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Nanya's new 12-inch fab to heat up DRAM sector

"Taiwan's DRAM players have a very short history, so this will allow Nanya a chance for long-term growth."

George Wu, a chip industry analyst at Primasia Securities Co

Construction on a new 12-inch computer memory chip factory, a joint venture between computer memory chip maker Nanya Tech-nology Corp (南亞科技) and Ger-many's Infineon Technologies AG, will help the two share the cost of opening a new factory.

"Twelve-inch fabs are very expensive and companies need to reduce costs by sharing the burden," said James Huang (黃建銘), an analyst at SinoPac Securities Corp (建華證券) in Taipei.

Nanya hopes the 2.2 billion-euro (NT$76 billion) Taoyuan facility will help strengthen its global position in the memory chip market.

The groundbreaking ceremony for the facility was held yesterday.

"The new fab will start producing wafers in 2004 and it will move us into the number four position worldwide," Charles Kau (高啟全), Nanya's executive vice-president, told the Taipei Times yesterday.

The factory will further expand Nanya's production of dynamic random-access memory (DRAM) chips, used for short-term memory in devices as varied as computers and answer machines.

The chips are cut from disks of silicon that are eight inches in diameter, but new technology allows manufacturers to produce 12-inch diameter wafers which will yield more chips and therefore cut costs.

The factory will begin churning out the first phase of chips at the start of 2004, with full-scale production expected to start one year later. By 2006, the second and final phase will be completed, increasing wafer output from 20,000 to 50,000 per month, Kau said.

The alliance spells a win-win scenario for both sides, with Infineon expanding its production capability, while Nanya gets to flex its muscles on the world stage.

"Taiwan's DRAM players have a very short history, so this will allow Nanya a chance for long-term growth," said George Wu (吳裕良), a chip industry analyst at Primasia Securities Co.

"Infineon doesn't see Nanya as a competitor now since they are looking [to grab market share from] Samsung, Micron and Hynix as quickly as possible," Wu said.

Samsung Electronics Co, Micron Technology Inc and Hynix Semiconductor Inc are the largest memory chip manufacturers in the world.

The timing of the new venture, however, is not good, with global DRAM chip sales plunging 62 percent to US$11.9 billion last year from US$31.6 billion in 2000, according to market researcher Dataquest.

In addition, the price of memory chips continues to slide, with September prices going below the cost of production. Analysts say prices are unlikely to recover before the beginning of next year.

"There's still downward pressure on DRAM prices, and memory chip producers will need to lower their costs to survive. Twelve-inch fabs will bring down costs in the longer term," Huang said.

South Korea's Hynix is having difficulty gaining approval for its third bail-out plan in two years, South Korean newspapers reported yesterday. Two-thirds of Hynix is owned by international banks, to which the ailing giant now owes 6.2 trillion won (US$5.1 billion).

Taiwan's third-largest memory-chip maker, Powerchip Semiconductor Corp (力晶半導體), is also having problems. The company announced yesterday that it was cutting in half a planned sale of bonds due to a cut-back in its own 12-inch fab expansion plans for next year.

Infineon pulled out of a joint venture with Mosel Vitelic Inc (茂矽) in October over Vitelic's financial problems.
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