Malaysian fabs tipped for U.S. bank loans

Posted on December 21, 1999 
Filed Under CNET, Julian

By Julian Matthews

KUALA LUMPUR–Two wafer fabrication projects in Malaysia are being considered to receive financing from the Export-Import Bank of the United States (Ex-Im Bank), the official export credit agency of the U.S. government.

The managements of startup fabs 1st Silicon (M) Sdn Bhd and Silterra (M) Sdn Bhd have confirmed that a bank representative made site visits to evaluate the two projects this month.

1st Silicon chief executive Claudio G. Loddo cited “significant progress” from the recent meeting. “The bank has been in contact with us since early this year and is evaluating and considering significant opportunities in Malaysia,” he said.

Silterra president and CEO Cy Hannon also confirmed that Silterra applied, and is a candidate, for Ex-Im Bank support and was met by senior loans officer Rita Murrell to review the project with management two weeks ago.

An Ex-Im Bank spokesman told CNET Asia the bank was considering financing up to US$1.9 billion in potential U.S. high-tech exports to Malaysia, mainly in wafer fabrication, telecommunications, power generation, aircraft and aircraft parts manufacturing.

“The bank sees the high-tech industry in Malaysia as a growth area for U.S. exporters, and we are encouraging potential Malaysian buyers of U.S. exports to pursue Ex-Im Bank financing for their purchases,” said the spokesman in an email response.

Ex-Im Bank is an export credit agency which provides financing in the form of credit insurance, loans, and loan guarantees to support the export of U.S. goods and services.

The bank’s offer comes in the wake of a visit by its first vice president and vice chair Jackie Clegg to Kuala Lumpur on December 10. Clegg cited “healthy growth” in the Malaysian economy for wanting to do business in the country.

Malaysia registered Q3 gross domestic product (GDP) growth of 8.1%, a sharp rise from the recession of 1998, and is projecting 4.3% growth for the year with 5.0% growth in 2000.

Clegg said this was the first time in recent years the bank would be doing major financing in Malaysia. To date the bank has an estimated exposure of US$465 million to businesses in Malaysia, mainly for large commercial U.S. aircraft.

Malaysia is one of the largest producers of semiconductors in the world, and the U.S. is its No.1 trading partner, comprising almost 30 percent of total semiconductor exports.

Malaysia also imports various equipment and electronics components for the industry from the U.S. for well-established final assembly and test operations of U.S. manufacturers based here, such as Intel, Motorola, AMD and National Semiconductor.

The two wafer fabs scheduled to come on stream by the end of next year will be pioneer fabs for Malaysia which has sought to draw the higher value-added end of electronics manufacturing for many years.

Loddo said construction of the 1st Silicon fab, located in the Sama Jaya Free Industrial Zone in Sarawak, is on track and will be operational by Q3 of 2000.

“We will begin equipping early next year and are in hiring mode, and hope to have 250 staff by March,” he said.

The US$1 billion pure-play foundry supported by the Sarawak State Government will be using 0.25-micron technology under license from Sharp Corp, which will be its first customer. The plant expects to produce 30,000 wafers monthly at full capacity and eventually shift to 0.18-micron technology.

1st Silicon secured a total of US$300 million in loans this year to fund its initial capital layout, of which US$200 million is from Ausfuhrkredit-Gesellschaft mbH, a consortium of German banks, and another US$100 million from another source.

Silterra’s Hannon said its plant Wafer Technology (M) Sdn Bhd at the Kulim Hi-Tech Park in the northern state of Kedah will be installing equipment in Q3 of 2000, and will also be operational by year-end. “We expect that production revenue will take place in Q1 of 2001.”

Silterra has 100 engineers and technicians currently undergoing training at LSI Logic Corp’s fab in Gresham, Oregon. Hannon said the relationship with its new technology provider LSI Logic is proceeding “very well” and the company is a better fit than previous partner VLSI Technology, Inc.

The US$1.2 billion project stalled last year during a global industry downturn when VLSI pulled out as 20-percent equity partner and technology provider for the fab.

Hannon expects the fab will be up in time to ride an expected wave of global demand for foundry services. “All projections indicate a strong semiconductor market for the next two years with about 20 percent growth in 2000. Shortages of foundry capacity are predicted particularly in 0.25-micron and 0.18-micron technologies, and growth for foundry services is projected to exceed overall industry growth rates.”

Published in CNET Asia, Dec 21, 1999.

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