ICT STATEMENT IN REPLY TO FURTHER ALLEGATIONS FROM MR. HILL AND DR. WIEMER
The claims by Mr. D.J. Hill and Dr. Klaus Wiemer in the US Wafer News publication released on the 6th October, 1997 that "the Government backed Malaysian group turned its back on the well organised project that would be profitable", is without any creditable basis.

InterConnect Technology Sdn Bhd ("ICT") was constrained to review and restructure the wafer project because unauthorised expenditures committed by Mr. Hill and Dr. Wiemer had resulted in huge project costs escalation.  Such huge increases in project costs not only made the project unprofitable but clearly not viable.  For example, ICT's Board was originally advised by Mr. Hill on 15th September 1996 that the total cost of acquiring the Sunnyvale manufacturing plant ("SMC") was just US$25 million, which included transferring the lease of the plant and its equipment.  Mr. Hill mentioned nothing about the additional cost of refurnishing the plant or to convert the plant for a 0.35 micron 8-inch CMOS process.  The Board was made to believe that after paying US$25 million, the SMC could start operating.  The additional cost of US$150 million was, therefore, never made known to the Board by Mr. Hill prior to the acquisition of SMC nor had the Board approved such commitments.

As for the Kuching Manufacturing facility ("KMC"), the original Business Plan produced by Mr. Hill on November 1995 showed a total budget estimate of US$1.2 billion for a 0.35 micron 8-inch CMOS process with the capability of producing 25,000 wafers out per month.  Subsequently Mr. Hill revised the Business Plan with project costs increasing to US$1.3 billion and eventually, to US$1.4 billion with a disclaimer to the effect that he is not responsible for the contents of the Business Plan and its revisions.  To finally justify such increases, Mr. Hill proposed a change in technology to 0.25 micron 8-inch CMOS process capable of producing 20,000 wafers out per month.  The Board remained unconvinced that Mr. Hill was able to stop or control the escalation in the cost estimates, and doubted Mr. Hill's ability to provide firm and final cost of the project.  As such, the revised Business Plan was rejected.

In case of Sharp Corporation, the Board never disputed Sharp's capability to provide technology assistance to ICT.  However, it ought to be mentioned that Mr. Hill originally proposed that Sharp, as a technology partner who should be offered 13% equity in ICT for US$150 million.  This however, never materialised.  Instead, ICT ended up having to buy technology from Sharp, without Sharp becoming an investor or injecting cash as originally proposed by Mr. Hill.  This is just another example of Mr. Hill not been able to deliver what he promised.  Further, Mr. Hill failed to secure the other 2 wafer partners he proposed in his Business Plan who were supposed to take up a total of 28% equity for US$300 million.  The project could not possibly proceed in the way proposed by Mr. Hill without sufficient capital injection from wafer partners or commitments from Fabless Companies.

As regards the construction cost for the Kuching wafer foundry, based on Dr. Jim Burnett's supervision and instruction, the Master Contract document submitted by the turnkey contractor showed the figure of US$508 million as the contract price.  If the cost of manufacturing tool sets were included based on the tool list approved by Mr. Hill and Dr. Wiemer, the overall total cost would escalate to US$1.166 billion.  Neither the proposed price nor the contract document were accepted by the ICT Board.  After the Board asked the turnkey contractor to review the design on a more effective and functional cost approach, the overall total cost inclusive of manufacturing tool sets, was reduced to US$868 million (and subject to further negotiation) which is definitely a cost saving of over US$300 million.  This episode only confirmed the total inability or unwillingness of Mr. Hill and Dr. Wiemer to safeguard the interest of ICT, for reasons best known to themselves.

As for the payment to the turnkey contractor, the method of processing the payment certificate by Dr. Jim Burnett, V.P. of Design and Construction was highly unprofessional and irregular.  For example, the second claim by the turnkey contractor was recommended by Dr. Jim Burnett based on a one page, skimpy, hurriedly hand-written note, which obviously showed incompetence and ignorance of industry practices.  This unprofessional "invoice", strange enough, was accepted by Mr. Hill and Dr. Wiemer and recommended to the Board for payment of over US$13 million.  The Board had no choice but to appoint an independent professional Quantity Surveying firm to evaluate the claims.

Regarding the financial position of SMC, ICT has just received the audited report prepared by Ernst & Young (USA).  Because of poor accounting record kept by a staff without accounting expertise appointed by Mr. Hill in SMC, Ernst & Young found a lot of difficulty and took a longer period of time to reconcile and audit the accounts.  The Board was also told that Mr. Solomon Lee, the Director of Finance in SMC was kept in the dark about Mr. Hill's expenditures.  The audited report is currently being studied by members of the Board.  Because of this unhealthy accounting situation and the problems faced by the ICT trainees, the Board in its attempt to resolve this matter has sent its legal counsel and 2 senior staff to Sunnyvale to ascertain the actual expenditure and liabilities incurred by Mr. Hill and his management staff there.

ICT is obliged to issue this statement to set the record straight and to put to rest the mischievous allegations and attempt by Mr. Hill to confuse readers in USA about ICT especially those whom he has previous dealings in SMC.
 


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Page last updated October 24 1997.