foundry manufacturing service.

Burgeoning shipments of third-generation (3G) handsets worldwide in the first quarter led Qualcomm to deliver 85 million sets of handset chipsets, pushing up the firm`s revenue for the period by 29% ( from a year earlier) to US$1.6 billion. The company was ranked the No.10 chipmaker for the first time last quarter.

Nvidia increased contracts to TSMC in the first quarter to keep up with thriving demands for its G92 graphics chips, which helped bulk up the company`s sales for the quarter to US$1.1 billion, up 37% year on year. The increase pace made the company the second best performer of the top 20 chipmakers in terms of revenue growth. Nvidia was placed on the 18th position on the top-20 list.

Yesterday CENS also mentioned Texas Instruments would be contracting both TSMC and UMC to manufacture their 45 nm chips. According to CENS:

When Texas Instruments (TI) recently announced its plan to have its 45nm base-band chips and digital signal chips made at two silicon foundries next quarter, industry watchers believed Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) would be the choice partners.

The main reason for this increase is that Texas Instruments will not independently develop process technologies below 45 nm.

Article 1: Shakeups Rock 1Q08 Top 20 Semiconductor Supplier Ranking
Article 2: Texas Instruments to Have 45nm Chips Made at Foundries

10% of Mainland Investments Remitted to Taiwan

Forbes reports 10% of all money invested in China by Taiwanese companies is remitted back to Taiwan. Forbes reports:

Companies listed on the Taiwan Stock Exchange and GreTai Securities Market had remitted home earnings equivalent to 10.30 pct of their cumulative investments in China as of the end of the first quarter to March, the Financial Supervisory Commission said.

The FSC could not pinpoint a starting point for the tallies as they take into account investments made by companies before and after their listings.

As of the end of March, listed companies had brought home from the mainland a cumulative, combined 73.9 bln twd, up by 10.3 bln from the end of 2007, it said.

The companies had cumulative, combined investments on the mainland of 717.6 bln twd as of the end of March - down by 14.5 bln from end-2007.

Of course there has been ongoing debate in Taiwan about the benefits accrued in Taiwan by investing in the Mainland. Many people here feel that this negatively impacts Taiwan's economy as it takes jobs away from Taiwanese people. As an example, many taxi drivers I speak to are ex-employees of companies that moved to the mailand and are bitter that there were no jobs for them. However, the structure of Taiwan's economy is changing and has been changing over the past few years. A 2006 Taiwan Review article noted:

According to the Directorate General of Budget, Accounting and Statistics of the Executive Yuan, in 1981 the service sector accounted for 47.23 percent of Taiwan’s GDP, while the industrial sector did so for 45.47 percent, 90 percent of which was manufacturing. In 2005, services had beefed up to 73.5 percent of GDP, nearly the same as those of developed countries like Germany and Japan, and it is expected to reach 76 percent by 2015.

It is true that many people in the manufacturing sector have lost their jobs. But the younger generation are finding more employment opportunities in the service sector or non-manufacturing based industries (e.g. IC design). Financial Services are another area where people are finding more opportunites. The China Post reported that Taiwan is aiming to become Asia's financial center. The China Post said:

The Economic Daily News quoted Chen Shu, director-general of the Financial Supervisory Commission, as saying that after incoming President Ma Ying-jeou's government is inaugurated Tuesday, he will give priority to building Taiwan into the Asia-Pacific financial center.

"During my four-year term, I will draft short-term, mid-term and long-term plans for building Taiwan into the Asia-Pacific financial center," the paper quoted Chen as saying.

Even if Taiwan doesn't manage to become Asia's financial center, the service sector opportunities are growing and, any money remitted to Taiwan from their investments on the mainland should be beneficial to the economy.

Article 1: Taiwan listed cos remit home 10.30 pct of cumulative China investments as of Q1
Article 2: Serve It Up!
Article 3: Taiwan sets sights to be a financial center

Chipmaker Shares Jump

Disruptions caused at the Hynix Semiconductor plant in China has pushed up the sport prices from DRAM modules and helped the share prices for some of Taiwan semiconductor companies increase. Taipei Times reports:

Stock prices of the nation's major computer memory chipmakers outperformed the main bourse yesterday amid speculation on further price rebounds.

This came after disruption at a Chinese plant belonging to the world’s second-largest memory chipmaker Hynix Semiconductor Inc, which could lead to an ease in a supply glut.Shares of the nation’s biggest dynamic random access memory (DRAM) chipmaker, Powerchip Semiconductor Corp (力晶半導體), jumped 0.78 percent to NT$13 yesterday, better than the turbulent TAIEX index, which fell 2.43 percent.

