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To: DJBEINO who wrote (4785)	4/3/1999 1:57:00 PM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

Flash! Prices on the march -- Manufacturers say glut is ending Andrew MacLellan Silicon Valley- After dictating terms to their suppliers for the past two years, cell-phone manufacturers are once again faced with rising prices for NOR-based flash-memory chips. With tags up 5% to 15% in both the spot and contract markets, a prolonged period of flash-IC overcapacity is drawing to a close, according to vendors. "Our ASPs are up this quarter," said Curt Nichols, director of marketing for Intel Corp.'s flash-memory components division. "Prices pretty much across the product line are higher in Q1 and Q2 than they were in the fourth quarter, so there's been a rebound." The uptick applies only to certain flash chips-namely, those used for code-storage applications. NAND-based flash ICs, which store data and are used primarily in digital cameras, voice recorders, handheld organizers, and the like, are still subject to severe price erosion, suppliers said. NOR-based flash, however, which stores program code and represented nearly 80% of all flash-IC sales in 1998, according to Semico Research Corp., Phoenix, is experiencing strong demand, particularly within the cell-phone market. According to STMicroelectronics Inc., contract average selling prices for 8-Mbit NOR flash are trending toward $4.50, while 16-Mbit chips are selling for up to $6.50. "Demand is so robust that customers, to ensure that they get their allocation, have agreed to pay more," said Eric Thun, director of memory marketing at Sharp Electronics Corp.'s Microelectronics Group, Camas, Wash. "It's very healthy," he added. Just how long component buyers will have to endure rising prices is uncertain. While many profit-starved suppliers froze capacity-expansion plans during the past two years, a few invested in the down cycle and are poised to pour on new production beginning this year. For the time being, however, flash ASPs are continuing to track upward for almost all densities-from 1, 2, and 4 Mbits to 8- and 16-Mbit devices. According to several sources, Intel, Mitsubishi, Sharp, and other companies recently informed cell-phone customers in Japan that contract prices for certain higher-density devices will be raised by at least 10%. And one analyst said that prices for 1- and 2-Mbit flash used in PC BIOS is up 20% in Taiwan. "The general trend is that prices are edging up. ... There has been definite movement," said Alan Niebel, an analyst with Semico Research. "This 10% price rise in Japan is really the first time I've seen a cell-phone price increase for OEMs in two years, or even more." On the spot market, prices have also risen by 10% on average, according to Frank Cavallaro, vice president of sales for NECX, an independent distributor based in Peabody, Mass. "Most of the activity is taking place on the supply side, where we're seeing manufacturers increasing lead times," Cavallaro said. "If you had orders on the books for a particular lead time, those prices will be honored, but anything outside of that will result in a price increase by the manufacturer." STMicroelectronics characterized the increase as a stabilization, saying that it has merely stopped dropping tags. Price erosion had been so severe that suppliers were forced to defer capital-expansion plans, which in turn has made it difficult for the industry to meet demand. A more balanced supply/demand picture will benefit both vendors and customers, the company said. "I'd say it's more of a price adjustment rather than an increase," said Pierre Matte, ST's director of memory marketing. "I think we're to the point where the customer can't expect prices to drop 10% a month or 10% a quarter. "Are they going to grow 20%, 30%, or 50%? I don't think so," Matte added. "It's more of a market coming back to a reasonable level of stability." Because flash memory serves so many applications, it's difficult to determine how the increase imposed on cell-phone makers will be reflected in other markets. Equally hard to fathom is how prolonged the flash-IC price hike is likely to be. Intel, for example, which ended 1998 with an industry-leading 28.9% of the flash market, according to Semico Research, is revving up production at its fab in Rio Rancho, N.M. The new facility, which is using 0.25-micron process technology, will increase the company's 1999 flash capacity by 75%, Nichols said. Sharp ramped up its newest fab, in Fukuyama, Japan, two months earlier than planned to meet growing demand. This year, the company will have the capacity to start 60,000 wafers per month, and is just now moving to volume production of 0.25-micron linewidths-with a shift to 0.18 micron slated for later in 1999. After deferring equipment purchases last year in response to the Asian economic downturn, Advanced Micro Devices Inc. is likewise poised to ramp 0.25-micron linewidths at the FASL 2 facility in Japan that it operates jointly with Fujitsu Ltd., according to Kevin Plouse, director of technical marketing for AMD's memory group in Sunnyvale, Calif. STMicroelectronics is ramping 0.25-micron lines at an 8-in.