After two-and-a-half years of negotiations with German government agencies, LSI Logic Corp is about to establish a new semiconductor venture in Erfurt to serve eastern Europe and the Commonwealth of Independent States. Thesys GmbH is to be set up in a semiconductor plant owned by the former East German government, and it has been equipped by LSI to process gate arrays and cell-based integrated circuits from six-inch wafers with 1.5-micron CMOS and BiCMOS technologies. According to Electronic News, Thesys is ready to produce its first prototypes by the year-end and could be in volume production by the first quarter 1993 if an agreement is soon reached with the government agencies handling privatisation of the East German semiconductor industry.
Painful exercise
The president and chief executive of Munich-based LSI Europe, Horst Sandford, says that he expects to reach an agreement within 30 days. He also says that the negotiations have been the most painful exercise of his entire career and that the rules governing privatisation changed continuously. The Treuhand agency, which is responsible for privatising East Germany’s state-owned agencies, turned a single company into four separate firms dealing in semiconductor manufacture; advanced research and prototypes; a bipolar plant; and a test and assembly facility. Thesys will employ some 500 people and LSI is to hold a 19.8% stake with the rest in the hands of the state bank, Tahuringia. The company has about $83m to draw on until 1994 and LSI has an option to acquire a 51% holding in the future. The length and complexity of LSI’s negotiations with the Treuhand agency are typical of the problems that western companies face when trying to break into eastern Europe. VLSI Technology Inc has been trying for over a year to to set up a semiconductor venture in Dresden. It wants to turn the old Zentrum fur Mikroelektronic Dresden into a new company selling into eastern Europe as well as providing design and foundry capacity for the whole of Europe. Meanwhile, Texas Instruments says it is monitoring the situation from an ‘information and technical liaison post’ established in Budapest two years ago. The Marco Group, an Advanced Micro Devices distributor in the UK, has established offices in Poland, Hungary and Czechoslovakia. Analysts say that the east European market is some 40% down on its peak of $2,100m in 1989, but while demand is likely to remain depressed for some time, long-term opportunities are there for companies willing to endure the red tape and form local operations.
