TOKYO--As ailing Japanese semiconductor manufacturers begin finally to awaken to a reality that going fab-lite is their best hope for survival, one question looms large: Who on earth would want to buy an old fab at a Japanese rummage sale?
The conventional wisdom says nobody.
Malcolm Penn, chairman & CEO at Future Horizons, flatly said that those Japanese fabs “are all in legacy nodes,” and buying any of those fabs “would be a management and logistic nightmare.”
On the other hand, when you bet on an opportunity that appeals to nobody else, the potential jackpot is all that much bigger.
The latest chatter on the Tokyo street reveals that at least one foreign company is bidding for a fab that a Japanese chip company is trying to dump.
Most industry insiders, however, can’t fathom why any company would be bold--or foolish--enough to make such a move.
Penn said, “If they’re not good enough anymore to be useful to R&D, why should I buy them? Better from a pure textbook market economic point of view to take them off line and raze them.”
But here’s the thing: It costs a lot to close a fab, with expenses covering everything from paying off employees to gutting the site. In this light, the idea of letting a foreign chip company buy the white elephant at a discount and having them run it isn’t so far-fetched. From the viewpoint of the Japanese chip company, inviting a foreign company in, to use the fab for its products while meeting the demands of existing customers, is a better outcome than shutting the whole thing down at two or three times the loss.
The pricing of old fabs differs significantly depending on the size of the fab, type of technology, products produced, said Joanne Itow, managing director at Semico Research.
But just for the sake of argument, what if it could cost as much as $300 million to shut down a fab? In that case, why not sell for $200 million--or even $100 million?
Itow is an analyst who sees potential opportunity in the acquisition of old fabs in Japan. Indeed, there is a precedent. She said, “One example is Tower’s purchase of a fab located in Japan from Micron.” While Itow doesn’t believe that Tier 1 foundries are interested in operating a fab in Japan, she pointed out that there are several pure-play foundries focused on MEMS, power management, and other products. They could become buyers.
Even if it were not an outright purchase of the whole fab, Itow thinks there could be some interest from Tier 1 foundries to purchase equipment already installed in the Japanese fabs. Pointing out GlobalFoundries’ recent purchase of equipment from the ProMOS Taiwan fab, she believes this could be done. Further, “As Taiwan Semiconductor Manufacturing Co. expands its CIS, HV and eFlash capacity, they could be in the market for used equipment.”
The examples given by Itow above are mostly about potential interest in old Japanese fabs among pure-play foundries. How about fabless chip companies in the United States? Any takers?