Bug, good read on Taiwan-
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Taiwan's new, ambitious DRAM makers have passed their first test. Despite
the ongoing glut and fierce price competition in the global memory market,
Taiwan's DRAM suppliers haven't thrown in the towel. On the contrary, they
are moving full speed ahead, and in most cases will more than double their
production in the next year.
And much to the chagrin of their reeling overseas competitors, Taiwan's
DRAM suppliers are slowly grabbing market share from them.
Taiwan was a minor player in DRAMs in the early to mid-1990s. Last year
Taiwan's suppliers had a mere 4.9% stake in the worldwide DRAM business,
according to Dataquest Inc., San Jose.
This year, however, Taiwan's DRAM makers could double their worldwide
market share to just less than 10%, said Pei-Lin Pai, director of marketing for
Hsinchu-based memory maker Vanguard International Semiconductor Corp.
And in 1998 or so, they could garner 12% to 13%, Pai said.
Taiwan's strategy to gain DRAM market share is simple: sell commodity parts
at the lowest-possible prices. Right now, how-
ever, Taiwan's DRAM vendors are too small to dictate worldwide memory
pricing.
Thanks to a slew of joint ventures and technology alliances with foreign
suppliers, Taiwan's DRAM manufacturers are rapidly moving from their
4-Mbit and 16-Mbit commodity lines to more advanced parts such as
16-Mbit synchronous DRAMs (SDRAMs), 64-Mbit parts, and, in the
not-too-distant future, 256-Mbit products.
It's clear that Taiwan's chip makers want to play in the big leagues: The
island's cash-rich IC vendors have recently announced plans to build a
plethora of 8-in., 300-mm fabs for a total investment of more than $60 billion.
Many of these new fabs are being targeted for DRAM production.
From 1990 to 1997, Taiwan accounted for 16% of the world's new DRAM
fab capacity in terms of square inches of silicon, according to George Burns,
an industry analyst at Strategic Marketing Associates, Santa Cruz, Calif.
"Based on Taiwan's announcements of new DRAM fabs, which are due to
come on line in 1998, 1999, and 2000, Taiwan will account for 20% of the
world's new DRAM fab capacity," Burns said.
Taiwan faces many challenges to reach these lofty levels, however. In the
short term, it's unclear whether local DRAM makers can squeeze any profit
margins from the depressed 16-Mbit market, said Donald Floyd, a research
analyst at ING Barings Securities Taiwan Ltd., Taipei.
In the first two weeks of September, spot prices for 16-Mbit DRAMs were
slightly above $5, with some parts going for as low as $4.50. But because
local DRAM makers are still wrestling with their yields, Taiwan's average
manufacturing cost for a 16-Mbit part is at or near break-even, or around $5,
according to Floyd.
In contrast, Boise, Idaho-based Micron Technology Inc., by some accounts
the world's largest DRAM maker, can squeeze some margin from its 16-Mbit
memories by manufacturing these parts at about $4.50 a unit, and perhaps
even as low as $3.50, Floyd said.
Taiwan is also behind in cutting-edge DRAMs. Some local vendors are just
getting their 64-Mbit parts out the door, and no one has yet shipped an
SDRAM.
Local companies are not standing still, however. Last month, Mosel-Vitelic
Inc. expanded its DRAM alliance with Germany's Siemens AG. Under the
plan, Mosel-Vitelic will obtain 50% of the 16-Mbit DRAM and SDRAM
output from Siemens' new fab in North Tyneside, England. This fab, capable
of making 20,000 wafers per month, will move into 64-Mbit DRAM
production in 1998.
This gives the Taiwan company "more capacity and access to new technology
for main-memory products, especially 16-Mbit and 64-Mbit EDO and
SDRAMs," said Rajit Shah, vice president of worldwide marketing at
Mosel-Vitelic.
Until recently, Mosel-Vitelic mainly focused on making specialty DRAMs.
But last year its focus significantly expanded, as it formed with Siemens a joint
venture in Taiwan called ProMos Technologies Inc.
