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TSMC picks up remainder of Acer's chip operations

In preparation for the coming semiconductor boom, Taiwan Semiconductor Manufacturing Company snaps up the remainder of Acer's chip making operations.

In preparation for the coming semiconductor boom, Taiwan Semiconductor Manufacturing Company (TSMC) today bought the remainder of Acer's semiconductor manufacturing operations.

TSMC is the world's largest semiconductor foundry, a business segment that is growing because of a surge in demand in semiconductors and the cost and risk associated with erecting fabrication facilities or "fabs." TSMC doesn't design chips. Instead, like UMC and other foundries, the company manufactures chips on behalf of the growing number of graphics companies and other silicon-centric firms that do not have the means or inclination to sink billions into fabs.

Under the deal, which is slated to close in June 2000, TSMC will buy the remaining 70 percent of the unit through a stock swap. Acer will also become one of the largest shareholders in TSMC. A TSMC representative placed the price of the acquisition at under $200 million.

The Semiconductor Industry Association estimates that demand for semiconductors will grow by 20 percent or more over the next two years and account for $234 billion in sales in 2002.

The deal is a culmination of an ongoing cooperative arrangement between two of Taiwan's largest companies. Last June, the Acer conglomerate sold 30 percent of its semiconductor operations to TSMC and changed the name of it to the TSMC-Acer Manufacturing Corporation (TASMC).

The TASMC fabs currently are mostly used to manufacture memory, but they will be converted to produce other semiconductors, the spokesman said.

Like a number of PC manufacturers, Acer is in the midst of exploring opportunities in Internet appliances, such as screen phones and set-top boxes. Although the company manufactures computers and notebooks for U.S. companies such as IBM, its own brand has languished in the U.S. in recent years.

"The Acer Group's competitive advantage lie in its brand management strength, extensive global sales and marketing network," Stan Shih, Acer CEO, said in a prepared statement. After the merger, Acer can concentrate on aggressively developing its PC, peripherals and key components business and exploring opportunities in intellectual property and digital service."