More Taiwanese chip makers slash spending

Three more Taiwanese chip makers plan to spend significantly less money on new factories and equipment this year as a dynamic RAM glut and uncertainty about the global economy weigh.

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 because of 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, Wednesday said it plans to spend NT$35.1 billion ($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 $800 million, down from $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 $500 million to $700 million, down from $900 million last year.

The company's customers have turned cautious because of 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% in the first quarter, compared with the fourth quarter of last year as chip demand weakens, particularly for communications chips.

Global semiconductor equipment spending is forecast to fall 9.9% to $40.3 billion this year, from $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.

The IDG News Service is a Network World affiliate.