Taiwan Memory Chip Makers Shift to 64Mb DRAMs
March 31, 1998 (TAIPEI) -- Ignited by the low prices of 16Mb DRAMs, Taiwan memory chip makers are
setting their sites on 64Mb chips with aggressive expansion projects
Their ambitions are reflected by total expansion investments of US$1.35 billion by four leading Taiwan
DRAM makers: Vanguard International Semiconductor (US$450 million) and Powerchip Semiconductor
Corp., Nanya Technology Inc. and Mosel Vitelic Inc. (US$300 million each). This contrasts with the
expansion slowdown in Japan, the United States and Korea.
The substantial revenue over the past few months of Applied Materials Inc., a major supplier of
semiconductor manufacturing equipment, can be attributed to continued orders from Taiwan, according to
Frank C. Huang, chairman of Powerchip.
Due to a production glut, unit price of 16Mb DRAMs took a nose dive starting in late 1995, and reached an
all-time low of US$1.80 at the end of 1997. Current prices remain around US$2.50- $3, and the profit
margins are razor thin, or even negative.
Although the price has bounced back, it is not likely to go over US$3, market analysts said. But
consumption is still growing at 60-80 percent annually in terms of bit quantity. The industry also is betting
on additional demand stimulated by sub-US$1,000 personal computers and Windows 98, which appeal to a
much wider customer base.
Although continued efforts in cost reduction through technological improvement can increase the profit
margin of 16Mb DRAM chips, memory chip makers anticipate the bulk of future profits will most likely to
come from 64Mb DRAMs.
If the unit price of a 64Mb DRAM chip stays at US$10-13, the manufacturer will gain a healthy profit
simply by continuously reducing the production costs to about US$6, said C.Y. Lu, vice president of
Vanguard International Semiconductor in Hsinchu.
Besides capacity expansion, local DRAM makers are ready to take on more challenges. For the 16Mb
products, they were mostly recipients of technology under original equipment manufacturing agreements,
including Powerchip for Mitsubishi Electric Corp., TI-Acer for Texas Instruments Inc. and Winbond for
Toshiba Corp.
The few exceptions are Vanguard and Mosel Vitelic, which developed their own processing and design
expertise. Now all these companies are aggressively pushing for 0.25-micron or even 0.21-micron
technology to acquire some autonomy and strive to build their own brand image.
"So far, everybody thinks Powerchip equals Mitsubishi," said Huang of Powerchip, which currently ships 50
percent of its output to Mitsubishi.
The other 50 percent are used by Powerchip's sister companies within the Umax Group, Taipei-based
Umax Data Systems Inc. and Elitegroup Computer Systems Inc., to make memory modules. This
consumption indicates Powerchip has secured its sales channel, which is another crucial factor to achieving
self reliance.
To establish its own brand, Powerchip is negotiating with Texas Instruments for technology licensing
starting in late 1998 or early 1999.
Taiwan-made memory chips are gaining more representation on the global market, with an 8 percent share
in 1996, 10 percent in 1997 and a projected 15 percent in 1998.
But it still is not clear whether Taiwan will become a powerhouse of 64Mb DRAM production.
"Taiwan has a long way to go, but we'll go a long way," said Michael Tsai, senior VP of Powerchip. Paul
Chien, VP of marketing and sales at Vanguard, is even more optimistic. He anticipates Taiwan to become an
influential production base for 64Mb DRAMs around 1999 or 2000. |
