VLSI Sets Up Wafer Foundry with Local Startup Firm

Posted on February 1, 1997 
Filed Under Julian, Nikkei Electronics Asia

By Julian Matthews

US semiconductor manufacturer VLSI Technology Inc is teaming up with local startup firm Wafer Technology Malaysia Sdn Bhd to set up a US$1.2 billion wafer foundry at the Kulim High-Tech Industrial Park in Kedah.

To be ready in two years, the plant will manufacture complex logic circuits on 8-inch silicon wafers using 0.35┬Ám CMOS process technology.

Wafer Technology Malaysia chairman Mohamed Saleh Ghazali said the plant, when fully operational, will process 30,000 wafers monthly mainly for export to the United States.

Based in San Jose, California, VLSI Technology designs, manufactures and sells custom-designed and application-specific integrated circuits. It is expected to provide key management and technological expertise and training assistance in the establishment of the plant.

Mohamed Saleh said the plant will hire a core team of about 40 local engineers who will be sent for six to 12 months training stints at VLSI Technology’s plants in the US.

The joint-venture plant is targeting end-user customers mainly in data processing, consumer and industrial electronics, telecommunications, military and aerospace and transportation industries.

Mohamed Saleh said although Malaysia was one of the largest producers of semiconductors in the world, the absence of wafer fabrication facilities was the single most critical missing link in its future development.

“It is also the most complex link, requiring specialized facilities, speciality chemicals and state-of-the-art circuit printing and processing equipment,” he said.

Mohamed Saleh said the establishment of a wafer fabrication plant in the country would result in the development of new clusters of supporting industries, enhance high technology manufacturing capabilities and create a pool of skilled professionals.

Mohamed Saleh expects the foundry to come onstream by the third quarter of 1998 and to break-even after five or six years.

Wafer Technology Malaysia shares are currently held by local industrial development bank, Bank Industri Malaysia Bhd, its subsidiary for venture capital, BI-Walden Ventures Kedua Sdn Bhd, and government investment arm Khazanah Nasional Bhd.

Mohamed Saleh said that because of the large investment required for the venture, local and foreign investors will be invited to take up stakes in the company.

The company’s current paid-up capital of US$400,000 will be gradually increased to US$600 million within the next two years. Its shareholdings will be restructured with VLSI Technology having a 20% stake, Bank Industri and BI-Walden Kedua holding a 10% stake, Khazanah, 25%, and another 30% to be offered to another local partner.

Industry sources say the local partner is mostly likely to be state-owned investment house Permodalan Nasional Berhad. The remaining 15% is to be offered to three foreign fabless semiconductor manufacturers to take up a 5% stake each.

A joint-venture agreement is expected to be signed in early 1997 by which time the various investors will be identified.

VLSI Technology currently focuses on providing semiconductor devices for cable and satellite set-top boxes, wireless communications such as cellular phones, networking equipment and computing products.

In fiscal 1995, VLSI Technology, with about 3,000 employees worldwide, chalked up revenues of US$720 million.

The new foundry is the fifth wafer-related project to be secured by the Kulim High-Tech Industrial Park, which is being touted as the Silicon Valley of Malaysia.

Published in Nikkei Electronics Asia, Feb 01, 1997

by Julian Matthews, Malaysian correspondent

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