Three Taiwan chip makers slash spending

TAIPEI – In another sign of concern about the global economy and a glut of DRAM (dynamic RAM), three Taiwanese chip makers say they will spend significantly less money on new factories and equipment this year.

Lower capital spending forecasts in the chip industry are a sign the global IT industry is on edge about future demand. Analysts have expected DRAM makers to cut back on spending for a long time due to falling chip prices. Prices for mainstream DDR2 (double data rate, second generation) chips remain below production costs, and most DRAM makers have reported losses for the fourth quarter.

Powerchip Semiconductor, Taiwan’s largest memory chip maker, said Wednesday it plans to spend NT$35.1 billion (US$1.09 billion) on new chip factories, technology and production line equipment this year, less than half the NT$86.3 billion it spent last year.

Powerchip’s smaller rival on the island, ProMOS Technologies, also more than halved its projected 2008 capital spending to US$800 million, down from US$1.84 billion last year. The company also put the expansion of its fourth 12-inch factory on hold pending a rebound in the DRAM market.

United Microelectronics (UMC), the world’s second largest contract chip maker, forecast its 2008 capital spending at US$500 million to US$700 million, down from US$900 million last year.

The company’s customers have turned cautious due to global economic worries, said Jackson Hu, CEO of UMC, at an investors’ conference in Taipei on Wednesday. The company forecast its chip shipments will decline as much as 15 percent in the first quarter, compared to the fourth quarter of last year as chip demand weakens, particularly for communications chips.

Global semiconductor equipment spending is forecast to fall 9.9 percent to US$40.3 billion this year, from US$44.8 billion last year, according to Gartner. The market researcher blamed over-investment by DRAM makers in 2007 for the cutback in semiconductor capital spending this year. Concerns about a U.S. economic recession have also put chip makers in a cautious mood, Gartner said in a report published early this month.

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