Siemens Tyneside plant ‘saved’ by Chinese

UK trade and industry secretary Peter Mandelson is poised to announce a face-saving deal that will keep Siemens' unviable Tyneside semiconductor fab open, according to reports this weekend. But from the sound of it, the proposed 'rescue' promises to be expensive, and of dubious value in the long term.

Siemens Semiconductor has been hit badly by the collapse of memory prices, and earlier this year announced the £1 billion Tyneside plant, which was opened only relatively recently, would close if a buyer couldn't be found.

Despite the infinite improbability factor involved in the concept of anyone today wanting to buy a state of the art manufacturing plant that built not quite state of the art DRAM (which was Siemens' problem, basically), Mandelson set off in pursuit of a buyer. And now, apparently, he's found one. But only sort of.

The plant is to be run as a joint venture between Siemens and an as yet unnamed Chinese company. The Chinese get 51 per cent, Siemens 49 per cent. The plant is going to switch from DRAM to telecommunications semiconductors, the idea being that the mysterious Chinese company will gain experience of the manufacturing process in order to construct factories in mainland China producing components for mobile phones.

pot the 'ah, buts…' dear readers. There aren't that many Chinese companies with substantial amounts of money to invest overseas, and the expression "with the aid of major government financial incentives" therefore springs to mind (Siemens, bless 'em, already had some of these).

Then there's the class of product to be manufactured - the phrase "expensive retooling" plus associated "major government financial incentives" drifts across our path. And of course, if one studies Siemens' global investment history over the past few years one will find that the company already has major telecommunications, wireless and semiconductor investments and joint ventures in mainland China.

Several of these appear on the surface to be driving in the same direction as the radically remodelled Tyneside plant will. So how long do you reckon it will last? And do you think Peter Mandelson is going to tell us how much this cost the mystery new majority owner, Siemens and the British government?