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Nation's IC packaging sector warned of Chinese competition

TAIPEI--Taiwanese integrated circuit packaging and testing services providers need to improve their technologies and come up with other improvements in the face of rising competition from China, market analysts said on Saturday.

Taiwan is a world leader in global IC packaging and testing, with the island accounting for 55.2 percent of total global sales, according to a research report released by the Industrial Economics and Knowledge Center (IEK) of the Industrial Technology Research Institute.

Taiwan's Advanced Semiconductor Engineering Inc. (ASE) is the world's largest IC packaging and testing service provider and Siliconware Precision Industries Co. is the fourth-largest.

But China is playing catch-up. Guidelines released by the Chinese authorities in June on developing Chinese semiconductor businesses said the mainland is determined to push up sales relating to high-end and mid-level testing and packaging to more than 30 percent of its overall business revenues in this industry by 2015.

Analysts say China intends to encourage consolidation in the IC packaging and testing industry through mergers and acquisitions to make better use of resources, while intensifying efforts to develop high-end technology. Rumors have been circulating in the market that Jiangsu Changjiang Electronics Technology Co., a Chinese IC packaging and testing firm, plans to expand by acquiring Singapore-based STATS ChipPAC Ltd.

Adding to the threat to Taiwan, Chinese firms have started poaching specialists who work for Taiwanese IC packaging and testing services providers in the mainland, analysts said.

If Taiwan is to maintain its lead over other nations, Taiwanese integrated circuit packaging and testing services providers need to increase their investments to expand economies of scale and strengthen links between downstream, midstream and upstream segments in the business, the IEK said in a report. In particular, Taiwanese companies in this business should invest more in the area of assembly, which is often outsourced to other companies.

Prominent Taiwanese companies such as ASE and Siliconware Precision Industries Co. have already stepped up their efforts to sharpen their high-end IC packaging and testing technologies, for example improving flip chip packaging, a kind of technology for interconnecting semiconductor devices such as IC chips to external circuitry.

They have generally assigned more resources to developing package technology to boost their visibility in the global market.

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