Slideshow: Sun shines on UMC's new fab

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.