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Sarawak In The Hot Seat
Sarawak has a relatively recent history in the electronics business, and is known more for its oil, timber and tourist attractions. Detractors say the perceived infrastructure concerns may be working against 1st Silicon's plan to draw foreign customer/partners to take up between 45 and 75 percent stake in the company.
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As fabless chip companies become a more potent factor in the industry, and more integrated device manufacturers (IDMs) rely on outsourcing production, demand for silicon wafers is expected to rise leaving room for new entrants to cash in.

"We'll be ready to ride the wave," says Claudio G. Loddo, chief executive officer of 1st Silicon. 1st Silicon has taken over where InterConnect Technology left off, building a fab in rainforest-clad Sarawak on the island of Borneo. By far, it appears ahead of its two rivals, with construction well under way despite the fact that the plant is in the middle of nowhere on the global semiconductor map.

"We are on schedule. There won't be any delays. The fab plant will be up and qualified by the third quarter of 2000 and in production by the end of that year," said a confident Loddo.

At peak volume production, the US$1 billion plant will have a capacity to make 30,000 200mm (eight-inch) wafers per month using 0.25 micron; and later 0.18 micron process technologies licensed from Sharp Corporation which will be 1st Silicon's main customer.

Backed by the Sarawak State Government, the plant is being built on a 39.4 hectare site in the Sama Jaya Free Industrial Zone near the state capital of Kuching. The plant will have a 8,500 sq m Class 100K cleanroom.

German technology group Jenoptik AG won the US$300 million contract to build the fab and commissioned its subsidiary Meissner + Wurst Zander AG as turnkey contractor. M+W Zander has designed and constructed other plants in Europe, Singapore, Taiwan and South Korea.

Loddo said 1st Silicon has secured a total of US$300 million in loans so far to fund its initial capital layout, of which US$200 million is from Ausfuhrkredit-Gesellschaft mbH, a consortium of German banks, and another US$100 million from another European source. The loans are guaranteed by the Malaysian government.

1st Silicon will be a pure-play foundry and count on U.S. and European customers, and possibly Malaysian-based customers with U.S. and European links. "By the time we come onstream we expect inventories to be reduced, and the market to recover," said Loddo.

The CEO was, however, realistic of 1st Silicon's initial market share, suggesting he would be happy with "breadcrumbs". "Other players have extensive contracts with the IDMs. Things are not like the good old days as there is intense competition now," he noted. 1st Silicon currently has 110 staff and expects to expand that to 200 by year's end.

Loddo, however, challenged criticisms that Sarawak lacked the resources and supporting infrastructure to host a commercial fab. "We have consistent power supply and abundant water, and the state is building a toxic waste treatment plant."



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