Sat, Apr 05, 2008 page12

• Elpida Memory's custom-chip unit expects solid sales

  • BLOOMBERG
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  Elpida Memory Inc, which is starting Japan’s first custom-chip venture, expects sales at the unit to reach ¥100 billion (US$976 million) in three years as it looks to reduce reliance on memory and use expensive machinery longer.

  The company plans to invest ¥50 billion for custom-chip production through March 2011 including new equipment and reallocation of some existing output at its factory in Hiroshima in western Japan, chief executive officer Yukio Sakamoto said in an interview with Bloomberg Television broadcast yesterday.

  Elpida aims to challenge Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) in the US$20 billion market for made-to-order logic chips used in flat-panel televisions, gaming consoles and digital cameras after glut in its main memory-chip business drove the company to a record loss in the third quarter. The move may also extend the use of its equipment, Sakamoto said.

  “Everything hinges on whether they can win customers and where, but the strategy in itself is sound,” said Yuichi Ishida, an analyst at Mizuho Investors Securities Co in Tokyo. “If they are successful, it will help shield the company from the volatility of the DRAM market,” referring to the most common type of computer-memory chip.

  Elpida, which expects to spend a total of about ¥100 billion on equipment this fiscal year, last month agreed with United Microelectronics Corp (UMC, 聯電), the world’s second-largest custom-chip maker, to begin jointly offering foundry services to Japanese clients. The business, Japan’s first dedicated made-to-order chip business, will use Elpida’s facilities and Hsinchu-based UMC’s manufacturing technology.

  “Short equipment lifespan is one of the biggest issues facing us now,” he said in Tokyo, where Elpida is based. “We can make logic chips with the same generation equipment for 15 years, while DRAM machinery is outdated in about five years.”

  Production will begin in the quarter starting January, with a monthly output of 30,000 wafers, and become profitable within a year, Sakamoto said. The company will use its most advanced facilities to make DRAM, he said.

  The company in January posted a ¥12.13 billion net loss in the three months ended Dec. 31, compared with a ¥24.9 billion profit a year earlier. That was the biggest quarterly loss since it was listed in Nov. 2004. Sales fell 34 percent to ¥94.05 billion.

  Revenue was ¥490 billion in the fiscal year ended March last year, more than double a year earlier.

  Elpida approached all of Japan’s major chipmakers, including Toshiba Corp and Fujitsu Ltd, offering to buy the equipment and hire employees involved in the production of logic chips, Sakamoto said.

  He said it wasn’t clear if any of them would accept.

  Logic chips include microcontrollers, or mini-computers dedicated to a specific function such as operating a liquid- crystal display in a microwave oven, microprocessors, and digital signal processors that power mobile phones. TSMC is the dominant “pure-play” foundry with 49 percent of the US$19.7 billion market last year, California-based industry researcher iSuppli Corp’s figures show.
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