Hitachi-NEC: A Lean, Mean Memory Machine
By Paul Kallender
Hitachi Ltd. and NEC Corp.'s DRAM joint venture took shape last week as the two companies launched Elpida Memory Inc. as a lean, mean memory machine that will have cutting-edge 0.13-micron, 256Mbit DRAM parts ramping from next April.
The 256Mbit part leads a charge to speedy rollout and rapid shrinks that will build the company a 20 percent market share as early as 2003, Mike Despotes, president and chief executive officer of Elpida said.
"We want to cover the broad spectrum of parts, (including) RDRAM, SDRAM and double data rate and be second to none," he said.
Elpida will have already begun sampling its 512Mbit version well before the 256Mbit device ramps, said Manabu Ando, vice president of engineering at Elpida.
While Elpida plans to churn out five million 512Mbit per month by December 2001, it remained more circumspect about its Rambus DRAM (RDRAM) output. The company would only say development of these parts Eplus NEC's fading Virtual Channel Memory technology Ewas ongoing.
Elpida also revealed something of its corporate structure, with the company posting Elpida Memory (United States) Inc. in Santa Clara, Calif. and Elpida Memory (Europe) GmbH in Dusseldorf, Germany. The joint venture also has branches in Taiwan, Hong Kong and Singapore.
With only 750 workers worldwide and production focused on NEC's Hiroshima and Hitachi's Singapore fabs, the slimmed down Elpida aims to reverse recent history by recapturing market share lost to Korean makers during the last DRAM cycle.
Both NEC and Hitachi have proud and highly proficient memory technologies, but lost billions of yen when prices plummeted on cycles of 8-,16-, 32- and 64Mbit DRAM parts, reaching a nadir in 1998, forcing consolidation and restructuring. Facing intense competition from Korean companies such as Samsung, NEC and Hitachi took the most radical route, merging their two divisions into Elpida, with which they hope to recapture market share to deliver cost-advantages and profits.
Combined market share for Hitachi and NEC currently adds to about 13.6 percent, Despotes said. By comparison, research firm GartnerGroup Inc.'s Dataquest unit estimates Samsung holds nearly 21 percent. Aiming at revenues of $3.5 billion by March 2002, Despotes confirmed statements made by Japanese executives earlier that Elpida wants to capture 20 percent of the market to be the world's No. 1 DRAM maker.
Such a target is possible and very achievable mainly because, unlike Hitachi and NEC before it, Elpida is totally focused on DRAM and DRAM only, according to Martin Reynolds, Dataquest vice president.
"You have to be totally and absolutely committed Eeither you make it in DRAM or you die," he said of competition that reduced Japanese giants like Mitsubishi Electric, Toshiba Corp. and Fujitsu Ltd. to bit players in three years.
"It looks like they have all their bases covered," said Reynolds of Elpida.
The broad consensus is that the strategy should work, according to analysts, who praised the company's cutting-edge 256Mbit product. Calling the part first rate, Jim Cantore of International Data Corp. said Elpida had a supersmart design team that looked already a generation ahead of competitors with 0.11-micron process parts sampling as early as the first half of 2002.
Cantore also called the company's streamlined staff numbers a real revolution for Japanese companies used to filtering decisions through layers of management.
Some issues have to be worked through, for example, how the company will deal with the old NEC-Hitachi sales and distribution channels, and what this will mean for potential job losses. Current NEC and Hitachi employees would be given the choice to stay where they are or jump ship to the new company, Despotes said.
"Most people are going to be transferred. Others will remain with the parent company," he said.
Finally, the DRAM marketplace will welcome the return of a major Japanese player that will be able to offer high-quality parts at competitive prices, something NEC and Hitachi were no longer able to do on their own, said Walt Lahti, analyst with Integrated Circuit Engineering Corp.
"One focused $3 billion company is a lot better than two less-focused Ecompanies. They're going to be a pretty formidable foe," Lahti said. |
