Elpida eyes $5B DRAM JV in China

August 6, 2008 – Japan’s Elpida Memory is moving ahead with a 300mm DRAM joint venture in China with a local venture capital group.

According to a statement, the JV between Elpida and Suzhou Venture Group will begin production by 1Q’10 with initial capacity of 40,000 wafers/month, and eventually doubling to 80,000 wafers/month by an undetermined time, with possibility for “opportunities for an even larger expansion of capacity” in the Suzhou Industrial Park. The JV initially will use Elpida’s 50nm DRAM process technology, with a migration to 40nm “as soon as the process is ready.” Elpida will take a 39% stake in the operation (for a reported ¥30B) and purchase 100% of the products made there; SVG and “potential third-party investors” would hold the remaining 61% of the JV.

Equipment purchasing for the initial capacity will be funded by a $720M shared investment by Elpida and SVG and third-party investors, as well as unspecified bank borrowings. Total investment in the operation is pegged at $5B. Suzhou Industrial Park Administrative Committee (SIPAC) will oversee fab construction and infrastructure installation.

“It seems like a fairly good deal for Elpida,” Nam Hyung Kim, director and chief analyst of memory ICs for iSuppli, told SST in an e-mail exchange. It also seems to offer an opportunity for Qimonda to expand its capacity, he noted.

Kim also pointed out that a key reason to locate a DRAM fab in China is cost. Government funding such as what Elpida is getting with Suzhou is a strong attraction. He also said that Hynix’s costs from its operation in Wuxi are now “very competitive relative to its Korean fabs.”

The Suzhou plant would be Elpida’s third production base outside its 120,000 wafer/month operation in Hiroshima and the JV in Taiwan with Powerchip which will ultimately have double that capacity, noted the Nikkei Business Daily. The combined DRAM of Elpida and its partners (Qimonda and Powerchip) nearly equals that of Samsung, the paper noted, adding that CEO Sakamoto has worked successfully for six years to battle the Korean giant, “defying the skepticism of other Japanese chipmakers cowed by the slumping market.”

In a statement, Elpida president/CEO Yukio Sakamoto said the JV will help strengthen Elpida’s production and marketing profile in China and all of Asia, through “cost-efficient investments based on shared capital expenditures and shared business risks.”

The PR noted that the JV will meet an anticipated surge in DRAM demand in China, pointing to Gartner estimates of an 18% CAGR in domestic PC shipments between 1007-2012 to 80M units, accounting for roughly 18% of worldwide shipments.

Earlier this year Elpida had been rumored to be exploring a 300mm fab in China with Hejian Technology, given that former partner (and rumored investment target) SMIC was getting out of the DRAM business. And Elpida CEO Sakamoto told the Nikkei Business Daily that the company is de-emphasizing its 65nm work both internally and with JV partners to accelerate its 50nm-node work.

It’s also worth noting that Elpida is working with Qimonda on 40nm DRAM processes combining Qimonda’s buried wordline technology and Elpida’s stack capacitor technology, but Qimonda is not mentioned in this China fab deal.

Elpida also recently agreed to fab NOR flash for Numonyx, the Intel-ST joint venture.


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