July 25, 2007 – Hoping to soften the blow of soaring chip development costs, a trio of Japanese chipmakers have revived the idea of a joint chipmaking operation to develop and eventually manufacture 32nm chips for use in flat-panel TVs and other digital electronics, according to the Nikkei daily.
Toshiba Corp. and NEC Electronics Corp., who have already been working together for 45nm process technology development, will welcome Fujitsu Ltd. into their partnership to share the cost burden of 32nm development, projected as much as 100-200B yen (US ~$800M-$1.6B). They are currently exploring a new JV (led by Toshiba but not as a majority owner) to fabricate system chips using the technology, utilizing a combination or all of the participants’ factories — Toshiba in Oita Prefecture, Fujitsu in Mie Prefecture, and NEC Electronics in Yamagata Prefecture. Mass production would start in two years following completion of development work.
Working together, the trio hope to better compete with Intel and Samsung — Toshiba is currently 4th in global chip sales, NEC 11th, and Fujitsu 27th, but together they can equal Samsung in terms of scale, according to Nikkei. “With bigger foreign rivals steadily gobbling up market share, Japanese chipmakers are growing acutely aware that their survival is at stake,” the paper noted.
The partnership is indicative of a new reality for parts manufacturers to improve financial stability or else lose leverage in pricing negotiations with their customers, the paper also noted. Toshiba’s memory business is doing ok but its system chip business is barely turning a profit, Fujitsu’s semiconductor profits are sliding, and NEC with >50% of its sales in systems chips has posted a net loss for two years.
Past efforts at a joint chip development-to-manufacturing project have not been successful. The concept of a shared joint fab proposal has been kicked around for years without fruition. And last summer, a planning committee formed by Hitachi Ltd. and Renesas Technology Corp. determined after six months of analysis that a proposed $860 million jointly owned foundry would not produce enough chips to be profitable to compete with established foundry competitors.