Gottfried,
Can you say ouch!!
Looks worse and worse for Rambus.
Toshiba axes Japanese fab, cuts Rambus production
By Paul Kallender
EE Times
(08/08/01, 2:20 p.m. EST)
TOKYO — Poor Rambus DRAM and Pentium 4 sales have piled further misery on this year's terrible memory market, forcing Toshiba Corp. to cut DRAM production 26 percent as the company ceases production of 128-and 256-Mbit parts at Fab 1 of its Yokkaichi Operations facility at the end of September.
Citing a "deepening global downturn" that was "particularly severe" for memory parts, the world's number-two semiconductor maker said the move would slash the company's memory production by 7 million units, reducing Toshiba's total output to 20 million.
The closure comes as a bitter blow to Toshiba's high hopes of ramping Rambus DRAM (RDRAM) parts in the face of worse than expected sales of Intel Corp.'s Pentium 4 chips, to which the memory has been until recently exclusively bundled. This spring, Toshiba Corp., Elpida Memory Inc. and Samsung Semiconductor, launching a propaganda offensive, promised to boost RDRAM production. As with Samsung and NEC, until this summer RDRAM was seen as a premium product, with Toshiba Semiconductor Co. president Yasuo Morimoto publically committing the company to switching production to it away from SDRAM.
Samsung said it planned to double production to 20 million 128-Mbit equivalents in the second half of this year; NEC claimed it would pump out 5 million parts beginning in September, while Toshiba promised 8 million.
Half a year later, the promise of RDRAM parts as a sole profit source and comfort to DRAM makers is in tatters, at least for Toshiba.
The cuts will knock down Toshiba's output of parts at Yokkaichi, which are "predominantly RDRAM" from 4 million 64-Mbit equivalents for 128- and 144-Mbit RDRAM parts in September to 3.2 million in October, said a Toshiba spokesman. Worse, 64-Mbit equivalents for 256- and 288-Mbit RDRAM parts will drop from 2 million in September to only 400,000 parts in October, the spokesman confirmed.
"The demand for Rambus parts is still relatively limited. The P4 is still very expensive and it does not penetrate the market yet. The demand is below our expectations," said the Toshiba spokesman.
Toshiba has already discounted Intel's second round of drastic price cuts of up to 50 percent on the P4, the spokesman continued. Intel is expected to announce the cuts in coming weeks in a bid to boost sales for its premium processor. While Advanced Micro Devices Inc. is already rumored to be preparing a counter-attack price cut that is sure to start a new processor price war, this will not affect Toshiba's strategy, said the spokesman.
"It doesn't matter to Toshiba about the price cuts, the point is whether the PC makers adopt the P4 or not," said the spokesman.
Despite the failure of the P4-Rambus combo to sell, Toshiba still insists it in a strong position with the difficult-to-produce RDRAM memory. The company feels it has cause to dispute Samsung's claims to upwards of 50 percent of RDRAM market share over some months this summer. Whatever happens to P4 sales, Toshiba claims the lion's share of RDRAM in Sony's PlayStation 2, said the spokesman.
On the bright side, gutting the Yokkaichi facility will not lead to job cuts, according to the company. Line one at Yokkaichi currently produces about 70,000 8-inch wafers a month, and Fab 1 contributes about half of this output, largely for DRAMs but also for 0.4-micron process SRAMs, according to the company. Production equipment in Fab 1, along with 300 staff, will be transferred to Fab 2 or other Toshiba facilities or sold to third parties, said the Toshiba spokesman.
"We are basically saving the cost of the power. This cost is very huge; if we stop production there, we can save a lot of money," the spokesperson said.
Line 1 was one of Toshiba's flagship lines, opening up for production in 1993 when the company was gearing up for big profits in the then ballooning DRAM market. Now, as Samsung and Elpida Memory Inc. race ahead with shrinks to the 0.13-micron line width, the fate of Yokkaichi is up in the air, said the Toshiba spokesman. The company is now deciding whether it wants to retool the fab or sell it off, he said.
"What we will do with it depends on the market. The clean room will remain, but we are not sure what to do with the facility. We think we may be able to utilize it or sell it to a third party, but for the moment we just can't tell," said the spokesman.
The company stressed it was following industry practice as a coping strategy to stem losses in the semiconductor industry's worst-ever year. The last six weeks has seen a string of fab shutdowns ranging from extended summer breaks to DRAM competitor Hynix Semiconductor Inc.'s July 18 move to mothball its Eugene, Ore., fab for six months. The debt-laden Korean maker, which is wriggling hard to meet about $2 billion in payments clustered around the fourth quarter this year, spun the closure as an opportunity to upgrade the fab and withdraw product from the badly oversupplied market.
Despite the closure, Hynix is continuing to flood the market with parts, according to a source familiar with the company. This ensures that Toshiba's withdrawal will have a minimal impact on supply, as the company only maintains a 5 to 8 percent market share.
However, analysts generally welcomed Toshiba's announcement, which will be good for the company's bottom line.
On Wednesday (Aug. 8), Merrill Lynch & Co. Inc. quintupled its estimate of Toshiba's semiconductor losses for the year to March 2003, from $81.2 million to $406 million, blaming the company's "inability to counter plunging earnings" from DRAM and NAND flash. Last month, the company also said it was lowering its semiconductor capital expenditures to $812 million from $1.1 billion. "This could go as low as $650 million," commented the report.
"They have obviously been losing buckets of money. Everyone expected this [production cut]. The big question is, why didn't they do this months ago?," said a source familiar with Toshiba's DRAM business.
"The market price is under $1.80. They've gone past the point where they can't justify keeping the line running," the source said.
The move could certainly signal a realignment of Toshiba's DRAM strategy or even signal the end for Japanese DRAM production, said sources.
For Sun Chung, memory analyst for Seoul, Korea-based Merrill Lynch's Asia-Pacific team, Toshiba's admission defeat on supposedly premium DRAM parts could herald a final withdrawal from DRAMs of all stripes by Japan.
"I believe the Japanese players will continue to minimize production of DRAM, and in 12 months Elpida may be the only DRAM maker left producing out of Japan," he said.
DRAM prices have remained unchanged across the board for the first time in many weeks, which may, according to some observers, confirm that supply may be tightening. Nevertheless the price purgatory should continue through the third quarter, said Dan Heyler, head of Asia-Pacific semiconductor research for Merrill Lynch, who said industry was watching who will follow Toshiba.
"It's pretty dismal, and finally the price points now are becoming the straws that are breaking the camels' backs. We expect to see more of these sort of announcements through the third quarter," said Heyler.
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