Expected Rise in Chip Orders from 2000

Local chip assemblers are in the midst of a ramp up for an expected rise in orders from year 2000 and beyond.

In Ipoh, contract manufacturer Unisem (M) Bhd has already begun piling for a 27,870 sq m plant expansion and rival Carsem (M) Sdn Bhd is set to purchase US$32.9 million worth of new equipment. Meanwhile, Penang-based Globetronics Technology Bhd and AIC Semiconductor Sdn Bhd have intensified their supply to their main purchasers Intel Corp and Atmel Corp, both of the US.

The local semiconductor sub-contracting industry saw a surge beginning in early 1999 with many companies experiencing high revenue quarters. Local manufacturers continue to grow as original equipment manufacturers (OEMs) divest and outsource the high volume, commodity-end of their businesses.

Analysts have stated that they are bullish that the strong growth will stretch into 2002 on the back of strong sales in the traditional personal computer (PC) business and also increasingly from mobile phones, palmtops, digital imaging products and new Internet devices.

Increased Growth, Profits

Unisem rang up profits of US$29.9 million in the first three quarters of 1999 on sales of US$57.3 milllion. "We doubled our capacity and raised our staff levels from 1,200 to the present 2,000 in 1999," said Unisem chief executive Colin MacDonald. He said that the company expected an overall increase in profits of 50 percent compared to 1998 figures.

"Analysts expect high double-digit growth rates in the next three years, especially since subcontract manufacturing continues to outperform overall semiconductor industry growth rates," he said.

Unisem's main customers are in North America comprising 60 percent of its sales while the rest are from Europe, Japan, and the rest of Asia. MacDonald said the company's latest plan expansion should be completed in the third quarter of 2000 and bring on much-needed additional capacity to cope with the increased demand.

TA Securities analyst Chie K Ngu also projects a healthy outlook for Carsem and its parent company Malaysian Pacific Industries Bhd (MPI) with a forecasted US$382.7 million in revenues in fiscal 2000, up from US$264.9 million in 1999. He said that production capacity is expected to grow by 25 percent this year. MPI is also hoping to raise US$32.9 million through a bond issue to purchase new equipment including molding systems, wire bonders, die bonders and pad marking machines for its two plants.

Ngu said that although MPI reported poorer profits for fiscal 1998 and 1999 partly owing to a wrong call on currency hedging, it is expected to see a turnaround in 2000.

(Julian Matthews, Kuala Lumpur, Nikkei Electronics Asia, Jan. 2000 Issue)