Powerchip Semiconductor Corp (力晶半導體), the nation's third-largest maker of computer-memory chips, has signed a contract to sell as much as half of production from its newest 12-inch plant this year to Japan's Elpida Memory Inc.
"The agreement is for between 30 and 50 percent of our production depending on [Elpida's] needs," Powerchip vice-president Eric Tang (
Elpida, a venture between NEC Corp and Hitachi Ltd, is taking over a contract from Mitsubishi Electric Corp after buying the company's memory-chip sales operation last October.
Powerchip will begin supplying chips to Elpida starting April 1.
Powerchip last year became the world's third memory-chip maker to open a plant making 12-inch wafers.
It plans to start making chips with 0.13-micron technology from Mitsubishi Electric in the second half of the year and chips with Elpida's technology early next year.
"The new alliance we set up with Elpida today involves the transfer of 0.1-micron and 90-nanometer technology from next year," Tang said.
"This alliance minimizes our investment risk while expanding our total production capacity," Yukio Sakamoto, president of Elpida, said in a statement.
"As a result, Elpida moves one step closer to achieving our goal of becoming the No. 3 DRAM supplier in the world by 2004," the statement said.
Powerchip last year said it expected the new plant to quadruple sales by the end of this year. Powerchip's sales in January fell 15 percent to NT$1.1 billion from a year ago.
Analysts welcomed news of the agreement yesterday.
"With this agreement, Elpida gains a production partner and Powerchip a technology partner," said Frank Wang, a chip industry analyst with Credit Suisse First Boston in Taipei.
Elpida, which has been unprofitable since its inception in 1999, desperately needs production partners.
"Elpida undoubtedly has technology," said Masahiro Fukuda, who helps invest ?1 trillion (US$8.5 billion) in Japanese equities at DL-IBJ Asset Management Co and doesn't own Hitachi or NEC shares.
"What it lacks is money to buy equipment and management to take it in the right direction," Fu-kuda said.
The venture's parent companies posted record losses last fiscal year, curbing their ability to invest in the new equipment and plants investors say Elpida needs to build.
Plants outfitted with the most advanced equipment can typically cost as much as US$3 billion. And transitioning from one technology to the next can set a company back by as much as US$400 million, Wang said.
Faced with such costs, many memory-chip makers have abandoned the industry, including Toshiba Corp, which sold its DRAM business to Boise, Idaho-based Micron Technology Inc a year ago.
Elpida said yesterday that it plans to raise US$700 million to boost production capacity, by signing an agreement with a number of yet-to-be identified companies in two weeks, chief administration officer Masaji Kubo told Bloomberg in an interview.
Elpida, Japan's sole remaining maker of DRAM chips, has also farmed out production to Shanghai-based Semiconductor Manufacturing International Corp (SMIC, 中芯國際集成電路) to lower costs.
Analysts speculated yesterday that the Japanese chipmaker will look to tie up with at least one other DRAM manufacturer in Taiwan, most likely ProMos Technologies Inc (
"Elpida wants to achieve a 10-percent global market share, so I think maybe they need to partner with ProMos," Wang said.
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