HSINCHU, Taiwan -- Don't assume the "921 quake" was a bad thing for Taiwan's semiconductor industry. One would have thought the powerful earthquake that rocked the island nation on Sept. 21 would have started everyone thinking seriously about moving local wafer fabs offshore out of harm's way.
Instead, the earthquake is turning out to be a good thing for the fast-growing chip industry. Taiwanese managers are now viewing their quick recovery from the quake as a successful test of the nation's chip industry and proof of the "can-do spirit" that has enabled them to build one of world's leading producers of semiconductors.
Their response was impressive. Less than three days after the massive quake hit, main power was restored at many of the fabs. After checking out production lines and finding no major damage, plant managers had most of their chip plants running full tilt in just 10 days.
In fact, feelings are running so strong now regarding Taiwan's chip-making prowess that some companies already have decided to keep their plants on the island. And many of them would build all their new wafer fabs here if there was space available to locate them in Hsinchu's crowded science-based industrial park.
"The cluster of fabs here helped all of us recover quickly because the government was able to make the decision to restore the power for Taiwan's semiconductor industry," explains Yen-Chun Huang, vice president and assistant to the chairman at Taiwan Semiconductor Manufacturing Co., which operates all five of its wholly-owned wafer fabs in Hsinchu.
The industry's high visibility here didn't hurt matters. The ground had barely stopped rolling before Morris Chang, TSMC's powerful chairman and father of the pure-play foundry strategy, called Taiwan's premier and asked that Hsinchu be given top priority in restoring electrical power.
TSMC, the island's largest chip maker by far, is still heavily committed to Taiwan. Except for the company's current U.S. joint-venture fab--WaferTech in Camas, Wash.--there are no plans now to set up any production outside of Taiwan, Huang says.
By 2002, the world's largest pure-play silicon foundry expects to build its first 300-mm wafer fab in the Hsinchu park with partner Vanguard International Semiconductor Corp. TSMC also is planning to build a new cluster of fabs in Taiwan's new Tainan high-tech industrial park, which is located about 150 miles south of here. Over the next 15 years, TSMC plans to put up a half-dozen fabs in the new park.
But some local chip makers initially did make noises about shifting production offshore following the 7.6-magnitude quake. "We have a saying in Taiwan, which is something like, 'You shouldn't put all your eggs in one basket'--so this might be a good time to consider offshore facilities," comments Hander Chang, assistant vice president of the Facility Service Center at Winbond Electronics Corp.
Weeks after the Sept. 21 quake, Winbond executives indicated they were reconsidering the plan to build their Fab 6 in Hsinchu. They even suggested that offshore options were possible. As a result, Chang's telephone began ringing off the hook as economic development agencies checked in from all over the world.
While Chang is still weighing some of these overseas offers, he now acknowledges that "Taiwan still looks like the best place for the potential 300-mm fab." As a result, he is checking out potential site locations throughout Taiwan, including the new industrial park in Tainan.
While earthquakes and power outages are still major risks in operating a fab in Taiwan, chip makers here seem to be placing more of a premium on the strong work ethics of the Taiwanese culture.
That culture has served the nation well. After a decade of hard work building up the country's semiconductor infrastructure and engineering base, Taiwan now supplies about 12% of the world's semiconductor supplies.
Taiwan chip company executives now are convinced they can easily beat Japan and the U.S. in productivity. Around Asia, there are no other strong competitors, they claim. "The can-do spirit is now very, very good here, especially after the earthquake," Winbond's Chang enthuses.
Other Taiwan executives are confident the nation will be able to maintain its edge over other countries in semiconductor manufacturing. For example, after the UMC Group acquired 56% ownership in Nippon Steel Semiconductor Corp. in 1998, they say they've been able to teach the Japanese-based chip maker how to be more efficient. During this time, UMC has been working to convert the 8-inch wafer fab from DRAM production to foundry operations.
"We know from the Nippon Steel fab that there is a 5-to-10% gap in efficiency between the way Japanese chip plants operate vs. Taiwan foundry fabs," claims John Hsuan, chief executive officer of UMC. On top of that, he says, costs are about 9% lower in Taiwan than they are in Japan.
"The Japanese way of doing business is so slow compared to the way we do it here," says Hsuan. In Taiwan's business culture, there is a willingness to be flexible and make decisions on the fly, he says. "We just do it, and don't ask a lot of questions."