-wafer fab in Catania, Italy; has capacity at two other facilities; and said it will move to a 0.2-micron geometry later this year. The company, which has yet to play heavily in the mass flash-IC market, is planning an aggressive push this year and expects to triple last year's $100 million sales revenue. And Hyundai Electronics Industries Co. Ltd., a newcomer to the flash market, is ramping up modest volumes initially, but intends to dedicate a portion of its vast DRAM manufacturing might to drive prices down in the commodity flash segment. Still, demand is so strong that even renewed investments are unlikely to dampen prices this year, according to several executives. In stark contrast, the NAND-based flash market is still experiencing heavy price erosion, according to observers. Hitachi Ltd., which is pitching its proprietary AND-based flash technology into data-storage markets, said a drive to reach a $1/Mbyte cost structure by 2000 is keeping the pressure on vendors. Similarly, Toshiba, which sells NAND-flash ICs, reported no pricing increases, according to a spokesman. Vendors of NOR-based flash, meanwhile, indicated that they aren't likely to increase prices to the point of inflicting pain on their customers, but are looking forward to a return to profitability. Copyright ® 1999 CMP Media Inc. techweb.com

To: DJBEINO who wrote (4785)	4/3/1999 2:12:00 PM
From: DJBEINO	Respond to of 9582

Analysis: Japan's DRAM doldrums continue By Anthony Cataldo and Yoshiko Hara EE Times (04/02/99, 3:56 p.m. EDT) TOKYO — Groping for fresh ways to stem massive losses in DRAM sales during the past year, several of Japan's chip makers are gambling that they can shield themselves from further hits by focusing on higher-density, leading-edge DRAMs. Whether they can do so in an environment of consolidation for a commodity product remains a question. The rethinking of DRAM strategy came to light amid a week of bloodletting and reorganization in Japan as the memory market, which had been flirting with stability for a little bit of time, resumed its two-year slide. As Japan's fiscal year drew to a close on March 31, the country's DRAM vendors reaffirmed their intentions to keep capital spending flat even as their market share has plummeted. South Korean companies, by contrast, have gained considerable market share and are upping their capital spending 15 percent above last year's total. The Korean vendors cut capital budgets 65 percent in 1997 and 30 percent in 1998, said Ilsuk Han, an analyst with ING Barings Securities Korea. Rather than adding more capacity, Japan's chip vendors are looking to upgrade existing fabs with leading-edge equipment while turning their energy toward newer product lines, such as 128-Mbit DRAMs, double-data-rate (DDR) models, Direct Rambus and 133-MHz synchronous DRAMs. Toshiba Corp. announced last week it would cut back 64-Mbit DRAM production by 90 percent by year's end, shifting the majority of its DRAM output to 128-Mbit SDRAMs and high-performance Direct Rambus and DDR parts. The company's sales revenue plunged more than 50 percent between 1997 and 1998, from $1.6 billion to $730 million, according to Semico Research Corp. Stephen Marlow, vice president of memory marketing for Toshiba America Electronic Components (Irvine, Calif.), said the company is leveraging its 0.2-micron process, the thinnest production-level geometry in use, to push out 128-Mbit and denser parts in hopes of improving margins. Marlow blamed Korean vendors for resuming mass production in late December, leading to a return of the DRAM price wars in late January.At the end of last year, "people said, we can make money at $10 apiece, let's pump some more [production] through. Now we're looking at a feeding frenzy," Marlow said. "If we don't act maturely as an industry, we're going to see a retrenchment and a consolidation, and it will impact our future