Thursday, March 28, 2002
Asian tech centres battle for supremacy
REUTERS
SINGAPORE: Singapore gained a major feather in its high-tech cap in January when a US-Taiwan partnership decided to pump several billion dollars into the economy to build a sophisticated plant making computer chips.
Advanced Micro Devices of the United States and Taiwan's United Microelectronics agreed a $3-4 billion investment to build an advanced computer chip making factory by 2005.
It was a timely boost in confidence for an economy struggling with its worst recession in almost 40 years and offered the country the edge in competition with Taiwan to attract the next wave of investment for tomorrow's computer chips.
But while Singapore has taken the lead in the high-tech stakes over Taiwan, its pole position was far from certain in the years ahead, analysts say.
In the future, Singapore's relative political stability will be pitted against the more advanced technological knowhow of Taiwan in attracting investments. And coming up fast is China, which has lower cost production but is behind in technology.
For AMD's chief, W J Sanders III, the reasons for choosing Singapore were clear.
"Singapore is one of the stars in our crown... and is going to give us a better supply chain, to supply the market," he told a press conference to explain the company's investment decision.
To maintain an edge over Taiwan, Singapore needs to polish up on the technology front, said Dan Heyler, Merrill Lynch's semiconductor analyst based in Hong Kong.
"I think Singapore is in the early stages of becoming the main semiconductor hub for the Asia Pacific, and we've had a powerful endorsement from AMD and UMC's decision," he said.
"But while Singapore has an advantage over China, which doesn't have the most advanced technology, it is still behind Taiwan, which is at the frontier of global technology."
The trade-dependent state has always been aggressive to attract investments to the hi-tech sector, which forms a cornerstone of its economy.
Electronics manufacturing contributes a quarter to Singapore's gross domestic product and some 40 per cent to manufacturing output. Making computer chips accounts for 16 per cent of total output.
POLITICAL CLIMATE KEY Singapore's electronics sector was ravaged by the global tech crunch in 2001 when electronics exports, making up about 60 per cent of non-oil domestic exports, tumbled 21 per cent.
The sector also accounted for about 35 per cent of Singapore's 25,600 job cuts last year.
Analysts said for the future Singapore's stable politics stacks up well against Taiwan's long-standing prickly relations with China, which views Taiwan as a renegade province that must reunify with the mainland, by force if necessary.
"Singapore has very strong infrastructure and a stable political system which is very key -- a wafer fab is a $2-3 billion asset in any country and you need to have total confidence in the political stability," Heyler said.
TECHNOLOGICAL DIVIDE But political considerations aside, Singapore has some way to go to catch up with the technological advantages that Taiwan can offer prospective investors, said Warren Lau, an analyst at HSBC Securities in Taipei.
"Singapore has a good chance of becoming Asia's main chip hub, but I think in some respects, it might have to continue to play catch up with Taiwan, as Singapore's chipmaking technology is still about six to 12 months behind its rival's," he said.
Singapore has 14 plants making computer chips, six of which are owned by Chartered Semiconductor Manufacturing, the world's third largest contract chipmaker after Taiwan Semiconductor Manufacturing and UMC.
Most of Chartered's factories make 200-mm wafers, using process technologies ranging mostly from 1.2 micron to 0.13 micron. Its latest plant, making 300-mm wafers on 0.18-micron technology, will kick off production in 2003.
TSMC and UMC have 18 wafer fab plants in Taiwan, including those that make a more advanced combination; a bigger 300-mm wafer using process technologies at 0.13 micron and below.
But the AMD-UMC plant planned in Singapore for 2005 would make 300-mm chips using just 0.065-micron technology.
EDGING OUT CHINA? While chasing to catch up with Taiwan's technology, Singapore has to watch that it is not stampeded by the might of China. Singapore is ahead, for now, analysts said.
Global computer firms, mobile phone makers and their components suppliers have been eyeing the world's most populous nation for decades for its potential to be the region's hi-tech manufacturing centre, thanks to burgeoning domestic electronics demand and a skilled but low-cost labour force.
"China at the moment doesn't have the most advanced technology," Merrill's Heyler said. "As for the cost of capital when making chips -- in terms of the available technology, scale and experience -- this is much higher in China versus Singapore."
China's larger chip producers, like Shanghai-based Grace Semiconductor Manufacturing and Semiconductor Manufacturing International, are producing 200-mm wafers using 0.25 micron technology, but plan to migrate to 0.18 micron soon.
"Singapore has a window period of about three to five years, after which, newer players in the game like China may catch up very quickly in terms of technology and pose a threat," said Gartner Dataquest's regional chip analyst Philip Koh.
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