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Japanese chipmaker seeks capital

"The power balance among chipmakers may drastically change as they shift to 130-nanometer technology from 150-nanometer technology."

Yukio Sakamoto president of Elpida Memory inc

Elpida Memory Inc, the memory-chip venture between NEC Corp and Hitachi Ltd, wants to spend Japanese Yen 70 billion (US$563 million) next fiscal year to boost production and compete with rivals, president Yukio Sakamoto said.

A fund manager suggested he could turn to his old employer, Taiwan's United Microelectronics Corp, to raise some of the funds.

The Japanese Yen 78 billion invested so far and Japanese Yen 18 billion pledged by the two companies is insufficient to increase production of dynamic random-access memory chips enough to contend with Samsung Electronics Co and other memory-chip makers, Sakamoto said at a conference in Tokyo held by Morgan Stanley.

Tokyo-based Elpida is in talks with potential investors because it needs funds from sources other than its parents, Sakamoto said, without confirming reports that Intel Corp and Sony Corp may invest. The company's success depends primarily on garnering finances, some investors said.

"Seventy billion yen is a big amount and hard to raise," said Makoto Suzuki, who manages Japanese Yen 4.7 billion at Chuo Mitsui Asset Management Co. "Sakamoto may rope in his former employer United Microelectronics Corp (聯電)."

Until October, Sakamoto headed UMC Japan, a subsidiary of Hsinchu, Taiwan-based United Microelectronics, the world's second-largest supplier of made-to-order chips. Before that he held several positions with Texas Instruments Japan Ltd.

Rival Samsung Electronics Co will spend a total of 4 trillion won (US$3.3 billion) next year in its businesses, including the memory-chip unit, the Dong-a Ilbo said today, citing an unidentified official at Samsung Group.

Elpida may become the second-largest maker of dynamic random-access memory chips, Sakamoto said. Its competitors are having trouble producing smaller chips, making room for Elpida to expand its market share, he said.

"Besides Intel Corp, none of the chipmakers have achieved a decent yield in production of chips with circuits of 130-nanometers, or billionths of a meter," Sakamoto said.

"The power balance among chipmakers may drastically change as they shift to 130-nanometer technology from 150-nanometer technology," he said.

Elpida will expand capacity at its factory, which is to start operations next month. The plant can produce 3,000 sheets a month of silicon wafers 12 inches in diameter. Sakamoto wants to raise the capacity to 15,000 sheets a month by March 2004.

Elpida was the fifth-largest maker of dynamic random-access memory chips last year after Samsung Electronics Co, Micron Technology Inc, Hynix Semiconductor Inc and Infineon Technologies AG, according to Dataquest, a unit of Gartner Inc.

Elpida expects to expand sales of dynamic random-access memory chips for use in devices other than personal computers, Sakamoto said. Demand for DVD players, mobile phones and hand-held computers are rebounding, fueling sales of memory chips.

Non-personal computer devices account for about a third of all global sales of dynamic random-access memory chips. Japanese electronics makers lead the market, Sakamoto said.

"We'd like to focus on this market," he said.

Sales of memory chips used in mobile phones and other such devices are usually based on long-term agreements, Sakamoto said.

The prices of these chips are less volatile and promise steadier profit than personal-computer memory chips, he said.
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