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Looking Ahead
Building fabs in Malaysia seems logical. Nearly every major multinational chip maker, including Intel, Motorola and AMD, has an assembly and test plant in the country. So far, none has chosen to build a fab here despite rounds of lobbying by government. Will matters change soon?
 »  A foundry first?
 »  X marks the spot
 »  Trials and tribulations
Trials and tribulations

Like 1st Silicon, WTM has also fought hard to keep its wafer fab project on track. Construction on the US$1.2 billion plant in Kulim was stalled for over a year-and-a-half. The company found itself scrambling after VLSI Technology, Inc. pulled out as technology partner and 10 percent equity holder early this year citing that the Kulim fab was "superfluous" in light of its own upgraded fab in San Antonio, Texas.

In May, WTM announced it had roped in San Jose-based LSI Logic Corp as its new technology partner and would pay US$120 million for rights to the latter's 0.25- and 0.18-micron process technologies.

To build a customer base, WTM has also set up Silterra (M) Sdn Bhd to serve as its sales and marketing arm in Sunnyvale, California. Under the agreement, Silterra will have immediate access to "bridge capacity" from LSI Logic's newly opened wafer fab in Gresham, Oregon. Silterra will also qualify customer designs, and use its premises to train employees for work in the Malaysian factory. LSI Logic will also be guaranteed capacity from the Malaysian fab, which is expected to produce less than 50 percent of the plant's output.

WTM CEO and president Cyril Hannon said the project is still on course despite the delay because it is backed by the Malaysian government. "Malaysian interests in the fab have not deteriorated. We've taken the time to re-rationalize the project as we move forward," he added.

Hannon, who was vice president of Operations for LSI Logic before climbing onboard with WTM, said the 200mm fab is scheduled to be operational by late 2000 at the earliest. The plant will have the capacity to produce 30,000 wafers per month by 2002.

Meanwhile, near the capital city of Kuala Lumpur, government-funded research house Mimos Bhd has embarked on Phase 2 of its own wafer fab project aimed at 0.5 micron, and later 0.35 micron process technologies.

"By the end of 2000, we will have an eight-inch line producing 6,000 wafers monthly of CMOS (Complementary Metal-Oxide Semiconductor) devices for the commercial market," said Mokhtar Ahmad, managing director of Mimos Semiconductor (Misem), the strategic business arm of Mimos.

Misem set a precedent in local wafer design when it produced 16-bit Reduced Instruction Set Computing (RISC) microprocessors in May 1997, pooling the skills of foreign-trained Malaysian experts. (Malaysia had otherwise never designed an integrated circuit locally, RISC or otherwise.)

Mokhtar said Misem currently has 180 staff, all local, who have been trained in-house with the help of various technology partners. He did not disclose the capital layout for Phase 2 of the project, although it has been estimated that almost RM100 million (US$26.3 million) has been spent on the initial experimental phase.

Mokhtar believed the demand for wafers will outstrip capacity and there will enough to go around for all players. "The fab will be complementary to other fabs, both locally and abroad, and we will each have a piece of the pie," he said.

Whether Malaysia can pull this off, like its Singaporean and Taiwanese counterparts have--and rise up the value chain--remains to be seen. Come 2001, Malaysia's three newcomers will either be thriving or crumbling under the weight of intense competition in the cutthroat wafer business. For now, market watchers will be reading the signs closely and scrutinizing the trio's moves to see whether the nation can--once again--prove its skeptics wrong.


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