October 15, 2007 – The first of four planned 300mm fabs from Rexchip Electronics Corp., the JV between PowerChip Semiconductor Corp. and Japan’s Elpida Memory Inc., is open for business. And while providing good business for tool suppliers and other partners, the new DRAM operation is causing some to worry about opening the floodgates and causing further slumps in DRAM pricing.
Rexchip has already started construction on its second fab, with an estimated combined 100,000 wafers/month by the end of 2008, with an overall plan of four fabs churning out 300,000 300mm wafers/month, at a total cost north of $13 billion.
The Taiwan Economic News notes that some fear this first Rexchip fab coming online is a bad move, and will accelerate declines in an already soft pricing environment, in which DRAM ASPs have sunk ever closer to $1. Despite this year’s pricing slump and “supply glut” — and a 30% decline in share value — PowerChip does not plan to slow its capacity expansion or reduce its exposure in the spot market, even though rivals Elpida and Hynix are reigning in business to try and stem pricing declines.
“PowerChip is the biggest memory chip supplier on the spot market. We will not change this business model,” company spokesman Eric Tan told the Taipei Times. “We do not want to lose market share by reducing supply, or cutting capacity,” he said, adding that “we believe that the DRAM price is hitting the bottom.”
PowerChip planned to spend around $2.2B on new facilities and equipment this year, the paper notes, and production is expected to surge by 75%, half of that coming from Rexchip’s ramp. The company did, though, shelve plans earlier this summer for two new NAND flash plants in Hsinchu when it couldn’t get the land from the government.
In fact, PowerChip points the finger of blame for the current DRAM market problems at Korea’s Hynix Semiconductor, which PSC chairman Frank Huang claims wants to hit 120% bit growth this year, vs. 70%-80% among Taiwanese rivals, and 50%-60% at Samsung. Digitimes also quotes Huang blaming a slower than anticipated adoption of Windows Vista, which he thinks will take about two full years for a full migration. He thinks pricing has hit bottom and will gradually rebound in 2008, with 512Mb eTT devices maybe recovering back to the $2.00-$2.50 level, vs. $1.04 recorded by DRAMeXchange on Oct. 14.
While DRAM makers fuss over the cause of pricing and supply woes, the new capacity is a boon to packaging/testing firms like Power ASE Technology and Powertech Technology Inc., both of which have an optimistic outlook, notes Digitimes. Power ASE (itself a JV between PowerChip and ASE) is now running at full monthly capacity of 30 million 512Mb DDR2 chips, and expects sales to double to $100-$200M in 2008, with ~30% gross margins.
PTI, meanwhile, which handles testing for Elpida’s contract customers, is seeing extended testing times with Elpida’s 1Gb DDR2 based on 70nm processes, which bodes well for memory testing in 2008, the report notes. Digitimes cited PTI chairman D.K. Tsai saying that some customers are already testing DDR3 devices, suggesting that may become the mainstream standard by 2009. Tsai also said the company plans to break ground on a new plant in December, expected to be online in late 2008, to handle upcoming business from Rexchip (third and fourth fabs), as well as business from ProMOS’ Fab 5 and Fab 6.