technologies." Fujitsu Ltd. has likewise said it will tilt toward high-density, leading-edge products. Ryusuke Hoshikawa, chairman of Fujitsu Microelectronics Inc., said in an interview that the company's Fast-Cycle RAMs and other exotic memory blends will get more of its attention in the future. The company is shifting memory production at a fab at Iwate, Japan, to logic, and last week Hoshikawa unveiled a new Web-based design environment to make it easier and faster for customers to get system-on-chip logic designs from Fujitsu. Semiconductor operations at Toshiba and Fujitsu, both of which have lost considerable market share, are under the gun as electronics vendors in Japan gird for further pressure to return to profitability at the close of a disastrous fiscal year. But is abandoning the so-called commodity DRAM market a realistic plan? "That's the million-dollar question," said Richard Kaye, an analyst with Merrill Lynch Japan. "Right now, Toshiba is just one of many companies trying to de-commoditize DRAM products." The turmoil is helping to make DRAMs an increasingly fragmented technology, as new speeds and memory types come on stream. Meanwhile, some vendors see spot opportunities in trailing-edge technology. Mitsubishi Electric, for one, has agreed to extend the production of 4- and 16-Mbit devices to some customers, even though it had earlier planned to phase out such parts, said Cecil Conkle, assistant vice president of DRAM marketing for Mitsubishi Electronics America Inc. "Our plan was to exit those products, but as we go through the steps to do that there are some critical customer requirements that have us extending [them] longer than we had planned," he said. And why not? Conkle noted that contract prices for 64-Mbit DRAMs are falling below $10 this year amid weakness in PC demand in the United States. At the same time, contract prices for a 4- or 16-Mbit device are edging up to $5 apiece (against less than $4 in the spot market). As it wrestles the DRAM demon, Mitsubishi's top management is downplaying the role of DRAMs in the company's future. "In three years, we plan to halve the percentage of commodity DRAM in total sales," Ichiro Taniguchi, president of Mitsubishi Electric Corp. said when the company announced its midterm corporate strategy last week. Taniguchi said Mitsubishi's semiconductor business would return to profitability in fiscal year 2000. Mitsubishi positions two sectors — microcontrollers and embedded DRAM products, a category it calls "eRAM" — as its competence fields. Even as the Japanese titans sketch plans to minimize their reliance on DRAM sales, other Asian manufacturers are all too willing to pick up the slack. Taiwanese DRAM vendors are pushing process to wring more profits from their product lines. Toshiba said that it will transfer its 0.15- and 0.17-micron CMOS process to Winbond Electronics Corp. in Taiwan. And Nan Ya Technology Corp. there said it was getting process technology from IBM that will allow it to skip the 0.25-micron manufacturing step and begin with 0.2-micron technology to produce 64-Mbit DRAMs. Profit from process The potential for profit at the lower geometries is impressive. About 350 of the 64-Mbit dice can potentially come from one 8-inch wafer using quarter-micron process technology. At 0.2 micron the potential yield goes to 550 dice, and at 0.17 micron it jumps to 800. Nevertheless, the vagaries of this market and the suffering it has brought suppliers is leading Japanese DRAM vendors to restructure their business units. Several companies are looking ahead to the time they will no longer be able to count on the corporation to prop up unprofitable businesses. In the past, for example, Japanese chip companies would often cross-subsidize semiconductor capital spending by diverting revenue from telecom equipment sales to national carrier NTT. Companies would use the money to help fund next-generation DRAM development, while keeping profit margins thin. From 1987 to 1997, Japanese vendors' average profit margin was 3 percent, said Kaye of Merrill Lynch. That practice is coming under fire, however, as NTT slashes its own capital budget this year. One ray of hope is cultural — the Japanese reluctance to fire workers appears to be softening. U.S. observers believe a judicious program of downsizing would go a long way toward cutting overhead and fostering more nimble operations. "In next year or two, you'll see significant cuts. There's been a tremendous change in operating thought process," said analyst Handel Jones of IBS Inc. (Los Gatos, Calif.). — Additional reporting by Brian Fuller. eet.com

