HILLSBORO, Ore.-- Japan's Sumitomo Electric Industries Ltd. today announced plans to produce compound-material semiconductor wafers, starting with 150-mm gallium-arsenide (GaAs) substrates, at a facility here. A second-phase expansion to the new facility will add large-diameter indium phosphide (InP) wafers to the output, said Sumitomo.

The Oregon facility is Sumitomo's first U.S. factory to produce compound semiconductor materials. Construction is scheduled to begin in November, and the plant slated to be in test production by August 2001. Full production of 150-mm (6-inch) GaAs wafers is expected to begin by the end of next year.

Sumitomo said its total investment for the first phase of the plant will be $20 million, with the potential for an additional $70 million expansion as demand in wireless markets for GaAs and other compound semiconductors grows.

The Hillsboro plant will be aimed at serving wireless communications applications, such as cellular phone handsets. Sumitomo estimates that the current worldwide market for mobile phone handsets will reach 400 million units in 2000 and grow to 600 million in 2001. The Japanese materials supplier said it has a number of major GaAs wafer customers U.S., including TriQuint Semiconductor in Hillsboro, TRW in Los Angeles, and Motorola Inc. Phoenix.

Sumitomo noted that a typical cell phone today now has six to seven GaAs chips, handling high-speed switching, power and low-noise amplification functions.

"There is a strong increase in demand for our products in the wireless communications industry, and the need to move quickly was a key factor in making this investment," said Kenichi Yoshida, managing director at Sumitomo Electric in Japan. "The `Silicon Forest' has excellent infrastructure for semiconductor manufacturing, including highly reliable utilities, a well-educated work force, and proximity to key sources of supply."

Sumitomo said its wafer facility will create 150 new jobs for the local economy as it expands over the next three years.