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Should Khazanah sell a stake in Silterra?

Silterra, the country's first wafer foundry that is saddled with huge debts after a decade of operations, is at a crossroads, Khazanah Nasional Bhd, which owns more than 90% of the company, has annnounced that it is looking for a strategic partner. But the entry of a foreign entity could derail Silterra's mission to build a Malaysian brand and grow the local semiconductor industry,

it first started producing wafer chips in December 2ooo,Silterra Malaysia Sdn Bhd has been running at a loss.But the governver since

ment knew itwould andwas prepared for that it had a larger

goal in mind.

After20years as a manufacturingbase for the semiconductor industry and then a testing and packing base with some R&D, mainly from Intel, Silterra represents a RMs billion bet on a dream to move up the value chain as a player in its own right and not merely

host to others.
Therewas also

national securityelement. be embedded in everything in the future [with terms ranging from "smart dust" to "the Internet of things"], it was believed that controlling a wafer fabricator and building the capability to run and manage such a high-tech facility would stand the nation in good stead in the future.

with the belief that chips will

pliers of hardware and software for the high precision machines used inwafer fabrication, to the real high-valuework of thosewho make the integrated chip [IC] designs to those who make the lithographic masks or the tool dye kits.ell highly complicated work,but then this is what high value and high income are all about.This is why Silterra pays its engineers globally benchmarked salaries. Naturally it was assumed that Silterra would turn profitable once this ecosystem took hold. Plus,there are so manyflexible financing models today through which to acquire the tools and technologies for expansion.The cost is no longer as jaw-dropping as Khazanah believes. But this does not take away from the criti-

alaysia's first semiconductor years, it could be a case of too little too late. foundry Silterra is indeed in a Globally, small foundries have found it precarious position.On the one difficult to survive.According to a 2oo9 rehand,it is considered a thom in port by iSuppli, smaller foundries such as Khazanah Nasional Bhd's side Silterra, Altis and Landshunt could become as it is without doubt one of part of a consolidation process as they are the worst performing companies in its stable. struggling to get by on their own.Altis was On the other, the government's investment put up for sale last year, while our very own arm faces much criticism over the handling Sarawak-based foundry called rst Silicon folof the company.Although much has been in- lowed a similar path in 2oo6when it merged vested in the foundry overthe last decade,it is with Europe-based x-rab.this exercise doustill in the red.Thus,anyproposed corporate bled x-Fab's capacity, and the results are now exercise, such as selling it, will upset more showing - X-Fabwas listed as one of the top than a few MPs and things could get rough 20 foundries in 2oo9, surpassing Silterra in a

in Parliament.

cism that none of the components of the

value chain took hold in and around Kulim, where silterra is based. Not true, will argue the die-hards at Silterra. They will point to the 2oos setting up of InfineonTechnologies'

wafer fabrication plant next door, with its

surveyby IC Insight. Before I get into why Khazanah should sell Silterra needs money,and it needs to be a a strategic stake in Silterra,oreven give up the part of a global chain of foundries in order to controlling stake,let me go over the nature of grow.Astrategic partner can offer this.Ah,but the industry.On this,I do agreewith some of I hear voices of dissent. Why should we sell the points made by my colleague. our national asset to a foreigner that might First, Silterra's addressable market size is iust come in and scoop our investment? Furindeed big.And compared to the other com- thermore,we have no guarantee that theywill panies in Khazanah's stable, Silterra has had help keep our mission of growing the local