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Kingmax setting sights on mainland
By Li Weitao (China Business Weekly)
Updated: 2005-04-17 09:52
Taiwan-based Kingmax Group, a major manufacturer of computer memory and flash
memory, is awaiting approval from Taiwan authorities to increase its investment
in the Chinese mainland.
The firm hopes to move high-end packaging and testing equipment to the
Chinese mainland, which is its largest revenue contributor.
That underlines a growing desire by Taiwan's chipmakers to move production
facilities to the Chinese mainland to take advantage of low labour costs and to
be closer to their customers in the mainland, which is one of the world's most
dynamic semiconductor markets.
"Moving (semiconductor) production lines to the mainland is clearly a trend
in the industry," said Joe Liu, chairman of Kingmax.
"We will do it if the Taiwan authorities gives us the green light."
Taiwan authorities have imposed numerous restrictions on investments in and
the transfer of technology to the mainland by Taiwanese chip makers.
An executive with Kingmax Semiconductor, the chip-making unit of Kingmax
Group, told China Business Weekly the firm was considering where to place a
US$200-million semiconductor assembly facility in the mainland.
The executive said Kingmax had talked with local government officials in
Shanghai, Chongqing, Shenzhen and some other cities in South China's Guangdong
Province about its investment plan.
At that time, he said he expected construction of the plant would begin
before the end of last year.
But the investment plan appears to have either been delayed or shelved.
Kingmax's executives would not say whether the delay had been thwarted by
Taiwan authorities' decisions.
Taiwan's "Ministry of Economic Affairs" (MOEA) previously said it will
consider loosening rules governing chipmakers' investments in the Chinese
mainland, but recently has apparently become cautious about the policy shift.
Last February, Taiwan authorities launched a series of raids against offices
of Taiwan's leading chipmaker, UMC (United Microelectronics Corp), over
allegations of "illegal investment" in the mainland.
UMC could face fines up to US$800,000 and its executives could be jailed for
up to five years if they are found guilty.
On March 31, "MOEA" fined Richard Chang, president and chief executive
officer of Shanghai-based Semiconductor Manufacturing International Corp (SMIC),
US$150,000. He was also required to withdraw his investment in SMIC.
"MOEA" said Chang "illegally invested" in the mainland in 2000, when he still
held a Taiwan identification card.
The tightened investment restrictions would make Taiwan chipmakers' business
activities more difficult, as they have begun relying more on the mainland
market to grow revenues.
Lawrence Chang, vice-president of Kingmax Semiconductor, said the Chinese
mainland is the top priority for the firm's investment decisions.
"We will be very active in investing in the mainland, if Taiwan regulators
give us the permission," he said.
Kingmax Semiconductor is now building its first mainland factory, in
Shenzhen, which will have five SMT (surface mount assembly) lines.
SMT is low-end in the industry, and Kingmax's first-phase investment in the
new plant was US$2 million.
The Chinese mainland contributes about one-third to Kingmax Group's total
revenues.
The chip-making unit, Kingmax Semiconductor, last year generated about US$260
million in annual revenues. The mainland contributed 25 per cent.
Lawrence Chang expects the global revenues of Kingmax Semiconductor to hit
US$300 million this year, up about 15 per cent year-on-year.
The ambition for the Chinese mainland is even higher.
"We are expecting a 20-per -cent growth in revenues in the mainland," he
said.
"Internally, in fact, our target is 25 per cent."
The Chinese mainland's PC market has been slowing down in recent years, but
demand for memory products will continue growing, especially given the low PC
penetration in the small cities and township areas, the vice-president said.
And an upcoming consolidation in the computer memory market will boost to
Kingmax Semiconductor's business.
"I expect a worldwide consolidation will occur within two to three years, and
the number of DRAM (dynamic random access memory) makers in the world will be
reduced to no more than five," Lawrence Chang said.
"Kingmax Semiconductor will definitely remain alive and competitive."
Kingmax Group also counts on the surging demand for flash memory products in
the Chinese mainland to grow revenues.
Kingmax Group has three subsidiaries: Kingmax Semiconductor; Kingmax Digital
Inc, in charge of manufacturing of flash memory products; and Kingpak Technology
Inc, in charge of packaging and test business.
Jack Liu, assistant vice-president of Kingmax Digital, said he expects
Kingmax's flash memory sales in the mainland market to double or triple this
year.
"The galloping mobile phone market in the mainland is a potential big driver
to our revenue growth," he said.
Small digital storage cards are increasingly being used in handsets to enable
users to store music files, phone and video clips.
US-based Sandisk dominates the mini-digital storage card market in China.
But Liu said many of the products sold in China under the Sandisk name are
fake.
Kingmax has adopted an industry-leading packaging technology called PIP
(product in package) that makes counterfeiting impossible, Liu claimed.
"In fact, we are the top player in the market," he said.
Kingmax Digital last year generated US$50 million from storage card sales
worldwide. The division expects the figure to double this
year.
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