"We have decided to put the T$500 billion Tainan project on hold for the time being," John Hsuan, co-Chief executive officer of United Micro group, told reporters at a news conference.

In June 1997, United Micro said it would invest T$500 billion -- the island's single largest industrial project -- over the next 10 years to build several 12-inch wafer fabrication plants at southern Taiwan's Tainan science-based industrial park.

United Micro said current industry conditions did not justify such an ambitious plan. "The whole semiconductor industry is under very serious over supply pressure," Hsuan said. "I see no reason to justify why people should invest in 12-inch fabs now."

United Micro is one of the world's leading makers of made-to-order semiconductors, a specialist industrial sectorknown as "foundry chip making".

In Taiwan, it is second in production value only to microchip powerhouse Taiwan Semiconductor Manufacturing Co.

United Micro's US division president James Kupec said it would take at least a year for the industry to recover.

"In about a year or a-year-and-a- half from now, the over supply situation will change," Kupec told the news conference.

But before that, Kupec said he expected to see 10 per cent price erosion in the first-half of 1999.

In 1997, upbeat Taiwan's microchip makers shook up the industry by announcing plans to invest over US$80 billion to build more than 30 advanced wafer fabrication plants in the next 10 years.

In addition to United Micro's giant project, Taiwan Semicon said it would build six advanced wafer-fabrication plants as part of a 10-year, T$400 billion investment in Tainan.

Several chip makers followed suit, announcing similar projects with investment ranging between T$100 billion and T$200 billion.

As the regional financial crisisstarted to unfold, many Taiwan chipmakers were forced to slow down or suspend originally planned investments.

Taiwan Semicon lowered its 1998 capital spending plan to US$920 million from US$1.3 billion in late June.

Hsuan said United Micro remained committed to investing in the industry, but he said not every company would be able to fulfill pledged investments.

"I would predict about 50 per cent of the programmes will be stopped. This is not a problem just for Taiwan, it's a problem for the global semiconductor industry," Hsuan said.

Nonetheless, Hsuan said United Micro was in talks to acquire an eight-inch wafer fabrication plant in Europe, Japan or the United States. "We feel buying existing capacity is cheaper than building a new one now," Hsuan said. Hsuan said the deal would be finalised before the end of September.

Hammered by a sluggish semiconductor industry worldwide, prices of Taiwan's semiconductor shares have slumped. United Micro plunged 54 per cent to T$34.1 on Thursday from a 1998high of T$73.64.

In August, United Micro slashed its 1998 pre-tax profit forecast by 49 per cent to T$5.442 billion and sales forecast by 39 per cent to T$18.347 billion.(US$1=T$34.5)