The press have been listening to senior executives spouting on about how wonderful China is and how many fabs are going to be built for several years now. I didn't buy it then and I still don't buy it now!

Yes we have seen China emerge as a chip producing country but they still have a very long way to go before having a significant market share. The potential is there but that rarely means anything in this industry.

The refreshing note came from an executive from ASE, Taiwan who questioned the projections given by Stan Myers of SEMI, that over 20 fabs will be built in China in the coming years. The only real success story to come out of China is SMIC. But even they are finding the going tough. SMIC was 6 months late in tool installing its first 300mm fab due to lack of cash. The ramp has faulted due to qualification problems of two different DRAM process technologies it plans to use for its contact customers (Infineon & Elpida) Elpida even went as far as stating in its latest financial records that it would not be ramping product at SMIC as planned. We believe that SMIC's output at that fab is still only qualification wafers and not real production wafer yet.

Other paper fabs announced over the last 12 months have yet to come off the drawing boards while foundries such as Grace have capacity utilisation rates below 10,000wspm. Anybody can build a fab but it takes a hell of a lot of skill to make one work. China has come a long way in recent years but its got a very long way still to go.

(Note: "Pete Tong" is a London cockney rhyme that means "its all gone wrong." Pete Tong is a highly respected DJ and radio broadcaster and the phrase has just been used in the title of a new film about a DJ who goes deaf).