HomeWorld RegionsAsiaPower plant woes worry Taiwan chip companies

Power plant woes worry Taiwan chip companies

TAIWAN, Oct 4, 2000 (Tech Web-CMP via COMTEX)à‚–Taiwan may consider scrapping plans to build the island’s fourth nuclear power plant à‚– a move that chip makers warn would cast a cloud over one of the world’s biggest semiconductor industries.

Under pressure from environmental groups, the Ministry of Economic Affairs has proposed to halt the $5.6 billion project, Economic Minister Lin Hsin-yi said in a press conference over the weekend. The recommendation is a blow to the IC and other electronics sectors, which rely on uninterrupted electricity for manufacturing.

Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co. Ltd. (stock: TSM), the world’s largest pure-play chip foundry, and Stan Shih, chairman of the Acer Group, one of the world’s 10 biggest PC makers, have each urged the government to reconsider the move.

“Canceling the nuclear project would be bad news for the future of Taiwan’s IC industry,” said a spokesman for DRAM vendor Mosel Vitelic Inc., Hsinchu, Taiwan. “The resources here to develop the high-tech industry are pretty limited.”

Taiwan is a leading manufacturing center for the world’s PC and telecommunications equipment OEMs, a reputation that has been gaining strength as companies around the globe continue to outsource more of their production to third-party chip makers and systems assemblers. However, when a major earthquake struck in September 1999, the island’s production was crippled when power plants were damaged.

TSMC and rival United Microelectronics Corp. (stock: UMC) together control about two-thirds of the foundry market worldwide. In addition to Mosel Vitelic, companies like Winbond Electronics Corp. and ProMos Technology, which produce DRAM for Toshiba Corp. and Infineon Technologies AG (stock: IFX), respectively, account for about 10 percent of the world’s DRAM output, analysts said.

The ministry’s move has sparked fears that electric rates will rise by at least 15 percent over the next five years, according to state-run utility Taiwan Power Co. (Taipower). Such an increase would put pressure on manufacturers to pass climbing costs on to customers.

According to an estimate from Taipei’s China Times, Taiwan will face a 2,550-megawatt power shortfall by 2007.

In an effort to ensure a stable power supply, companies in Taiwan’s Hsinchu Science-based Industrial Park à‚– the largest electronics manufacturing center on the island à‚– have built a dedicated power plant to augment services offered by Taipower.

However, concerns remain as to Taiwan’s ability to provide adequate, reliable power, particularly in the summer months. In July 1999, much of the island lost power for hours after one of Taipower’s major lines failed unexpectedly.

In addition to other economic factors, Taiwan’s shaky utilities infrastructure has caused a slew of IC makers to shift production overseas. Mosel Vitelic, for one, is in the final stages of locating a new 300-mm-wafer fab either in Canada or Germany. Macronix International Co. Ltd. (stock: MXICY), the largest maker of EPROM and flash chips in Taiwan, is planning to build a plant in an undisclosed foreign country.

The nuclear plant, located in the northern coastal township of Kungliao, is designed to have two reactors with a combined capacity of 2,700 megawatts. The reactor cores would be provided by General Electric Co. (stock: GE), Mitsubishi Electric Corp., and Hitachi Ltd. (stock: HIT).

Taipower now operates three nuclear plants, which account for 18 percent of the company’s total 28,927-megawatt capacity. Thermal power comprises about 72 percent of the utility’s output, while hydroelectric power makes up the remaining 10 percent.

In the past several years, some 15 private companies have submitted bids to build power plants in Taiwan, but to date only Formosa Plastics Corp. à‚– the island’s biggest industrial conglomerate à‚– has begun commercial operation.

The nuclear project has become a political hot potato since President Chen Shui-ban and his Democratic Progressive Party made a campaign promise to cancel the plant over environmental concerns. The Kuomintang Party and the People First Party, Taiwan’s biggest opposition parties, oppose the move because they believe it would hurt economic growth.

Premier Tang Fei, who favors the power plant project, said a decision whether to proceed with construction would be made by the end of October following a detailed review by the presidential cabinet. Fei has pledged to resign his post if the plant is scrapped.

Lin has promised to accelerate construction of privately owned natural gas power plants and other utilities to meet Taiwan’s growing energy needs, although KMT legislators have criticized the plan as economically infeasible.

The Kungliao nuclear plant, which is about 30 percent completed, has already cost the Taiwan government $1.5 billion, and Taipower would incur an additional $2.9 billion in losses if the project is canceled, according to government officials.