Julian Matthews, Kuala Lumpur
Govt Partners Atmel, VLSI to Build 0.25mm Fabs
The Malaysian government has signed separate deals with Silicon Valley-based semiconductor manufacturers Atmel Corp and VLSI Technology Inc to set up wafer fabrication plants in the country.
Both plants are to be located at the Kulim Hi-Tech Park, in the northern state of Kedah, and scheduled to be operational earliest by third quarter of 1999.
The plants will be the first advanced wafer fabs in the country producing 200mm wafers using 0.25µm technology.
The Malaysian government's investment arm Khazanah Nasional Berhad has taken large stakes in both projects, raising confidence that they will not suffer the same fate of other such projects.
In the last three years, at least three proposed wafer fabs never got off the ground.
A memory chip fab joint venture between Japan's Hitachi Ltd and Korea's LG Semicon Co Ltd, and another fab by Taiwanese company Hualon Corp, were derailed because of deterioration in the chip market.
A third start up foundry led by the the Sarawak State government collapsed in July after key staff of the company InterConnect Technology Sdn Bhd resigned following non-payment of salaries.
The Hualon and Hitach-LG fabs were to have been set up at the Kulim Hi-Tech Park, while the third fab was to be set up at the Sama Jaya industrial zone in Kuching, the capital of the Sarawak state.
At the latest signings, Khazanah Nasional's managing director Mohd Sheriff Mohd Kassim gave his assurance that the projects would take off.
State Investment in Restructuring
He said the investments marked a major step in efforts to accelerate the restructuring of Malaysia's electronics industry.
"With Khazanah giving a kick-start to the wafer fabrication industry, we can expect to see other companies coming in to set up similar operations on their own or in joint venture with other companies here," he said.
Mohd Sheriff expects a wide range of companies supplying supporting services to follow suit once the fabs are established. "These companies will also bring new technologies that would lead towards greater linkages in the electronics industry," he said.
On October 14, the Malaysian government's investment arm Khazanah Nasional Bhd signed up a deal worth US$830 million with Atmel Corp to build and operate the first fab.
Atmel will hold a 60% equity in the venture and Khazanah the remaining 40%.
Construction is expected to commence in February 1998, with first production output expected within 18 months.
Atmel plans to purchase 100% of production from the plant, which will have a planned maximum capacity of 28,000 8-inch wafers per month.
Atmel president and chief executive officer George Perlegos said at the signing that his company derives over a third of its US$1 billion a year sales from Asia.
"We selected Malaysia due to its strategic location in Asia, its established base for semiconductor assembly and test operations, as well as the tax and financial incentives offered for foreign investments," said Perlegos.
The plant will employ about 1,000 people at full capacity.
Headquartered in San Jose, California, Atmel designs and manufactures a broad range of devices including Flash, EEPROMs, EPROMs, programmable logic, microcontrollers, and application specific integrated circuits (ASIC).
Formed in 1984, the company has been profitable every year since its founding. It has other manufacturing facilities in Colorado Springs, Colorado, and Rousset, France.
On October 16, Khazanah Nasional inked another deal to take up a 30% stake in a US$1.2 billion wafer foundry project to be run by Wafer Technology (Malaysia) Sdn Bhd (WTM).
Under the investment and shareholders agreement, technology partner VLSI will take up a 20% stake, industrial bank Bank Industri Malaysia Bhd and investment company Walden International Investment Group will together take up 15%, and Hicom Holdings Bhd another 10%.
Japan-based Sumitomo Group has tentatively agreed to take up another 5% equity, while the remaining 20% is to be offered to foreign customer-partners.
VLSI vice president of corporate communications Alan Markow, said the company is pumping in an initial investment of US$120 million and will provide training and technology transfer to the venture.
VLSI VP Alan Markow
"The fact that the project is government-supported means that Malaysia is really serious about the wafer fabrication business," he said.
Markow said the new fab will supplement VLSI's advanced San Antonio fab which will have samples of products using a dual 0.25µm and 0.20µm process technology by year's end and will be in production by 1998.
Markow said the Kulim fab will be a high volume producer of products for its four main market segments: wireless communications, networking, digital entertainment and workstation applications.
"This partnership will make available to us a high volume capacity to meet our needs in the foreseeable future," he said.
WTM aims to produce 27,000 wafers monthly of which half is expected to be taken up by VLSI.
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