Rumors intensify over PSC-Elpida 300mm fab

October 5, 2006 – PowerChip Semiconductor Corp.’s (PSC) move this week to raise around $363 million through issuance of global deposit receipts provides further clues that the company is ready to move forward with a 300mm DRAM fab project with Elpida Memory, noted the Taiwan Economic News.

The report speculated that the funds only make sense as preparation for a PSC-Elpida JV, because otherwise the timing is not good given PSC’s stagnant share price and the company’s abundant cash.

The $2.4-$2.7 billion fab project would be a 50-50 JV, financed 50% from deposits, and then listing the JV to raise the rest of the capital. The fab would be placed underneath a JV company, and then equipped with 70nm process, with R&D results and capacity shared by the two companies.

The report noted that PSC has been among the most aggressive suitors for an Elpida fab partnership, with company chairman Frank Hwang accompanying Elpida president/CEO Yukio Sakamoto during a visit Taiwan’s Economics Minister Steve Chen last month to discuss fab investment incentives. Elpida had indicated it would not seek a fab in Japan without competitive tax breaks or subsidy incentives.

Last month rumors first circulated about a PSC-Elpida JV, which would move them to the top of the world’s DRAM chip producers. Combined, the companies’ 300mm fabs will have total output capacity of 180,000 wafers in 2006, more than current No. 1 Samsung. Elpida had previously courted partners in Singapore and mainland China, but reportedly chose to build the fab with a Taiwan partner, due to domestic chipmakers’ proven ability to operate 300mm fabs efficiently — Powerchip and ProMOS Technologies Inc. have run their 300mm fabs at 85% and 80% capacity utilization, respectively, while Inotera Memories Inc. has seen utilization top 100%.

In August, Elpida countered a report in Japan’s Nihon Keizai Shimbun suggesting the chipmaker was ready to spend multibillions of dollars over several years to build a new DRAM fab. Elpida stated at the time that it was considering a new fab as an addition to its existing facility in Hiroshima, but had no concrete plans for construction of such a facility, either in location or in timing.


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