Kuching-based chipmaker 1st Silicon (M) Sdn Bhd chairperson JC Fong has come out to defend the government's multi-billion-ringgit investment in wafer fab following recent criticisms that the loss-making venture is only a drain on state financial resources.

Speaking at a company's employees appreciation night on Monday, Fong disagreed that the billions poured into the project could have been better spent on such things as schools as schools alone could not cater for the future.

Fong, who is also Sarawak attorney-general, described the wafer fab located on the fringe of Kuching City in which the state government holds a 70 per cent equity stake through the Sarawak Economic Development Corporation (SEDC) as "an investment in the future, in job opportunities for youths."

He was quoted in local newspaper reports as saying that there are already "miles and miles of roads and now we have bridges coming up."

"We cannot throw all our money into infrastructure development anyway," he added.

Fong asked company employees to ignore all criticisms which he said were not constructive against 1st Silicon.

DAP Bandar Kuching MP Chong Chieng Jen told Parliament recently that 1st Silicon has been losing heavily and is into a technology process that is best described as generations behind others.

He also claimed that 1st Silicon, one of two wafer fabs in Malaysia, holds little prospect for the future and should therefore fold up to avoid incurring further huge losses.

Wafer fabs produce silicon micro-processing chips for the world's telecommunication devices, personal device assistants and computers.

Capital wiped out

The state government has so far refused to state publicly how much it has invested in the wafer fab located in the Sama Jaya Free Industrial Zone (SJFIZ) nor has it acknowledged publicly the losses reported at around RM2.5 billion since it was set up in 1998.

According to returns filed with the Malaysian Companies Commission (formerly Registrar of Companies), 1st Silicon has a paid-up of about RM1.8 billion.

The DAP parliamentarian said over the years up to the end of 2004, the company had incurred accumulated loses of about RM2.5 billion, which means that the losses have effectively wiped out its paid-up capital.

During the appreciation night at which SEDC chairperson Talip Zukpilip and 1st Silicon chief executive officer Dr John Nelson were also present, Fong did not touch on the company's losses. He only mentioned the company had been "experiencing incremental increase in revenue."

He also did not mention the present wafer production level nor how much sales were generated from production shipments of wafer chips.

Tough industry

Nelson, in his speech, said the company's clientele base has broadened, from five in 2003/2004 to 20 presently, and admitted the company has gone through the up and down cycles in production, with the last down cycle in the second half of 2004.

"But things are looking better now. The semi-conductor industry is tough. When it is good, it is too good, and when it is bad, it is terrible," he said.

In an apparent reference to the opposition's claim that the company will not be able to survive if its technology remains at the existing stage, Nelson said there is a misconception that the plant has to have absolute state-of-the-art technology to compete.

He said it would be much too expensive to have all the technology and to further invest in order to be state-of-the-art, but he believed that the company could contend with fabrication of 0.25 micron technology, "even though countries like China and Taiwan have been investing research and development into producing 0.09 microns."

However, 1st Silicon announced early this week it had what it said in techno language completed qualification and began production shipment for its technology partner Sharp Corporation 0.13 micron NOR Flash Technology.

The company stated it was the first in the country to produce the 0.13 micron node, describing it as a major milestone and a successful third-generation technology transfer.

TONY THIEN is malaysiakini's Sarawak-based stringer.