Why Taiwan’s UMC Is Building A $5 Billion Chip-Making Factory In Singapore

Taiwan’s United Microelectronics Corp. plans to invest $5 billion in a chip-making factory in Singapore, the company’s second in the city-state, amid surging global demand for semiconductor chips.

The factory will have a monthly capacity of 30,000 wafers, with production expected to commence in late 2024, UMC said in a statement on Thursday. The Taiwanese chip maker said the $5 billion plant—which will make 22 and 28 nanometre chips for cars, IoT devices and PCs—will be one of the most advanced of its type in Singapore.

“Singapore has been one of the main manufacturing sites for semiconductor chips and UMC has a fab in Singapore, so the expansion makes sense for the company,” says Dale Gai, a Taiwan-based research director at Counterpoint who focuses on semiconductors.

UMC has done business in Singapore for more than 20 years, including operation of an R&D center for “advanced specialty technologies,” according to the statement.

Singapore offers UMC “diversification” and mitigates the growing risk of having its supply concentrated mainly in Taiwan, says Mario Morales, IDC’s group vice president of semiconductor research. In Singapore, UMC joins fellow chipmaker GlobalFoundries and Idaho-based memory-chip maker Micron.

Beh Swan Gin, chairman of Singapore’s Economic Development Board, the government agency responsible for attracting foreign investment, said in the statement that UMC’s plan for the new factory “is in line with Singapore’s vision to further grow and deepen Singapore’s role in the global supply chain for semiconductors.”

The new fab will be backed by customers who have signed multi-year supply agreements to secure chipmaking capacity from 2024, UMC said in the statement. Those deals augur a “robust demand outlook for UMC’s 22/28 nanometer technologies for years to come,” the statement said.

“UMC is one of the major foundry suppliers of the 22/28 nanometer node, with leadership in some areas,” notes Gai. “We believe the initiative helps UMC to win more long-term orders from top clients who see the commitment of UMC’s further fab expansion.”

Pandemic-era buying of PCs and smartphones for working and studying from home created a backlog for chips. The automobile industry alone is expected to lose $210 billion in revenue because of the shortage. Technology to be installed at the new Singapore factory are critical for smartphones, smart home devices and electric vehicle use, UMC said in the statement.

“The current market shortages have been acute in mature and mainstream technologies where UMC primarily competes,” says Morales. “This capacity will help alleviate the constraints on a longer-term basis and will allow UMC to create closer ties with existing customers who have been waiting for the company to make this level of commitment in the business.”

Worldwide, UMC runs 12 plants, with combined capacity of more than 800,000 wafers per month. Besides Singapore, the Taiwanese company also has offices in China, Europe, Japan, South Korea and the United States.