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Taiwan Semiconductor Manufacturing Co (TSMC), Taiwan's largest chip maker, has doubled its monthly sales over the past year. The company's record November sales figures, up 98.5 percent to NT$7.85 billion, are evidence of a dramatic turnaround in the industry, from slump last year to boom today. TSMC and its main competitor, United Microelectronics Corporation (UMC), which yesterday reported a 66 per cent increase in November sales, are both running at full capacity. "The major issue for the industry here is capacity constraints," said Alex Hinawi, a UMC spokesman. If additional capacity was available, said Eric Wang of ABN Amro, UMC and TSMC would have boosted sales by at least 20 per cent more. UMC will open a new chip factory this month in Hsinchu, and is working to increase capacity at existing plants. Speculation is rife in the industry that UMC and TSMC are also looking to expand capacity by investing in other chip makers, or buying one outright. Earlier this year, TSMC bought a 30 per cent stake in Acer's semiconductor manufacturing subsidiary. UMC has acquired semiconductor plants in the past, and sources say the company may be close to announcing a significant investment. UMC's current business plan should bring capacity growth of 35 to 40 per cent in the next year, said Hinawi. The company is gradually introducing more advanced, and more profitable, 0.18 micron technology, he added,, and will introduce 0.15 micron processes in the first quarter of next year. He would not comment on possible acquisition plans. UMC and TSMC will probably be "very successful" with their plans to phase in new technologies, Wang predicted. The new production processes compare favourably with those in use at some of the most advanced foreign manufacturers, he said. TSMC still leads UMC in sales, selling NT$7.859 billion worth of chips in November, more than twice UMC's NT$2.955 billion. However, at the beginning of January, UMC will complete a re-merger with four former subsidiaries, boosting its official sales figures considerably. Utek Semiconductor, the only one of the former subsidiaries which is listed, and has to release financial data, reported sales of NT$0.8 billion in October. "The numbers will jump significantly... if you look at it on a consolidated basis, then our capacity's getting close [to TSMC] now," said Hinawi. Without acquisition, UMC will need at least two year to match TSMC's sales figures, said Eric Wang of ABN Amro. "There's no physical way they can build the facilities in less than two years," he explained. The main competitor to TSMC and UMC, Chartered Semiconductor Manufacturing of Singapore, appears to have fallen by the wayside recently. The company announced a major loss last year, and failed to make a profit in the first nine months of 1999, despite a booming market. ®

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