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Slideshow: Sun shines on UMC's new fab
Rick Merritt
TAINAN, TAIWAN – It was a good day in a good year for United Microelectronics Corp.
Taiwan’s second largest foundry officially broke ground on its latest and largest fab to date. When complete, the $8 billion factory—known as Phase 5 and 6 of Fab 12A--will spit out up to 50,000 300 mm wafers per month starting at 28 nm and eventually moving to 20 and 14 nm processes. The company expects to start installing equipment in the second half of 2013.
The fab will contain 53,000 square meters of clean room space—enough to house ten football fields. It will cost UMC as much as it has spent to date on two previous generation fabs that are part of the same complex here.
The new plant sits next to UMC’s current high-end fab where the company is ramping up a 28 nm Poly SiON process. The existing fab has already shipped thousands of sample parts using the process, and by the end of the year UMC will log as much as five percent of its sales in 28 nm technology, said chief executive Shi-Wei Sun.
The dynamics are driving the company’s upbeat forecast that sales will be up about 15 percent in its next quarter. That’s significant but less impressive than the 20 percent sales growth its rival, the much larger TSMC forecasts, said Bill McClean, president of IC Insights.
More than 300 vendors, partners and local dignitaries turned out to wish the island nation’s oldest foundry well on the latest chapter of its growth. Like all such high risk operations at the heart of the electronics industry, it will need all the luck it can get.
Although companies such as Nvidia and Qualcomm are crying for 28 nm technology today, they are mainly customers for rival TSMC due to their need for the latest technology. It’s not clear either would use the poly version UMC is ramping now or would prefer the high-K metal gate version it won’t have in pilot production until late this year.
It’s anyone’s guess what the demand could be like in two years when the $8 billion plant needs to start paying back on its investment. Larger questions hang over UMC’s long term horizon.
The company officially lost its position as a distant second to TSMC late last year when GlobalFoundries edged ahead in quarterly revenues. Market watchers like McClean believe the company will eventually slip to number four.
“I still see TSMC as the leader with GlobalFoundries and Samsung fighting it out for number two,” said McClean. “Over the long run, [UMC] is going to find it increasingly difficult to keep up with leading-edge technology,” he said.
More than 300 visitors gathered under tents next to UMC's current high-end fab for the groundbreaking ceremonies.
Clouds on the horizon
As part of a relatively new group of top management that came up the ranks at UMC, Shi-Wei Sun knows his company’s position well. It will not try to beat TSMC, but instead focus on serving customers with closely aligned road maps.
Sun shrugs off the negative implications of being tagged a “fast follower” by observers such as McClean in a semiconductor industry where the leaders take the biggest share of the profits. “Everybody in this industry is a follower, we all follow Intel’s technology and manufacturing capability,” he said in conversation after the groundbreaking.
UMC has a patch of land beyond its latest construction site where it can someday build a potentially larger fab, its planned Phase 7 and 8. But the big question is whether a #4 player can accumulate the double-digit billions such a plant would require.
Currently UMC’s financials look good. The company is funding the current project on its own through a bond issue and other reserves. It has a 20 percent debt to equity ratio and could push it to 30 percent if it needed more resources, Sun said. In addition, the company recently announced it is exploring a private equity investment of up to $600 million.
The company will need all that and more to tackle the issues on its horizon. It must get into production a 20 nm process so far demonstrated in a test chip, develop a 14 nm process that includes FinFETs and come up to speed on the new and complex areas of 2.5 and 3-D chip making where it currently manages two collaborative efforts. In addition, it faces a long term migration to 450mm wafers and extreme ultraviolet lithography, both of which carry hefty price tags.
Currently, UMC lacks the volumes of TSMC, the deep pockets of GlobalFoundries’ Abu Dhabi backers and the multi-company development support of the Common Platform partners such as Samsung and IBM.
UMC is also hamstrung by the policies of its local Taiwan government. It cannot accept foreign equity ownership of more than 10 percent. And it faces restrictions on any collaboration with China, its near and deep-pocketed neighbor that is hungry to establish leading-edge process capabilities.
Just how UMC will find its way around the technical, business and policy hurdles ahead is anything but clear. But just for today, the weather in Tainan was warm and sunny, smiles and hearty handshakes were all around and it looks like a good year ahead.
The new fab site is already under development (left) as guests arrive for a formal groundbreaking ceremony.
