June 26, 2003 – Recent activity by DRAM companies to rev up advanced chipmaking production could signal an upswing in the DRAM market, according to a recent Dow Jones report.

Two of Taiwan’s top three chipmakers are boosting capacity at current plants, and investing heavily in building new ones. ProMOS Technologies Inc. says it has increased capital spending this year to $170 million, up from earlier estimates of $100 million, in order to fund a new 12-in. wafer plant in Taiwan.

Powerchip Semiconductor Corp. said it also plans to spend $600 million next year, and will pour $2 billion into a new 12-in. wafer fab to be built by the end of 2003, with production planned for early 2005, according to Powerchip spokesperson Eric Tang.

After huge up-front investments, the cost savings in moving from 8-in. wafers to 12-in. wafers can be dramatic — more chips can be cut per wafer, reducing manufacturing costs by nearly a third. According to Tang, Powerchip’s current 12-in. plant is already producing high-end 256MB DDR-400 DRAM chips at a lower cost (under $3.00 each) than what the company’s 8-in. plant can produce. As a result, Powerchip plans to stop producing DRAMs at its 8-in. plant next year and will instead use it to make other kinds of chips.

“The cost savings are there, the (12-in. plants’) competitiveness is real,” Tang said. Consider that the spot price of DDR-400 chips is currently above $5.00 on DRAMeXchange, the online clearinghouse for DRAM chips, and the attractive margins for 12-in. wafer production become even clearer.

Both Powerchip and ProMOS are positioning themselves to gain leverage in the $16 billion DRAM market, where industry leader Samsung Electronics Co. is the only company to post a profit this year.