To: DJBEINO who wrote (4785)	4/3/1999 2:18:00 PM
From: DJBEINO	Respond to of 9582

Taiwan Computer Firms Cleaning Up in U.S. Boom -------------------------------------------------------------------------------- Bloomberg News -------------------------------------------------------------------------------- TAIPEI - America's economic expansion and the Internet boom have translated into a windfall for Taiwan's leading computer and semiconductor companies, which are riding a crest of booming sales as suppliers to U.S. manufacturers. Acer Inc., one of the world's top 10 personal computer makers, reported record sales of 13.5 billion Taiwan dollars ($407.5 million) in March on growing demand from International Business Machines Corp. The company sales climbed 40 percent in the first quarter, and it said it anticipated its strongest year ever as its relationship with IBM continued to expand. In another sign of the boom, Taiwan Semiconductor Manufacturing Co. said Friday that it was running at full capacity through April, which would probably lift earnings in the second quarter. ''The demand from our customers is extremely strong,'' said Huang Yen-chun, a vice president at Taiwan Semiconductor. ''That's going to have a positive impact on our sales and profits.'' The bright outlook for the Taiwan high-tech industry helped power the domestic stock market to its biggest gain in six weeks Friday. Acer climbed 5.8 percent and Taiwan Semiconductor rose 1.4 percent, helping lift Taiwan's benchmark stock index 3.05 percent. All of Taiwan Semiconductor's production lines are fully booked this month, compared with ''a little more than'' 90 percent in March and 90 percent in February, Mr. Huang said. Taiwan Semiconductor is Taiwan's bellwether technology stock and the world's biggest contract chipmaker. The company and its rivals, United Microelectronics Corp. of Taiwan and Chartered Semiconductor Manufacturing Ltd. of Singapore, are benefiting from an increase in outsourcing by ATI Technology Inc., Xilinx Inc. and other chip companies in North America and Japan. Acer predicts that sales this year will hit a record 100 billion dollars, largely because of sales to IBM and a reorganization of several unprofitable units. Acer and other computer-related companies are improving sales as U.S. clients such as IBM and Motorola Inc. increasingly turn to Taiwan to help them cut costs. Acer's relationship with IBM has expanded rapidly since last year as IBM tries to outsource more of its production amid falling personal computer prices. Steve Milunovich, an analyst with Merrill Lynch & Co. in New York, said in a recent report that to further reduce costs, IBM may hire companies in Asia and Europe to make and sell its PCs. The companies would make and market IBM-branded PCs, paying IBM a 6 percent royalty. IBM declined to comment. Acer's revenues of 13.5 billion dollars in March topped its expectations of 12 billion dollars. The company said it delivered 200,000 notebook computers during the month, compared with 130,000 a month earlier. In March 1998, Acer's sales were 8.29 billion dollars. The company expects to deliver between 1.2 million and 1.5 million laptops this year, with 60 percent going to IBM and a few other clients. Last year's total shipment was 800,000 units. But it is never clear sailing in the volatile high-tech world, analysts warn. Acer could face a challenge if another computer price war erupts and squeezes profit margins. Chuntex Electronics Corp., a computer monitor manufacturer, said this week that it was having cash flow problems because of a price war with rivals in Asia during the fourth quarter. The company said it owed 8.3 billion dollars to banks and bondholders. Acer expected to benefit from rising worldwide PC shipments, which are forecast to grow about 14 to 15 percent this year to 100 million units, according to industry estimates. The company expects to sell 7.5 million desktop computers, compared with 6.7 million in 1998. Still, rising unit sales do not necessarily mean profits. IBM itself lost $992 million last year in its PC business, as a fierce round of price cutting slashed profits. Acer is moving to revamp its global logistics and overcome problems at its unprofitable U.S. unit, which sells computers and semiconductors in the retail market there. The U.S. unit - Acer America Inc. - may see its losses shrink to $20 million or $30 million in 1999, from $50 million the year before, said Philips Peng, a vice president. iht.com