Feb. 2, 2008 – Elpida Memory is significantly slowing its production of 65nm products and shifting its gaze to 50nm work ahead of schedule, anticipating tighter DRAM supplies as some firms get squeezed out of the market, according to an interview with the Nikkei Business Daily.

A year ago Elpida managed to keep profitable while other firms slipped into the red by shifting product focus to cell phone memories and boost production efficiency at its Hiroshima subsidiary, while a reorg where individual divisions handle single production processes helped aggressively lower defect ratios, notes the Nikkei Business Daily. But now Elpida is suffering pains like everyone else in a tough market — a group loss of ¥8.9B in the calendar year-ending quarter, while sales fell by a third to ¥94B — and Elpida president Yukio Sakamoto told the paper in an interview that the company probably might not see an operating profit until the April-June period.

Furthermore, production efficiencies achieved by moving down to 65nm will exacerbate the problem – 30% more chips/wafer also means more supplies in the market, aggravating a market glut and further depressing prices. The paper claimed Yukio “appears to be at his wit’s end,” and cited an identified Japanese chipmaker who “expressed sympathy” at the company’s plight.

So, Sakamoto has ordered Hiroshima Elpida to reduce output 65nm-based memory for network servers from 40k WPM to just 10k, and the company’s joint facility in Taiwan with Powerchip, Rexchip, will shift to 65nm for only half its monthly production (70k WPM by March). Meanwhile, the company is targeting sooner-than-planned mass production of 50nm process technologies by early calendar 2009, in order to gain an advantage on rival Samsung. New etch/coating equipment would be needed at 65nm anyway, he told the paper, so the company will shift its gaze to 50nm where it can “raise our investment efficiency.” Also at 50nm, Elpida will test immersion litho tools from ASML, Canon, and Nikon and select a final vendor, he added.

As soft market conditions persist, some DRAM makers have already suspended their 200mm wafer lines and others have stopped sending work to foundries, Sakamoto noted, and he wants Elpida ready to step up production to make up for tightening supplies. “I personally want to add 30,000 units to lift the capacity [at the Powerchip JV] to 100,000” by the end of this year, he told the paper.

If memory prices fail to improve by midyear and market conditions don’t improve (hampered by things like the subprime mortgage mess), Sakamoto thinks some form of industry reorganization will be required, or else “weak companies will be forced to withdraw from the industry or go belly up,” he told the paper. “We’re facing a similar situation to what we had in the latter half of the 1990s.”