South Korean Hynix yesterday said the 15-hour outage at a Chinese plant operated jointly with Numonyx, a joint venture with STmicroelectronics, Intel and Francisco Partners, would not have a major adverse effect as emergency power generation activated immediately.

The affected plant, located in Wuxi, southern China, makes 100,000 12-inch wafers of DRAM chips a month, accounting for about half of the Korean firm’s total DRAM chip output. Hynix also operates an 8-inch plant in Wuxi, making memory chips used in consumer electronics.

“Hynix’s power outage may affect one week’s worth of production,” Taipei-based market researcher DRAMeXchange Technology Inc (集邦科技) said in a statement yesterday.

DRAMeXchange said the output disruption greatly boosted the spot price of benchmark DDR2 1Gb 128Mx8, which jumped 1.21 percent to US$2 per unit yesterday following an almost five percent decline during the slow season last week.

Hynix said the outage on Monday was likely to result in a US$16million to US$18 million loss in sales. It would take about two days for the plant to resume normal operations, the chipmaker said.

Article: Taiwan chipmakers' stock jumps

Motech Forms Partnership with Solar Semiconductor

Last week we noted the increased investment in the solar cell industry with many companies ramping up production. Additional news is that Motech has apparently a significant deal to collaborate with Solar Semiconductor. China Economic News (CENS) reports:

Motech Industrial and Solar Semiconductor recently agreed to collaborate on development of thin-film solar cell technology and silicon-wafer supplies shortly after Motech received Solar`s lucrative orders for 120 megawatts of solar cells.

Industry watchers estimated the orders at over NT$10 billion (US$333 million at US$1:NT$30), given that one megawatt of solar cell now sells for around NT$100 million (US$3.3 million).

Solar Semiconductor is among the top three Indian suppliers of solar modules, specializing in polycrystalline and mono-crystalline solar modules.

Article:Motech Forms Partnership With Solar Semiconductor

Taiwanese Chip Assemblers Investing in China

Powertech Technology Inc. and Advanced Semiconductor Engineering Inc. (ASE) have both been granted permission by the Ministry of Economic Affairs (MOEA) to fund investment projects in mainland China. China Economic News (CENS) says:

With the permission, Powertech will invest US$100 million to open a brand-new test and packaging factory in southern or central China to keep up with rising demands from memory-module maker Kingston Technology and other customers in the mainland.

ASE is ratified to put US$90 million into expanding an operating factory in Shanghai to keep it advantageous in the intensifying competition in the mainland`s test and packaging market.

However, in return for receiving permission to invest in the mainland, both Powertech and ASE have pledged to invest significant sums back into Taiwan. CENS says:

Powertech pledges to invest NT$8 billion (US$266 million at US$1:NT$30) over next few years to boost capacity at a factory in northern Taiwan, which was completed early this year, and increase 1,000 jobs. Also, MOEA officials said Powertech planned to inject NT$20 billion (US$666 million) into Taiwan`s operations and create 2,000 jobs in next stage of its investment plan.

For ASE, the commitment as return for government permission is to put a total of US$550 million into Taiwan`s operation and increase high-ranking jobs for Taiwanese talents over next three years.

Both companies seem to be convinced they need to invest in China. Powertech argues many of their companies are located there and to be able to service their needs they need to be closer. Whatever the reason, this investment, in the short term at least, seems to be a win-win for both the Mainland and Taiwan.

I am sure over the next few months we will see more and more Taiwanese chipset makers and assemblers investing in China. Previous legislation prevented them from doing so as there was a fear that the high-tech knowledge of these companies would be used in Chinese military applications against Taiwan. The new president Ma Ying Jeo has said he will provide more flexibility to chipmakers and follow the US government guidelines on what technologies can be manufactured in China.

Article: Two Taiwanese Chip Assemblers Approved to Invest in China

TSMC and UMC Receive Big Orders from NVIDIA

China Economic News (CENS) says:

To keep up with strong demand for its graphics chips, Nvidia Corp. will increase outsourcing to silicon foundries Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Crop. (UMC).

Chip-making equipment suppliers pointed out that throughout last quarter Nvidia had contracted TSMC to make a record 50,000 wafers of 65nm chips and UMC to make 7,000-9,000 wafers of similar chips. Although Nvidia has scaled down contract volume of G80 chips by 3-5% as part of its effort to work off overstock, the company has increased foundry contracts of its G92B, G94 and G96 chips. Accordingly, industry watchers forecast contract volume to TSMC would surge to 60,000 wafers and the volume to UMC to rise to 10,000-12,000 wafers next quarter.

