Study of the Fund Raising Strategies of Semidonductor Companies: The Case of Inotera Memories Inc.
Date Issued
2007
Date
2007
Author(s)
Jao, Changming
DOI
zh-TW
Abstract
Taiwan has become an important souce of capacity in the global semiconductor industry. To date, the local semiconductor industry’s excellent infrastructure and economy of scope are expected to continue to improve in the future. In fact, based on publicly available information, more than 15 new 12”fabs are currently under planning. However, as semiconductor design and process technologies are constantly improving, the investment amount for each fab is becoming more and more expensive, not to mention the regular capital expenditure needs from existing technology migration. As a result, local semiconductor manufacturers’ present and future business risks lay on (1) technology migration, and (2) funding for regular capital expenditure needs. As the basic investment amount has climbed to the US$1 billion mark, the funding strategies of local semiconductors have become more important than ever.
This research first covered the characteristics of the semiconductor industry to demonstrate the capital-intensive nature of the industry and the large amount of regular capital expenditure needs. Then, the research encompassed the funding strategies of local semiconductor manufacturers, with an emphasis on DRAM manufacturers’ needs for long term capital funds, establishing an understanding of the challenges and conditions for successful fund raising of their funding strategies.
This research followed through by reviewing previous thesis paper related to capital structure and local semiconductor manufacturers’ funding strategies. This research covered Inotera Memories Inc., as a case study to evaluate its funding strategy to raise up to NT$200 billion for its fab 1 and 2, its decision logics and successful execution. The optimum capital structure for Inotera to achieve its lowest weighted average cost of capital was examined, in an effort to indicate a strategic direction for the Company and other semiconductor manufacturers.
This research uncovered that local semiconductor manufacturers’ funding strategies, especially DRAM manufacturers’ ones, have been dependent on the successful issuance of cash injections (including global deposit receipts). It has been vital for local DRAM manufacturers to successfully raise cash in either local or international capital market which, in turn, effectively increases their debt capacity and, combined with the internally generated funds from deprecation, both to finance the regular capital expenditure needs. The result is different from the preference of the pecking order theory. The case study also indicated a deviation that the successful issuance of seasoned public offering and GDR to increase its debt capacity was imperative to Inotera’s fab 2 investments which will amount to US$2.3 billions.
To evaluate Inotera’s funding strategy, this research manifested the result of the calculation of Inotera’s weighted average cost capital, and pointed out that the 1:1 leverage ratio, common to local semiconductor manufacturers, would not achieve the lowest weighted average cost of capital to Inotera. As a rule, local semiconductor manufacturers ought to decrease their financial leverages to decrease their overall business risk. Therefore, the research concluded by suggesting Inotera should decrease its financial leverage to achieve its lowest weighted average cost of capital.
Subjects
融資策略
資本結構
加權平均資本成本
Funding Straegy
Capital Structure
Weight Average Cost of Capital
Type
other
File(s)![Thumbnail Image]()
Loading...
Name
ntu-96-P91745003-1.pdf
Size
23.31 KB
Format
Adobe PDF
Checksum
(MD5):0439fc1f14c456571ef624154fee4af8