As foundry demand turns sharply up, the world's No.2 silicon foundry, UMC of Taiwan, is making a play for the mainland China IC market with a bid to buy out the 85 per cent of the shares in Suzhou-based chip-maker He Jian which it does not already own.
UMC's expansion into mainland China comes on the back of a big boost in orders for the company.
UMC is feeling so bullish about the chip market that it reckons its Q209 wafer shipments will be double those of Q1, and it expects its fab utilisation will shoot up from 30% in Q1 to 75% in Q2.
UMC expects to be profitable in Q2 after a Q1 loss of $242m. It is sitting on $1.2bn in cash. Gross margin is expected to go from minus 40% in Q109 to plus 20% in Q2.
UMC's expansion strategy involves paying $285m for the 85 per cent of He Jian it does not already own. The 15 per cent it already owns was acquired by UMC in return for helping He Jian set up its eight inch fab.
He Jian's fab can run 40,000 eight inch wafers a month. The reason for the acquisition is, according to UMC CEO Sun Shih-wei, to get access to a fast-growing market. China-based customers like the opportunity of accessing local production, he said.
Buying He Jian will give UMC very fast time to market - much faster than it could get by building and ramping a new fab which would take at least a couple of years. UMC intends to expand and upgrade the fab if the acquisition is completed.
He Jian, whose best process is 0.18 micron, has received local validation by being designated a 'High and New Technology Enterprise' by the Science and Technology Department of Jiangsu Province. Five years ago, Xilinx invested in He Jian as part of its multi-foundry strategy.
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