ProMos, which is ramping up 64-Mbit DRAMs in an 8-in.-wafer fab in
Hsinchu, will go into production by year's end. Based on Siemens' 64-Mbit
technology, ProMos parts will be sold under the Siemens and Mosel-Vitelic
logos.
Other Taiwan vendors are taking steps to obtain advanced technology.
Recently, DRAM maker Nan Ya Technology Corp. invested in a U.S.
fabless IC-design house, Genesis Semiconductor Corp., San Jose.
The two companies will co-develop SDRAMs and other memory
technologies, said Charles Kau, executive vice president of Taoyuan-based
Nan Ya.
Formed in 1994, Nan Ya has licensed 16-Mbit and 64-Mbit EDO DRAM
technology from Japan's Oki Electric Industry Co. Ltd. Nan Ya, which is
now making 2 million to 3 million 16-Mbit EDO DRAM parts per month,
plans to double its production by mid- to late 1998, Kau said.
Nan Ya also recently announced plans to build three more fabs, including two
300-mm plants. It will break ground on an 8-in., 0.18-micron fab later this
year, and production is planned for the end of 1999, Kau said. The company
did not give a timetable for its two proposed 300-mm fabs.
Other Taiwan suppliers are developing products in-house. Vanguard is about
ready to sample a 16-Mbit SDRAM as well as a 64-Mbit EDO DRAM,
both of which are being internally developed, Pai said.
"We will begin production of our 16-Mbit SDRAMs by year's end," he said.
"We will also have a 64-Mbit product in limited production by year's end, but
we don't see the 64-Mbit crossover until the middle of next year."
Three-year-old Vanguard plans to double its current 16-Mbit EDO DRAM
output from 6 million units per month to about 12 million to 13 million units by
late 1998, Pai said. To achieve this, the company will shift from the 8-in.,
0.35-micron level to 0.25-micron technology next year.
Rather than going after the main-memory DRAM markets, other companies
are focusing on niches. One example: Hsinchu-based Etron Technology Inc.,
a fabless IC-design house that sells 8-Mbit and 16-Mbit synchronous
graphics RAMs (SGRAMs) for use in 3-D graphics cards.
Also in Hsinchu, Powerchip Semiconductor Corp., a joint DRAM venture
between Umax Group, Mitsubishi Electric Corp., and Kanematsu Corp.,
recently entered the merchant DRAM market by sampling a line of 8-Mbit
SGRAMs that will be sold under the Powerchip logo.
This marks a change in strategy. Founded in 1994, Powerchip makes
16-Mbit EDO DRAMs in an 8-in.-wafer fab in Hsinchu, but Mitsubishi sells
the entire output on a resale basis. Powerchip has no plans to sell its 16-Mbit
DRAMs under its own logo.
Powerchip is a classic example of a so-called fab company, whose main
charter is to build products for investors. Such companies generally do not
sell DRAMs on the merchant market.
Taiwan's most famous fab company is Texas Instruments/Acer Inc., Hsinchu.
TI-Acer, whose output is sold back to TI, will expand its production from
approximately 6 million 16-Mbit DRAMs per month to 10 million units by
year's end.
Another example of a fab company is the joint DRAM alliance between
Toshiba Corp. and Winbond Electronics Corp. Hsinchu-based Winbond
makes and sells communications ICs, SRAMs, and other chips under its own
brand name. Early next year, Winbond will make its first DRAM, a 64-Mbit
product, which will be resold by Toshiba.
Taiwan's two major wafer foundry companies, Taiwan Semiconductor
Manufacturing Co. Ltd. and United Microelectronics Corp., also produce
DRAMs for outside companies.
Taiwan's DRAM makers are here to stay. Still, a big question lingers: Will
Taiwan take some of the DRAM business from U.S., Japanese, and South
Korean suppliers?
Mosel-Vitelic's Shah offered a terse opinion: "Not immediately, but
gradually."
Tim
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