NVIDIA's strong growth is good for Taiwan's foundries. I am sure these orders are well received by both TSMC and UMC. NVIDIA however is also backing VIA Isaiah processors and therefore supporting a third significant Taiwanese company. CENS says:

In competition against Intel in Mobile Internet Device (MID) market, Nvidia has decided to side with VIA by supporting its Isaiah microprocessors.

Article: Nvidia to Increase Foundry Outsourcing to TSMC and UMC

Increasing Focus on Solar Cells

Shortly after Mosel Vitelic announced they will be raising capital to expand into the photo-voltaic field, China Economic News (CENS) also reports Unitech PCB, Big Sun Energy and Sintek will also focus on solar cell production. According to CENS:

Director board of chipmaker Mosel-Vitelic Inc. recently passed a motion to issue 228 million units of Global Depository Receipt (GDP) to raise capital for expansion in photovoltaic field.

The amount of the capital to be raised is estimated at NT$6.3 billion (US$210 million at US$1:NT$30) given an average NT$27 of the company`s share price in recent weeks.

Digitimes reports Mosel Vitelic is already producing solar cells and has broken ground for a new solar cell plant that will be at full capacity during 2009.

Mosel Vitelic has broken ground for a new solar cell plant, which is scheduled for completion in the first half of 2009 with a total capacity of 200 MWp.

According to the company, solar cell capacity at its existing fab will be expanded to 60MWp in July this year. Of the 200 MWp capacity at the new plant, half will be operational in the third quarter this year, with the other half to come online in the first half of next year.

Mosel Vitelic president has said they are rapidly expanding their production capactiy to reach economies of scale and increase their profit margins. CENS says:

The company (Mosel Vitelic) is running a 30-megawatt production line, which is funneling around NT$200 million (US$6.6 million) into its revenue every month.

And Digtimes notes:

The solar cell business currently accounts for 50% of the company's revenues, but the proportion is expected to increase to more than 60% by the end of this year, the company said.

CENS says this rapid expansion is currently inline with other solar cell manufacturers. According to CENS:

Industry watchers pointed out that burgeoning solar-energy market has inspired the insiders to launch bold expansions. Since early this year many Taiwanese photovoltaic manufacturers have announced aggressive capital-raising plans, with Gintech Energy Corp. scheming to raise around NT$10 billion (US$333 million) through syndicated loans and capital increasing, as well as Moteck Industries Inc. and Neo Solar Power Corp. mulling to raise capital through syndicated loans and capital increasing.

Yesterday CENS reported the Letzer Industrial Park is set to become the major supply base for Taiwan`s solar cells:

Actively engaged in production of solar cells, the Taiwan-based Unitech Printed Circuit Board Cop., Big Sun Energy Technology Inc. and Sintek Photronic Corp. all plan to continue focusing on solar cell production and development in Letzer Industrial Park of Yilan County, northeaster Taiwan, according to company sources.

Letzer Industrial Park management said that the park has successfully signed on investment valued at NT$104.5 billion by the end of the first quarter of this year, with more than NT$800 billion from solar cell makers. Optimistically, the park is expected to become Taiwan`s major supply base for solar cells soon.

Taiwan is set to become a major player in the solar cell industry worldwide. I remember reading an article in 2004 saying how Taiwan's expertise in IC chip manufacturing is transferrable to solar cell manufacturing. Since Taiwan is the clear global leader in IC chip manufacturing there is no reason why they cannot become significant competitors in this field too.

One of the biggest problems for this industry however is the shortage of polysilicon, the material used to manufacture solar cells. Digitimes noted Simon Tsuo's (Motech chairman) comments on the current supply situation:

Despite there being more than 30 new polysilicon makers in China, very few of them have actual output, Tsuo noted. Since many of these suppliers have secured contracts with solar cell makers and are scheduled to start shipments in 2009, any unexpected schedule delay will severely affect global polysilicon production value, he said. As solar cell makers have to pay a deposit for material supply, the delay will also affect their funding operations, he noted.

The solar cell industry is set for growth. The need to find alternative energy sources and to start leveraging non-intrusive energy production methods are providing an impetus to the industry and big business opportunities to many people. There is no doubt a lot of money to be made in this game. However, as Mr. Tsuo observed, there are also many risks. The strategic management of resources and raw material supply chains is increasingly important in this industry and if companies are unable to secure the polysilicon needed for production then they will face big problems.

Hopefully this industry can grow and better ways of powering our homes and day-to-day electronic applications will become increasingly evident.

Article 1: Mosel-Vitelic to Raise Capital for Photovoltaic Deployment
Article 2: Mosel breaks ground for 200MWp solar cell plant
Article 3: Unitech PCB, Big Sun Energy and Sintek Focus on Solar Cell Production
Article 4: Solar industry full of uncertainties in 2009, says Motech chairman
Article 5: Global warming sparks polysilicon crunch