Fri, Dec 08, 2006 - Page 1 News List

Powerchip, Elpida agree on memory joint venture

By Lisa Wang  /  STAFF REPORTER

Powerchip Semiconductor Corp (力晶半導體), Taiwan's biggest computer memory chipmaker, yesterday signed an agreement with Japan's Elpida Memory Inc to enter into a 50-50 joint venture, aiming to rapidly expand market share amid robust demand.

The new entity will invest between NT$450 billion and NT$500 billion (US$13.93 billion-US$15.48 billion) in building four 300mm plants for manufacturing dynamic random access memory (DRAM) chips with monthly capacity reaching 24,000 wafers over the next five years.

The planned investment will be the largest foreign investment on a single project that Taiwan has seen in years, according to the Ministry of Economic Affairs' statistics. In the first 10 months of the year, foreign investment totaled US$1.23 billion, the ministry's data showed.

"The alliance between Elpida and Powerchip will help the two to collectively strive for the number-one position in the DRAM industry within the next three years," Elpida executive officer Yukio Sakamoto told a press briefing in Taipei.

In the initial stage, the two companies plan to pool NT$40 billion to invest in the new venture.

The first plant, which is under construction and originally owned by Powerchip only, is scheduled to start mass production next August.

"The cooperation will hasten Powerchip's capacity expansion and secure technology resources," Powerchip chairman Frank Huang (黃崇仁) said.

The agreement would give the Taiwanese company the right to half of the venture's output.

Elpida and Powerchip will jointly develop advanced DRAM manufacturing technologies using 70-nanometer process technology first and more advanced 50-nanometer process technology in the future with the specific aim of producing low-cost chips.

To raise funds for future equipment and facilities, Huang said the new entity (which has no English name yet) would arrange to list public shares in Taiwan after it starts to make profits, which could be two years from now.

The latest cooperation between the two is an extension of a long-term partnership, as Elpida has been transferring advanced technologies to Powerchip in exchange for capacity.

Stronger growth in the DRAM market recently has prompted Merrill Lynch to raise its growth forecast for DRAM and NAND flash sales to 28 percent for this year and 19 percent for next year, compared with its earlier estimate of 21 percent and 16 percent, respectively.

"I believe the deal will have a relatively positive impact on Powerchip as it will obtain much-needed advanced technologies, which is very important [for the company to make cost-efficient chips]," said Crystal Lee (李懿薇), a chip industry analyst with ABN AMRO, in Taipei.

In addition, Powerchip's strategic alliance with Elpida would reduce the potential threat from China's Semiconductor Manufacturing International Corp (SMIC, 中芯), Lee said.

SMIC, China's biggest chipmaker, competed with Powerchip for Elpida's partnership after Japan's sole DRAM maker said it planned to build new plants overseas. Its only factory, in Hiroshima, already runs at full capacity.

Elpida chose the Taiwanese company because "Powerchip can make DRAM chips at the lowest cost," which is essential for chipmakers to survive in the highly volatile DRAM industry, Sakamoto said.

The Tokyo-based chipmaker does not have further overseas investment plans in the near future, Sakamoto said.

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