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Malaysian wafer fabs get US Ex-Im Bank loan boost
KUALA LUMPUR -- The Export-Import Bank of the United States (Ex-Im Bank) has approved loans worth $760 million to support two fledgling Malaysian wafer fabrication projects.
A spokesperson for the bank said its board of directors approved yesterday a $673.8 million long-term direct loan to wafer fabrication plant Silterra Malaysia Sdn Bhd.
This is the second loan extended to a Malaysian wafer fab start-up in three weeks. On May 4, the board had approved a $86.5 million guaranteed syndicated loan to 1st Silicon (M) Sdn Bhd, another wafer fab being constructed in Malaysia's eastern state of Sarawak.
The loans lend credibility to Malaysia's long-held ambitions to get into wafer fabrication services or the "front-end" of the semiconductor industry.
Malaysia is a well-established chip manufacturer in what is referred to in industry parlance as "back-end assembly" and is one of top exporters of semiconductors in the world.
The US is also Malaysia's No.1 trading partner comprising almost 30 percent of total semiconductor exports.
Although Malaysia plays host to some of the top American chip players such as Intel, Motorola, AMD, Texas Instruments and National Semiconductor, some with close to 30-years presence here, none of the companies have ever committed to invest in the capital-intensive end of the business for varied reasons.
The two pioneer advance wafer fabs, which will act as pure-play foundries, are backed by the federal and state governments respectively and scheduled to come onstream as by year-end or early 2001.
The fabs are hoping to capitalize on expected shortages of global foundry capacity in the next two years, particularly for 0.25-micron and 0.18-micron process designs on 200-mm wafers.
The loan to Silterra, formerly known as Wafer Technology Malaysia, is to support the $824 million sale of US semiconductor manufacturing equipment to the company and the financing will be guaranteed by Malaysia's Ministry of Finance.
Silterra's plant is currently under construction in the Kulim Hi-tech Park in the northern state of Kedah.
The US exporters are chip-maker LSI Logic Corporation of Milpiltas, California and equipment-supplier Varian Associates Inc of Palo Alto, California. US suppliers include LSI Logic and 22 other companies in California, Arizona, Massachusetts, Maryland, and New Mexico.
Silterra is a licensee for LSI Logic's technology and manufacturing expertise.
The guaranteed syndicated loan from Ex-Im Bank to 1st Silicon also supports sales from several US exporters and has a 10-year repayment term. 1st Silicon has previously received loans of $200 million from a German bank consortium, another $100 million from private European sources and $200 million funding from the Sarawak state government.
Technology partner Sharp Corp of Japan is assisting in the qualification of the 1st Silicon fab, while US-based equipment suppliers Applied Materials, Inc and FSI International, Inc recently announced purchase orders from the company.
The Ex-Im Bank is the US government's export credit agency which provides financing in the form of credit insurance, loans, and loan guarantees to support the exports of US goods and services.
The bank first made an offer to support Malaysia's nascent wafer fab industry during a visit by its vice chair and chief operating officer Jackie Clegg to Kuala Lumpur in December 1999.
Clegg cited "healthy growth" in the Malaysian economy for wanting to do business in the country. The bank was considering financing up to $1.9 billion in potential US high-tech exports to Malaysia, mainly in wafer fabrication, telecommunications, power generation, aircraft and aircraft parts manufacturing.
Clegg stated then that it was the first time in recent years the bank would be doing major financing in the country, and, at that time, the bank had an estimated exposure of $465 million to businesses in Malaysia, mainly for large commercial aircraft.(Published in Newsbytes, May 25 2000)
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