Hitachi Ltd, Toshiba Corp and Renesas Technology Corp are looking into building Japan's first factory to supply made-to-order computer chips to compete against rivals such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).
The three Tokyo-based companies said in a statement yesterday that they may start a company to offer specialized chips, without providing further details. The factory's cost and production targets will be decided by the middle of next year, executives and a government official familiar with the plan said yesterday.
Japanese chipmakers are joining forces as higher costs make it difficult to compete against rival foundries that make specialized semiconductors used in electronics from mobile phones to DVD players. TSMC, the world's largest supplier of made-to-order chips, already supplies chips for Microsoft Corp's Xbox 360 game console and Nokia Oyj's mobile phones.
"This is a step in the right direction, without which they will probably lose out" to overseas rivals, said Yuichi Ishida, an analyst at Mizuho Investor Securities Co in Tokyo. They will compete against TSMC and Samsung Electronics Co. China's Semiconductor Manufacturing International Corp (
The three Tokyo-based companies said in a release yesterday that they haven't set a date for starting the company to plan the foundry, the companies said.
Hirokazu Hashimoto, a former vice president at NEC Electronics Corp, Japan's No. 3 chipmaker, will helm the discussions, according to the people familiar with the plan.
Hitachi's President Etsuhiko Shoyama in September said the company was in talks with Toshiba, NEC Electronics Corp, Matsushita Electric Industrial Co and Renesas to create a foundry.
Renesas, owned by Hitachi and Mitsubishi Electric Corp, will join the venture, the Nihon Keizai newspaper reported yesterday. The three companies are expected to spend ¥100 billion (US$852 million) to begin production by 2007, it said, without citing where it got the information.
"Japan is unique in the sense that there is a very large number of semiconductor companies that supply a significant amount of their product internally," Mike Splinter, the chief executive of Applied Materials Inc, said in an interview earlier this month.
Making electronics that use their own chips "also makes it difficult for them to compete on the world stage." Applied Materials is the world's largest maker of semiconductor-manufacturing equipment.
A think-tank affiliated with the ministry, the Japan Society for Promotion of Machine Industry, in March proposed setting up a US$3 billion foundry in the country by 2007. Sales of customized chips will have to reach at least US$5 billion to recoup the spending, the association said.
"Some tax assistance from the government will be necessary in the beginning, as the foundry will not be able to immediately enjoy benefits of scale," said Masahiko Ishino, an analyst at Mitsubishi UFJ Securities Co.
The joint Japanese foundry will probably focus on 45-nanometer chips to get ahead of the rivals. Seventy-nanometer chips are currently the smallest mass-produced and 90-nanometer is the industry standard.
"When it comes to 45 nanometers, going it alone is difficult technologically and financially," Ishino said. "Doing it as a group helps reduce investment risks."
TSMC will begin production of chips using 65-nanometer technology by the end of this year, the company said in September. The smallest chips it makes now measure 90-nanometers.
Intel Corp, the world's biggest chipmaker, already ships 65-nanometer chips and is spending US$3 billion on a plant that will make 45-nanometer chips in the second half of 2007, the company said in July.
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