Taiwan: An Island of Continental Dimensions

Taiwan is an island smaller than the state of Vermont but as big as a continent in the geography of the chip industry. One city in Taiwan, Hsinchu, has more capacity online than Germany, France, Italy, England, the Netherlands and Ireland combined.

In terms of 300 mm capacity, Taiwan is the reigning champ, having more capacity either under construction, being equipped or online than any other region of the world. Taiwan has 29% of the total 300 mm capacity, while the United States, the runner up, has only 19%.

Five Taiwanese companies — Inotera, Powerchip, ProMOS, TSMC and UMC — either have such fabs in production or are in the process of building one.

Since 1995, the island has added more capacity than any other region of the world, including the Americas (Figure , top). From 1995 to 2002, it has put 32 fabs online whose total capacity when fully ramped is >1.1 million equivalent 200 mm wafers a month. Of the top 10 companies that have added the most capacity in this time period, two Taiwanese companies, TSMC and UMC, are No. 1 and No. 2. Powerchip is No. 10.

Since 1991, Taiwan has added more capacity than any other region in the world (top). New capacity in this chart is defined as fab-designed capacity when fully ramped. Capital spending by Taiwanese companies peaked in 2000 at slightly more than $10B (bottom).

TSMC and UMC are the industry's biggest foundries, and foundries are one of the chip industry's fastest growing segments. In 1995, they accounted for only 3% of the industry's capacity. Today, they account for 22%, representing as much as 60% of the capacity added in Taiwan since 1995. DRAMs also represent a sizable and growing share, 25%, of Taiwan's capacity.

Since 1995, the island's share of industry capital spending has been greater than all of Europe. For the period 1995-2002, Taiwan's capital spending exceeded that of South Korea and Southeast Asia combined. Capital spending by Taiwanese companies peaked in 2000 at slightly more than $10B (Figure , bottom). From 1995 through 1999, Taiwan's share of industry capital spending grew rapidly — from 9% to 18%. Today, its share of total spending is 14% and likely to increase.

In 2000, TSMC and UMC spent >$6.6B on capital equipment, 64% of the island's total. However, these two companies not only cut spending in 2001, and again in 2002, but are still cutting in 2003, despite high utilization rates. They plan to spend just $1.85B this year, much less than either company spent in 2000. But spending will be up for the island as a whole, expected to increase from $3.8B last year to $4.3B this year.

Taiwan is home to 36 companies with 56 fabs, according to our World Fab Watch database. It has plans for 13 more by 2006. As the recovery takes hold, the foundries will rapidly ramp capacity at their existing fabs. Taiwan's DRAM industry, through its alliances with Japanese and German DRAM manufacturers, is also poised to grow capacity and spending.

Taiwanese companies' investments are overflowing the island, extending to other parts of Asia. Both TSMC and UMC have fabs in Singapore and plan to bring fabs online soon in China. Other Taiwanese companies are also planning to invest in Chinese fabs.