But Wacker officials cautioned that a decision to immediately start work on a new facility is not certain, and in fact, it's not likely to happen in 2001, if uncertainty continues to exists about the timing of volume production ramps inside new 300-mm fabs.

"Pilot lines such as those now being brought up by a half dozen chip makers can be stopped, but volume production fabs cannot," said Robert Römer, president and CEO of Wacker Siltronic, which is a division of Wacker-Chemie GmbH and now the world's second largest supplier of blank silicon wafers to chip makers.

Wacker--along with the world's other major suppliers of blank wafers--is all too aware how quickly 300-mm plans can evaporate following the near collapse of the large-diameter wafer movement in the 1997-1998 recession. But now, major semiconductor manufacturers have restarted their 300-mm plans, and a number of them are attempting to accelerate their schedules, said Wacker managers in interviews this week.

The problem, however, is that silicon-wafer materials suppliers are not likely to be completely ready to for high-volume shipments of production-grade substrates, if guarantees about demand are not made in the coming months. In fact, there's already a good chance that 300-mm wafers will be in short supply next year, warns Römer.

To increase its delivery of 300-mm monitoring wafers and polished production blank substrates, Wacker is attempting to squeeze out five times the capacity from its ever-expanding pilot line in 2001. The pilot facility was initially set up in the mid-1990s for a maximum capacity of 20,000 wafers a month, when Wacker thought it would support initial 300-mm development activities in the late 1990s.

But now, Wacker hopes to incrementally increase its 300-mm shipments from the expanded pilot-line plant to 75,000 wafers a month by the middle of 2002 from its current run rate of 10,000-wafers a month. About 50,000 wafers-a-month are planned by the end of 2001.

While all this is going on, Wacker is also conducting its study for a new high-volume 300-mm (12-inch) wafer factory. "This is now underway, but we have not decided the next step," Römer said. "It will be three to four months before we can be at the point of a reliable decision."

The Wacker Siltronics chief executive made it clear that a decision could go either way--to start work on the plant or hold off in 2001--based on market conditions, projections for 300-mm fabs and the outlook for profits. Even if the building construction is started, Wacker plans to have "milestones" to stop the project, if it sees the 300-mm movement stalling again.

"Prices for blank wafers--especially the industry's mainstream 200-mm substrates are not so exciting that we would decide to build new facilities," Römer cautioned. "We will continue to fill out shells, but not build in 2001."

A major problem for the 300-mm movement is the depressed prices for 200-mm wafers, said Wacker managers. During the severe and long industry recession in the late 1990s, wafer prices plunged after suppliers built up capacity, based on overly optimistic forecasts for 200-mm substrates. In some cases, average selling prices fell 50% in 1999 from 1998. Now that some shortages are beginning to appear, prices have eased up slightly by about 5-to-10%, according to Wacker, but the increase is far short of what's needed for major new investments in wafer blank capacity worldwide.

During the worst of the recession, wafer materials suppliers were racking up combined annual losses of nearly $1 billion in 1998 and 1999, according to industry analysts. But market conditions have improved slightly, and Wacker--along with other suppliers--is now making a small profit. Helped by strong U.S. dollar exchange rates, Wacker Siltronic's revenues are expected to grow 36% to DM 2.25 billion ($983 million) in 2000 compared to DM 1.65 billion $721 million) in 1999.

While the immediate future of 300-mm remains somewhat clouded, Wacker is pushing ahead with its global expansion. Earlier this month, the company announced it had completed the acquisition of 55% equity in Nippon Steel Corp.'s silicon wafer production company, NSC Electron Corp. (see Nov. 8 story). The acquisition solidifies Wacker's position as the No. 2 wafer substrate supplier in the world, behind Shin-Etsu Handotai Co. Ltd. of Japan. More importantly, the acquisition also enables Wacker to immediately increase its presence in Japan as well as Asia, which consume 35% and 25% of the industry's wafers, respectively.

"The main emphasis now is to strengthen our business in Asia and Japan," said Römer. "As you know you don't achieve anything in Asia or Japan without having production in the market."

With the acquisition of a majority stake in NSC Electron, Wacker gains access to the company's three wafer production facilities--two in Hikari, Japan, and one in Kulim, Malaysia. The Japanese facilites produce wafers with 5-, 6- and 8-inch diameters, while the Malaysian plant is focused on 8-inch (200-mm) substrates.

Prior to the acquisition, Wacker's market share in Japan was only 4%, Römer estimated. The company's share will now rise to about 15% in Japan with the setup of Wacker NSCE Corp. The company's major Japanese customers now include the likes of NEC, Hitachi, Fujitsu and Rohm.

Wacker expects to increase its worldwide market share in blank silicon wafers to about 20% from what was 14-to-15% prior to the acquisition. Römer estimated that the NSCE unit will bring in additional sales of DM 500-to-550 million ($218-240 million). With those sales, Wacker Siltronic revenues are expected to exceed DM 3 billion next year.

The acquisition also gives Wacker room to expand its 200-mm production. "We could sell more 200-mm, if we had them," said Römer, who believes shortages in 8-inch wafers will grow in 2001.

NSCE's Malaysian plant is now running at 100,000 eight-inch (200-mm) blank wafers a month. A second phase could push that total up by another 100,000 in the future.

Wacker is also still ramping and filling out its Singapore plant, which began production at the start of 2000. The facility is increasing its output of 200-mm blank wafer by 10,000 each month, and it will reach its total capacity by the end of 2001. A second phase could be added in the middle of 2002, but those decisions will be made based on market conditions.

"Right now we are expanding capacity by working out the bottlenecks and filling out the facilities," Römer said. "We are also focused on integrating the management of NSCE into the our company. And, we are expanding as aggressively as we can 300-mm production."

If Wacker decides to build a new "greenfield" 300-mm production plant, it will most likely cost between DM 800 million and DM 1 billion ($350-440 million). "It would be fair to say that it takes two years to start production with a new 'greenfield' plant," he said. "If you have a building or shell, it would take 14-to-15 months."

Worldwide demand for 300-mm wafers (monitoring and production quality) is expected to grow from about 25,000-30,000 per month to as much as 150,000-200,000 per month at the of 2001, based on current projects. To maintain its current one-third market share in 300-mm wafers, Wacker hopes to push its pilot line to the 50,000-per-month range, but company managers said they fully expect to see a shortfall in supplies of the large diameter substrates as new chip-processing fabs begin to ramp their volumes.