PSi Technologies of the Philippines plans to shift half of its production to the mainland, creating 1,500 jobs as it joins the movement of chip-packaging and testing companies to China - the world's largest importer of semiconductors. Chairman and chief executive Arthur Young said he expected to see more rivals following suit. The mainland chip market is forecast to reach US$82.8 billion by 2007, but most of this will be imported. 'I think it is a natural progression of our business... As part of the supply chain, it makes sense to get closer to end-users,' Mr Young said. 'A lot of our clients have moved their production to China.' The Nasdaq-listed company provides assembly and test services to major semiconductor manufacturers, such as Infineon Technologies, ON Semiconductor and Texas Instruments. Last month, it signed a deal with the Chengdu government to set up a 4,000 square metre factory. The first phase of the project, estimated to cost US$20 million, is expected to be completed early next year. The company's move comes as other providers of assembly and test services shift production to the mainland to take advantage of tax breaks, land concessions and cheap labour. Unlike other parts of the semiconductor manufacturing process, assembly and testing is relatively labour-intensive. Companies with plans to set up packaging and testing operations on the mainland include Intel Corp, which has also chosen Chengdu as a base, and Singapore's ST Assembly Test Services. Also driving mainland demand is a growing chip-design industry and foundry players such as Semiconductor Manufacturing International Corp, Grace Semiconductors and Taiwan Semiconductor Manufacturing. According to iSuppli, the market for assembly and test services on the mainland is expected to reach US$10.3 billion by 2007, up from $3.6 billion in 2002. Mr Young said PSi decided on the move after a major customer with operations in China had asked it to build a factory there. 'A lot of our customers have products they are selling into China,' he said. Unlike the Philippine government, Mr Young said, Chengdu officials had been more receptive to the company's concerns as the city tried to attract IT investment. PSi and other players in the electronics industry had complained to the Philippine government about high power costs, poor infrastructure and shaky security. Many potential foreign investors had gone elsewhere because the government had not done enough to ease their concerns.
