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.