HSINCHU, Taiwan--The devastating earthquake that struck this island on Sept. 21 has caused some chip makers here to rethink their next round of plant expansion. Instead of adding capacity locally, a few are now considering moving some production offshore instead.
The 7.6-magnitude quake, which killed more than 2,300 persons and caused widespread structural damage, resulted in no serious damage or casualties at the high-technology plants located here at the Hsinchu Science-Based Industrial Park. Most of the park's wafer fabs were quickly restarted in early October, but the quake did spotlight the area's growing power problems.
As a result, managers of the industrial park are redoubling their efforts to find a private operator to build a second power-generating plant. They want to show the chip industry they're doing everything they can to avoid future fab-crippling outages.
But local chip makers aren't so sure and are worrying more than ever about the fragile infrastructure and the country's inability to keep up with the explosive growth of chip-making operations clustered in Hsinchu's 600-hectare industrial park.
Some chip makers already have stated publicly that September's earthquake is causing them to seriously consider offshore facilities in their next round of expansions. What's concerning them the most about "putting too many eggs in one basket" is the potential risk for more power failures.
"The real damage was not caused by the earthquake," says John Hsuan, chief executive officer at UMC Group. "The power failure was the real damage," he said, referring to the loss of production while the company and rival foundries waited for power to be fully restored in the last week of September.
Hsinchu's park, now home to 290 companies and 75,000 workers, has almost run out of land for any new plants. The leading alternative for local expansion now is the new Tainan Science-Based Park on the southern end of the island, where Taiwan Semiconductor Manufacturing Co., UMC Group, and four other companies are building or planning new fabs.
But some chip makers worry about power and infrastructure in the less-developed Tainan area as well. To make matters worse, the Tainan area was rocked by its own earthquake on Oct. 18. No major damage was reported, however, from the 6.4-magnitude tremor.
Power isn't taken for granted these days in Hsinchu. And it's not only the quakes that knock out the power. Summer heat waves and peak-consumption periods throughout the year have caused spot power outages and brownouts. This plays havoc with sensitive fab gear, according to fab managers.
Most of the 500,000 kilowatts of electricity required by Hsinchu's industrial park is brought in by Taipower Co., a public utility. Local startup Hsin Yu Cogeneration Co. is capable of providing only about 150,000 kilowatts of electricity.
Keenly aware of the problem, Hsinchu's high-tech park has stepped up efforts to find a private company to build and operate a second power-generation plant locally. Park officials are putting on an optimistic face here.
"In two years, we plan to have 100% of our power supplied locally," predicts Yen Tzungming, director of investment services at the Hsinchu park. To make the job easier, Taiwan has amended its laws to allow private utility companies to deliver more of the country's electricity.
But some fab operators at Hsinchu don't believe a second private plant will solve their power problems because government regulations require all electricity to run through the same utility lines to factories. "This simply won't work. What we need is a true second source of power," insists Hander Chang, assistant vice president of the Facility Service Center at Winbond Electronics Corp.
The Winbond executive would like to see regulations changed to allow a separate power grid for electricity, which would prevent a failure in one generation plant or network from completely disrupting available power.
Winbond is one of the chip makers that is now reconsidering whether or not to build its next fab in Taiwan following the earthquake and power problems. "We don't want to put all our eggs in one basket," says Chang.
His company does have enough land to build a fab at Hsinchu, but Chang began fielding calls from all over the world when word got out that Winbond was rethinking the location of Fab 6, a planned 300-mm wafer processing plant that is likely to be build in 2002. The best choice now, he believes, is still to build it in Taiwan, but the issues of infrastructure, power, and water treatment are still major concerns.
When the main power goes out at Hsinchu, Winbond can now supply about half of the 29,000 kilowatts that its wafer fabs use. Chang believes it would be better to spend about NT$150 million ($4.7 million) to install additional emergency power generators at the Winbond facility instead of paying higher prices for electricity supplied by local private companies using the same utility lines as Taipower. But "the regulations must change," he says.
UMC isn't willing to wait until a second local power company is up and running. By June 30 next year, CEO Hsuan says his company is determined to have a plan in place to limit power outages to no more than 6 hours, even in the event of a natural disaster--like September's quake. That will be critical since UMC is planning to have eight wafer fabs operating the Hsinchu industrial park next year.
"Before the next typhoon season, UMC will address the power issue," Hsuan promises. One option being considered by UMC is switching its main power use from Taipower to Hsinchu's existing local utility company. "The initial investment would be $20 million, but the additional costs would also be $15 million to $18 million a year because rates are 30-40% higher," he says. UMC is still considering couple other options.
While fab managers search for solutions, power outages continue to hit Hsinchu. "Just yesterday we lost power for 10 minutes because a construction crane hit the electrical lines outside our building," said Justin Wang, executive advisor who heads up the marketing and strategic development center at Worldwide Semiconductor Manufacturing Corp. (WSMC).
WSMC was able to weather the temporary failure. Its backup power system kicked into action as planned, with dynamic uninterruptible power supplies (UPS) providing emergency electricity in just 20 milliseconds. The three-year-old silicon foundry startup invested heavily in emergency electrical and water systems because of the risks of disruptions in Hsinchu.
In the event of such power outages, WSMC's dynamic UPSs can provide up to 60% of the electricity needed for its fab systems. Another 30% of power comes from emergency generators.
The company also has a plan for handling emergency water requirements. Its fab has a recycling system that permits the reuse of 80% of its water. The facility also has a 14,000-ton water storage tank, with an extra 10,000-ton system planned by next June. This provides about 2,000 tons of water a day.
But despite all its precautions and planning, WSMC had problems in the aftermath of the Sept. 21 quake. "We were confident that we were in pretty good shape just after the quake because emergency generators started right up and we were able to keep systems running and the air flowing in cleanrooms," Wang recalled. "But then, we were surprised by a fire in one of the generators, which might have happened as a result of diesel fuel spilling into some part of the engine. The fire broke out inside the diesel generator."
The smoke and fire did not damage the fab's cleanrooms, but it did shut down the plant completely when power was lost. "We ended up just like everyone else," laments Wang, referring to the neighboring fabs in Hsinchu's park.