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Startup Fabs Sign On New Customers

Malaysia's two advanced wafer foundries, 1st Silicon (M) Sdn Bhd and Silterra (M) Sdn Bhd, have secured new customers, additional funding and are on track for growth despite the dismal market conditions.

1st Silicon has signed on US customers Cypress Semiconductor Corp and JMAR Semiconductor, Inc, and an unnamed Korean customer, apart from its current technology partner Sharp Corp; while Silterra has signed on Japan's Seiko Instruments Inc.

1st Silicon CEO Claudio Loddo said with the two wafer fabs up and running, Malaysia is well-positioned for the future. "Malaysia now has two fabs on the map, and is finally emerging from its 30 years in purely assembly and test manufacturing. This will keep it connected and in the game for years to come," he said.

The two pure-play foundries were eventually backed by both federal and state government guarantees, and managed to secure financing, both internally and externally, from varied sources.

Kuching-based 1st Silicon most recently completed a US$250 million bond issue, led by Nomura Investment plc. "This bond demonstrates the strong level of confidence the world investment community has in 1st Silicon and the soundness of the pure-play foundry model," said 1st Silicon chairman J C Fong in a statement.

1st Silicon had also earlier received loans worth US$206 million from Ausfuhrkredit-Gesellschaft mbH, a consortium of German banks, US$94 million from Standard Chartered Bank and US$138 million from Export-Import Bank of the United States.

Growth Ahead

Loddo said the plant is currently producing 10,000 wafers using 0.25micron technology and hopes to ramp up to 20,000 wafers by 2002. The volumes are still short of its earlier projected 30,000 wafers a month capacity, but Loddo is convinced the current dip is "quite normal."

"Microchips will continue to be the key ingredients of prosperity and the engines of economies globally," he said. "I already see the light at the end of the tunnel. Demand will eventually climb back up to compounded annual growth rate of the high double digits experienced in the boom years."

Loddo pointed to the various wireless, handheld and telephony products that have emerged in recent years, coupled with growth of the Internet and continued use of PCs, that will spur demand.

Meanwhile, Silterra, located in the Kulim Hi-Tech Park, announced in March that it has signed on Seiko with an investment injection of more than US$50 million in return for certain capacity rights to Silterra's 0.25micron and 0.18micron process technologies. Silterra had already jump-started its sales last year by obtaining immediate access to bridge capacity from strategic partner LSI Logic Corp in US.

Silterra's fab was built at a cost of US$1.5 billion, with equity financing primarily from government investment arm Khazanah Nasional Bhd, local bank Bank Industri Malaysia Bhd, LSI Logic and venture capital company BI Walden Sdn Bhd. The company has also secured long term debt financing from the US ExIm Bank worth US$674 million, and the Japan Bank for International Cooperation worth 5 billion yen.

by Julian Matthews, Kuala Lumpur

(August 2001 Issue, Nikkei Electronics Asia)

Copyright (c) 1996-2001 Nikkei Business Publications, Inc. All Rights Reserved.