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The Magical Moneyman Of Thailand


International Business: THAILAND

THE MAGICAL MONEYMAN OF THAILAND

One princess, two pigs' heads, and nine monks graced the groundbreaking ceremony for Texas Instruments Inc.'s newest semiconductor plant, in Chachoengsao, 25 miles east of Bangkok, Thailand. A court Brahmin, resplendent in white tunic and trousers--with a mobile phone tucked into his waistband--directed Princess Galayani Vadhana's blessing of the cornerstone, accompanied by chanting monks and a blue-and-white-suited school band.

What allure could such a setting possibly hold for TI? It's an opportunity to sink even deeper roots in Southeast Asia--the world's fastest-growing semiconductor market and production base. TI already is milking three profitable chip joint ventures in Japan, Singapore, and Taiwan. All three are set up so that TI can pass off most of the huge investment burden, reap profits as long as the chip market is strong, and shrug off the damage if the market tanks.

SNAKEBITES? But taking this model to Thailand poses new challenges. The country boasts neither the spotless high-tech industrial parks nor the state-of-the-art telecom and transport systems that TI is used to. Snakebite kits were in the packets handed to TI's construction team at the planned $1.2 billion facility, on a rutted, unpaved road running beside rice paddies. Nor can TI depend on a corps of local engineers, such as those found elsewhere in Asia.

But TI is confident, because its partner, a soft-spoken Thai entrepreneur named Charn Uswachoke, is a minor miracle worker. In less than a decade, his Alphatec Group has built an empire packaging and testing chips for the likes of TI, Cypress Semiconductor, and Advanced Micro Devices. To win over TI, he's picking up 74% of the tab.

Last year, the nine companies that make up his group posted combined profits of $60 million on sales of $1 billion, both up about 30% from 1994. While most Thai electronics companies are screwdriver plants for Japanese VCRs and TVs, Alphatec has higher-tech niches. The group "seems to be driving the whole industry in Thailand," says Eddy Tan, a Singapore-based semiconductor analyst for Dataquest Inc.

One credential that caught TI's attention: Uswachoke's long experience working with Western businesspeople. A U.S.-educated engineer and MBA, he lived in the U.S. for 11 years. Back in Thailand, he ran AT&T's Thai semiconductor unit, and then acquired Philips Signetics' Thai chip-packaging operation in 1988. Next, he harnessed a team of expatriate managers to run Alphatec. Today, he's the only Thai among the company's 10 top executives.

Uswachoke's other trump card is his ability to attract major-league financing. A member of Thailand's close-knit, powerful ethnic Chinese community, he's a master of guanxi (connections). When he needed $25 million to buy the Philips Signetics unit, Uswachoke simply made a few phone calls to friends. They were on hand again when he was short $70 million to buy the AT&T subsidiary, and they may put up as much as $500 million for the TI venture. Marvels Alphatec Group's American president, Robert B. Mollerstuen: "You shake hands and walk away with millions."

With more of that kind of financial help, Uswachoke figures, group sales could quadruple, to $4 billion by 2000. To get there, Uswachoke covets a grander industrial base (table). Even as he was negotiating with TI earlier this year, his company broke ground on a $1.5 billion fabrication plant to make logic chips in the same vicinity. Two other plants, worth $400 million, are in the works nearby. The result will be Thailand's first high-tech industrial park, called Alphatechnopolis, occupying a swath of land double the size of Taiwan's famed Hsinchu Science Park.

None of these bold projects is free of risk. Already, Uswachoke is shouldering a debt burden that will soon outweigh his equity base. What's more, with massive new dynamic random-access memory capacity coming on stream in North America, Europe, and North Asia, Alphatechnopolis could be cranking up just as the chip industry heads south.

But that seems unlikely. Dataquest expects semiconductor consumption in non-Japanese Asia to surpass the Japanese market in 1998, making it the second-largest in the world, after the U.S. Getting in early, says the president of TI's Semiconductor Group, Thomas J. Engibous, "gives us access to the best educated labor force in the country."

Moreover, if global growth of the industry accelerates to 20% a year, as some expect, TI's current customers will be clamoring for more product than its existing plants and joint ventures can supply. That should leave Uswachoke plenty of room to pursue his favorite activity: rapid expansion.

A NEW ASIAN CHIP POWERHOUSE

(Alphatech's 1995 investments)

-- Breaks ground on Thailand's first major chip fabrication plant, worth $1.5 billion

-- Breaks ground on first phase of $1.2 billion DRAM plant with partner Texas Instruments

-- Lays plans for a $1 billion high-tech industrial park called Alphatechnopolis

-- Announces a $165 million expansion of U.S. chip-testing and assembly operations

-- Constructs a $50 million chip-testing and assembly

facility in Shanghai

DATA: BUSINESS WEEKBy Mark L. Clifford in Chachoengsao, Thailand


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