Japan scales back Rambus ramp -- Memory makers delay DRDRAM expenditures
Jack Robertson
Tokyo- Having witnessed the ill effects of global oversupply, Japan's chip makers are holding further Direct Rambus DRAM capital spending plans in check until they're certain a mass market for the technology is developing.
Executives interviewed here attributed the cautious stance to continued Direct RDRAM design changes and Intel's unexpected three-month delay of a chipset needed to support the new wideband memory device. Chip companies, from NEC to Toshiba, said they will refrain from building a large amount of Direct RDRAM production capacity to avoid a possible market glut later this year.
"Initially, we had projected an industry demand for Direct Rambus of more than 300 million [units] for 1999," said Shigeki Matsue, NEC Corp.'s associate senior vice president and the new head of the company's semiconductor group. "Now that Intel has delayed the mass-market introduction of Direct Rambus, customer demand this year will be much lower than we expected."
Matsue said NEC has the capacity in place to make at least 2 million Direct RDRAM chips per month. The company originally had planned to expand this capacity greatly, but will now hold back until it sees how demand for Direct Rambus shapes up.
Much depends on the price premium for Direct RDRAM when it hits the market. If the price is too high, the chip initially may be used only in niche markets such as high-performance workstations and PCs. "If the industry has built up too much [Direct Rambus] capacity, there is a danger of oversupply, and we could end up with very low or no margins," Matsue said.
Matsue went on to outline a Catch-22 pricing dilemma confronting the industry: Unless Direct RDRAM has a premium of more than 50% over standard SDRAM, chip makers won't earn enough to recover their heavy investment in special test, packaging, and assembly infrastructure.
"Unless we can get a high enough price premium, there is not enough enticement to make all the [Direct Rambus] investment," Matsue said.
But if the price is too high, market acceptance could be slow to evolve.
A Toshiba Corp. spokesman here painted a similar picture, saying his company will hold off on the bulk of its investment in Rambus production until later this year. "[Toshiba] will time its [Rambus] investment in assembly operations depending on the market ramp-up," he said.
Toshiba has a major incentive to ramp up Direct RDRAM production, however, given that it has been tapped to supply chips for the Sony PlayStation II when it is introduced next year. The new Sony game machine will use 32 Mbytes of Direct RDRAM. Toshiba and Sony are partnering to make the device's CPU, and it is believed Toshiba will parlay this relationship to drive volume sales of Direct RDRAM.
Fujitsu, Hitachi, and Mitsubishi, meanwhile, are also keeping their production-equipment schedules on hold, waiting to see what Rambus and-more important-their PC customers do later this year.
Concerned that DRAM suppliers may be getting cold feet, Intel Corp. in the past several months has approached most of Japan's chip makers, offering to help pay for the initial equipment costs associated with Direct RDRAM. To date, Mitsubishi and NEC have rejected the Intel offer.
"We don't need the Intel investment," NEC's Matsue said. "We can borrow money in Japan at extremely low rates. Also, we feared accepting the Intel money might incur some unwanted obligations."
Japanese chip makers' wait-and-see attitude toward Direct Rambus contrasts with Korean rival Samsung Electronics Co. Ltd., which is ramping production to get a jump on the market. By year's end, 20% of Samsung's total DRAM bit output will consist of Direct RDRAM, jumping to 50% in the fourth quarter of 2000, according to a report from Morgan Stanley Dean Witter & Co.
Subodh Toprani, vice president and general manager of the logic products division of Rambus Inc., Mountain View, Calif., said the back-end investment for Direct RDRAM equates to about $10 million for every million chips produced. Samsung, for example, has estimated it spent $80 million in back-end investment in the hopes of reaching a production level of 8 million chips a month. "I think spending an additional $80 million in the back end is a small investment to keep a $1.5 billion fab full," Toprani said.
However, some DRAM suppliers, which asked to remain anonymous because of contractual obligations to Rambus, said privately that they are reluctant to commit additional funds to the ramp because of design changes that are still being made to the chip. Some of the modifications came as recently as two months ago, and have caused vendors to push their production plans out further, they said.
With 128/144-Mbit chips slated to sample this fall, many vendors are reporting that their chips have still to achieve the 800-MHz frequency defined in the Direct RDRAM specification. Toshiba and Hitachi both attributed their ability to field 800-MHz devices to a transition to a 0.2-micron production process.
"Companies trying to make Direct Rambus on 0.25-micron lines are having trouble," said Robert Fusco, product marketing manager for the DRAM business unit of Hitachi Semiconductor (America) Inc., San Jose.
Chip makers in Japan and elsewhere said their reluctance to ramp up volume production of Direct Rambus too quickly is also grounded in a concern over market timing. Because the wholesale transition to Rambus requires vendors to convert their manufacturing lines, they must be sure there is a ready market for Direct RDRAM before making the switch. This is especially true because existing lines are dedicated chiefly to manufacturing PC-100 SDRAM devices, which represent most companies' largest production volumes.
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