SINGAPORE - South Korea's Samsung Electronics and Germany's Siltronic AG on Thursday opened their one-billion-US-dollar joint venture microchip plant in Singapore.

Siltronic Samsung Wafer Pte Ltd will produce 300mm wafers and aims to reach a monthly capacity of 300,000 by 2010, a statement said.

The opening of the facility makes Singapore home to one of the world's largest and advanced factories for such wafers.

"Today's commissioning is a key milestone in further expanding our presence on Asia's growth markets," said Siltronic chief executive officer Wilhelm Sittenthaler.

Oh-Hyun Kwon, president of Samsung Electronics' semiconductor business division, said the 300mm segment is undergoing rapid growth.

Siltronic AG is a subsidiary of chemical group Wacker Chemie AG, which expects to see strong growth in demand for 300mm chips worldwide, especially from Asia.

Each time you use an electronic device, you're also using a semiconductor chip, which requires wafers to make. The larger the wafers are, the more chips can be produced. For now, the popular size is 200mm, although those behind the factory say the 300mm wafer can trump that.

Rudolf Staudigl, president and CEO of Wacker Chemie AG, said: "Our customers can build more chips on one wafer. They get a significant productivity increase. Productivity increase means cost savings for our customers."

But this optimism comes at a time when the semiconductor industry remains in the doldrums. Domestic exports of electronic goods from Singapore have been declining since February last year, according to the government's trade promotion agency.

At a press conference, Kwon said that a major recovery in the semiconductor industry is unlikely this year because of an increase in production leading to price declines. But he said Samsung will stick to its plans regardless of the market situation "because we have a very long-term plan".

And Singapore Prime Minister Lee Hsien Loong said the semiconductor industry's long-term prospects remain bright.

"Despite these near-term challenges, the long-term prospects for the semiconductor industry remain bright. The convergence of electronics, communications and entertainment is stimulating growth in new products, generating a plethora of new uses for silicon chips and semiconductors," he said at the opening of the Siltronic Samsung Wafer Pte Ltd.

Growing demand is also seen coming from new sectors like healthcare, robotics and clean energy.

The Prime Minister also noted another trend - the semiconductor industry's shifting of its geographic centre away from the US to Asia for low-cost labour.

While Singapore cannot compete on absolute cost, he said, the country can remain a major manufacturing location in Asia by providing good value propositions.

"We cannot always offer the lowest absolute cost or provide land for semiconductor fabs as cheaply as other locations in the world. But we will do our best to deliver cost-effective solutions with a compelling value proposition," said Mr Lee. - CNA/ir