Taiwan's memory back-end service providers are showing little interest in Hynix Semiconductor's offer of incentives aimed at luring them to set up a testing plant in Korea.

The Korean memory maker has been in talks for two months with major packaging and testing houses, including Powertech Technology, King Yuan Electronics Company (KYEC), UTAC Taiwan, and Thailin Semiconductor, trying to convince one of them to set up a testing plant in Korea to serve Hynix, the sources said.

Hynix's incentives include an 8% ROE (return on equity), five years of guaranteed orders, and the Korean firm will not take any stake in the plant, the sources revealed.

According to the sources, Taiwan's back-end service providers do not think the terms are attractive enough. The guaranteed orders means that the new plant would be like an exclusive partner for Hynix's outsourcing. It would be too risky for a plant that may need NT$10 billion (US$301.86 million) to build to serve only one client. The Taiwan players also think that the 8% ROE Hynix is promising is too low.

As the costs for running a plant in Korea will be similar to running one in Taiwan, and Korean's labor unions are tougher than Taiwan's, the testing houses are reluctant to accept Hynix's terms, the sources said.

Hynix's has been seeking a testing partner to set up a plant in Korea to serve its NAND flash production. Hynix, which plans to increase its NAND flash production, will have sufficient in-house capacity for packaging. But neither its own testing capacity, nor that from existing players in Korea, will be enough, the sources commented.

The terms being offered for the NAND flash testing plant are similar to those Hynix spelt out in 2006 when it was seeking to team up with a Taiwan player to set up a DRAM testing and packaging house in China, the sources said. But the terms failed to interest any Taiwan players.

By: DocMemory
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