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Advanced Micro Plans a Venture With Taiwan Firm in Singapore

Wall Street Journal; New York, N.Y.; Feb 1, 2002; By Don Clark;

|Edition:  |Eastern edition |

|Start Page:  |B.4 |

|ISSN:  |00999660 |

|Subject Terms:  |Joint ventures |

| |Factories |

|Geographic Names:  |Singapore |

|Companies:  |Advanced Micro Devices IncTicker:AMDDuns:04-863-4059Sic:334413 |

| |United Microelectronics CorpDuns:65-601-9288Sic:334413Sic:334413Sic:334413Duns:04-863-4059Duns:65-601-9288 |

Abstract:

UMC had already announced three previous 300-millimeter plants, two of them with outside help. The company, known for foundry services that produce chips designed by other firms, first set up a joint venture with Hitachi Ltd. in Japan using the new technology. It later announced plans to start 300-millimeter production in Singapore, with financial help from Germany's Infineon Technologies AG and Singapore's Economic Development Board. The joint venture with AMD will be located next to that plant.

AMD produced about 30 million microprocessor chips last year, and Mr. Sanders believes it can generate 50 million this year, by gearing up a new plant in Dresden, Germany, and by shrinking the size of its chips. He estimates that AMD had about 20% of the chip market in 2001, up from 8.7% in 1997, and predicts its new production arrangements should further eat into Intel's lead to give AMD 30% of the market.

|Full Text: |

|Copyright Dow Jones & Company Inc Feb 1, 2002 |

Advanced Micro Devices Inc. and Taiwan's United Microelectronics Corp. said they will establish a joint venture to build an advanced chip-manufacturing plant in Singapore, the latest move to share costs and risks in a rapidly consolidating industry.

The plant, estimated by analysts to cost $3 billion or more, will be part of a new breed that processes silicon wafers that are 300 millimeters in diameter, a major boost in production capacity over the 200-millimeter wafers that are the current standard.

AMD, the perennial underdog in microprocessors to Intel Corp., needs help in countering the chip leader's huge capital-spending budget. Intel spent $7.3 billion last year on new plants and equipment, and plans to spend an additional $5.5 billion in 2002. It is expected to begin shipping some chips soon using the advanced production process.

UMC had already announced three previous 300-millimeter plants, two of them with outside help. The company, known for foundry services that produce chips designed by other firms, first set up a joint venture with Hitachi Ltd. in Japan using the new technology. It later announced plans to start 300-millimeter production in Singapore, with financial help from Germany's Infineon Technologies AG and Singapore's Economic Development Board. The joint venture with AMD will be located next to that plant.

The announcement continues a wave of cross-border negotiations and alliances, driven by a downturn in chip demand and escalating costs for building factories. Memory maker Micron Technology Inc., for example, has recently discussed buying some operations of South Korea's Hynix Semiconductor Inc. As those talks cooled, reports surfaced this week that Infineon had started its own discussions with Hynix, likely focused on technical or marketing cooperation rather than a major investment by Infineon.

Besides buying more expensive buildings and equipment, the shift to 300-millimeter wafers creates bigger financial risks if those plants don't operate at close to capacity. AMD and UMC plan to each take half of the new plant's output when it begins operating in 2005, improving the odds that it will operate profitably.

The companies didn't disclose precise financial details. But W.J. Sanders III, AMD's chief executive officer, described the deal as a "multibillion-dollar" investment, split 50-50.

AMD produced about 30 million microprocessor chips last year, and Mr. Sanders believes it can generate 50 million this year, by gearing up a new plant in Dresden, Germany, and by shrinking the size of its chips. He estimates that AMD had about 20% of the chip market in 2001, up from 8.7% in 1997, and predicts its new production arrangements should further eat into Intel's lead to give AMD 30% of the market.

"Intel has had many advantages over the years that we've dismantled one by one," Mr. Sanders said.

Besides the benefits to AMD, the deal may help UMC by transferring advanced technologies associated with microprocessors sooner than foundry companies normally get it.

Credit: Staff Reporter of The Wall Street Journal

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