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   Wafer fabs in Malaysia: the race has begun

By Julian Matthews
July 2, 1999

A race to build Malaysia's first commercial wafer fabrication plant has begun in earnest.

Three projects are in the reckoning in anticipation of a sudden spike in worldwide demand for wafers come 2001. The fabs are led by 1st Silicon (M) Sdn Bhd, Wafer Technology Malaysia Sdn Bhd and Mimos Bhd.

By a quirk of geographical fate, all three are situated a few hundred kilometers from each other, but distance accounts for nothing when one is constantly looking over one's shoulder. Their stock reply that the market is big enough to accommodate three new players belies growing rivalry. Already they seem all geared up for battle mode.

In May, Wafer Technology Malaysia (WTM) threw its hat into the ring when it set up a sales office in Sunnyvale, California, and claimed it was ready to take orders for prototypes even though the plant would not be ready in a year.

Not to be outdone, 1st Silicon said it will set up a sales office in the Silicon Valley by the third quarter of this year.

Mimos, notably the least ambitious of the three new combatants, remained hushed about its marketing strategy except to say it was "looking at global customers".

The jostling to secure customers has turned the heat on in an industry otherwise dampened by the fallout from the regional crisis and marred by inventory overruns.

The three pioneer fabs also herald a new age for Malaysia's electronics industry.

In recent years, the export and import of electronic components were canceling each other out, suggesting there was little in terms of value-add in the industry.

Without the higher value-add that only an advanced wafer fab could bring, the local semiconductor industry, which is dominated by American and Japanese multinationals, seemed unlikely to grow.

Several irons in the fire in recent years have also fizzled out, aggravating the situation.

A US$800 million wafer fab at the Kulim Hi-Tech Park in the northern state of Kedah, led by Taiwan's Hualon Corp and announced in 1994, never got off the ground.

Another US$1.2 billion foundry to be built in Sarawak went belly up when key staff of the startup, InterConnect Technology Sdn Bhd, clashed with investors over non-payment of salaries.

At the height of the financial crisis last year, semiconductor players Atmel Corp and VLSI Technology, Inc. backed out of two separate wafer fab projects costing over US$2 billion in Kulim, citing depressed market conditions and a worldwide credit squeeze.

The current projects by WTM, 1st Silicon and Mimos are indicative that the semiconductor industry will see better days in the new millennium.


Julian Matthews is the Malaysian correspondent for CNET Malaysia. Email us your comments.

The Wafer Fab Situation
Malaysia is one of the world's largest producers and exporters of semiconductors, with a proven 27-year-old history in assembly and test manufacturing--commonly referred to as the "back-end" of the industry. However, it has been unable to attract investors to set up plants for the more capital-intensive, front-end part of the business--wafer fabrication.
 Web Resources

What it takes to build a wafer fab facility
From Texas Instrument  

Wafer fab profit opportunities and costs
From Semiconductor International 1999  

Cost of ownership of wafer fab sites: understanding the impact on the bottom line
Semiconductor FabTech Online Industry Analysis  

Wafer manufacture
On how wafer fabs are created.  


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