Winbond's technicians come home

Winbond Electronics Corp (華邦電子), one of Taiwan's leading makers of DRAM computer memory chips, has called its technical team home from Japan amid reports that its top technology transfer partner and customer, Toshiba Corp, is planning to sell its DRAM business. Winbond has also put on hold plans for a 12-inch wafer chip making facility.

Toshiba is currently in talks with memory chip powerhouses Infineon Technologies AG and Samsung Electronics Co Ltd to sell its DRAM memory chip unit. The price of industry standard 64-megabit DRAM memory chips has fallen from around US$9 this time last year to less than US$1 today, less than the cost of production. With market conditions so bad, DRAM makers worldwide are suffering. Toshiba appears ready to exit the industry.

Any sale of the unit by Toshiba would be very damaging to Winbond, analysts say. Not only does Winbond depend on Toshiba for technology upgrades, the firm also ships over half of its memory chips to the Japanese powerhouse.

According to a Winbond statement, the Taiwanese firm plans to make alterations to its original development plan while Toshiba negotiates with Infineon and Samsung.

In addition, Winbond is delaying the construction of its US$3.5 billion 12-inch-wafer fab until a re-negotiation with Toshiba and other partners is completed. Winbond leased land in the Hsinchu Science-based Industrial Park to build the new fab.

Winbond's stock price has fallen 6.83 percent to NT$19.1 over the past few days in response to the news. "We believe our long-term relationship with Toshiba will carry on no matter what Toshiba decides to do with its DRAM operation," said Hander Chang, an assistant vice president of Winbond.

Some analysts took a more negative view, raising concerns that Winbond would lose its ability to license next-generation technologies.

Analysts disagreed with Chang, saying once Toshiba sells its memory chip business, Winbond will be in a tough situation since it has no ability to develop new technologies on its own and it is very expensive to license from somebody else.

The situation with Winbond could signal serious trouble for Taiwan's DRAM industry. Makers of these inexpensive memory chips depend heavily on foreign partners for technology transfers.

Powerchip Semiconductor Corp (力晶半導體), for example, uses process technologies from Mitsubishi Electric Corp, ProMos Technologies Inc (茂德科技) gets technology from Infineon, and Nanya Technology Corp (南亞科技) from IBM Corp. Vanguard International Semiconductor Co (世界先進), a unit of Taiwan Semiconductor Manufacturing Co (台積電), relies on Mitsubishi for technology, according to the Electronic Buyer's News.

Before Winbond's technical team was recalled, it was working on the development of 0.11-micron process manufacturing technology with Toshiba, analysts said. Now, the 50-engineer team will focus on 0.13-micron DRAM and flash memory technologies at Winbond's lab in Hsinchu, the company said in a statement.

Toshiba said earlier this week that it would post a larger-than-expected loss of US$958 million in the year to March 2002 and cut 10 percent of its workforce.