Chip Production Moving to China: Low Costs and an Expanding Market Increasingly Are Attracting the U.S. and European Microchip Makers to China, Causing a Shift in Production Capacity to the East. (the Nation: High Technology)

Whalen, Christopher, Insight on the News

Despite the recent strong rally in semiconductor stocks, some pundits continue to predict the demise of the technology industry as it has been known for the past half-decade. The good news is that many managers in the technology sector generally, and the semiconductor industry in particular, see demand for chips picking up in the first half of 2003. Such demand is driven mostly by consumer products rather than sales of personal computers (PCs), and thus tracks a recovering economy. The bad news is that the manufacturing capacity needed to make the latest types of microprocessors, including memory chips and processors for PCs and other products, is rapidly moving to Asia.

The leading provider of tools and materials for chip makers, Applied Materials Inc. (AMAT), now gets more than half of its business from Asia, including Taiwan (27 percent), Japan (14 percent). South Asia and China (12 percent) and Korea (9 percent). This compares to 26 percent for North America and 12 percent for Europe. The geographic distribution of AMAT's business shows that the continuing drop in the number of working "fabs" (fabricating plants) in the United States and Europe is forcing the entire semiconductor industry, including the producers of the chemicals and other inputs required for chip manufacture, to focus investment on China and other Asian venues. Whereas only one-third of all chip wafers are started in Asian labs today, that figure is expected to increase to more than 50 percent by 2005.

Some analysts worry that the meat of the global semiconductor industry's whole production capacity gradually is moving to Asia, particularly mainland China. Others are …

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Publication information: Article title: Chip Production Moving to China: Low Costs and an Expanding Market Increasingly Are Attracting the U.S. and European Microchip Makers to China, Causing a Shift in Production Capacity to the East. (the Nation: High Technology). Contributors: Whalen, Christopher - Author. Magazine title: Insight on the News. Volume: 19. Issue: 2 Publication date: January 7, 2003. Page number: 32+. © 1999 News World Communications, Inc. COPYRIGHT 2003 Gale Group.

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