UPDATE 1-INTERVIEW-Japan's Elpida eyes China for new DRAM plant http://today.reuters.com/news/articlebusiness.aspx?type=media&storyID=nT280988&from=business
Wed Nov 1, 2006
(Adds comments, details, share price, byline)
By Mayumi Negishi
TOKYO, Nov 2 (Reuters) - Japanese chipmaker Elpida Memory Inc. (6665.T: Quote, Profile, Research) said on Thursday that tax breaks and subsidies make China the most attractive place to build a new 1 trillion yen ($8.5 billion) DRAM factory, due to come online by March 2009.
Building the next plant in China would enable the maker of dynamic random-access memory (DRAM) to slash initial costs by 30 to 50 percent, Chief Executive Yukio Sakamoto told Reuters.
"Choosing China would do more than level the playing field and help us compete. It would give us an advantage," Sakamoto said in an interview. "China is overwhelmingly attractive."
His comment comes after Taiwan's Powerchip Semiconductor Corp. (5346.TWO: Quote, Profile, Research), a production partner of Elpida, said it would issue up to 600 million global depositary receipts, fuelling speculation that the funds would be used to help Elpida build a factory in Taiwan.
Elpida has been considering China, Taiwan and Singapore for the new plant, which will be critical for its plans to overtake market leader Samsung Electronics Co. Ltd. (005930.KS: Quote, Profile, Research) in 2009. The plant will boost production capacity to 200,000 wafers per month in 2009, up from 70,000 now.
Elpida, vying with Micron Technology Inc. (MU.N: Quote, Profile, Research) for No.4 spot in the DRAM market, hopes to double chip volume in 2007 via bigger wafer volume and use of 70 nanometre technology, which yields double the chips per wafer than the current 90 nanometres.
SUPPLY GLUT AHEAD?
But competitors also plan to ramp up production capacity next year, led by Samsung's plan to nearly double production. Powerchip and ProMOS Technologies Inc. (5387.TWO: Quote, Profile, Research) also plan roughly 70 percent bit growth in 2007.
The moves are stoking speculation that DRAM prices could weaken next year. Analysts forecast a fall of over 20 percent in 2007, and say DRAM orders could fall further if Microsoft Corp.'s (MSFT.O: Quote, Profile, Research) launch of its Windows Vista operating system is delayed.
But Sakamoto, who forecast global bit volume to grow 70 percent in 2007, said prices will decline gradually, as the U.S. economy makes a soft landing and crude oil prices shore up.
"Analysts were wrong this year. Just look at prices holding steady for the current quarter," he said. "On top of demand from the U.S., there's new demand coming in from low-end PCs in southeast Asia and Africa." Elpida's specialty is DRAM chips, used in personal computers, but Sakamoto said the Tokyo-based company is in talks to set up partnerships with flash memory producers about providing chips for mobile phones.
Elpida is considering both NOR-type flash memory chips, widely used to store software programmes in mobile phones, and NAND-type flash memory chips, used to store data-heavy files such as music and photos in high-end cellphones and Apple Computer Inc.'s (AAPL.O: Quote, Profile, Research) iPod, he said.
Sakamoto spent nearly 30 years at Texas Instruments Inc. (TXN.N: Quote, Profile, Research) and later earned fame in Japan as a turnaround expert while president of Taiwanese chip maker United Microelectronics Corp.'s (2303.TW: Quote, Profile, Research) Japan unit.
Elpida last week posted a swing to a record quarterly profit, on stronger-than-expected DRAM prices, and Sakamoto's focus on high-margin DRAM chips for mobile phones and digital electronics.
Elpida shares closed down 2 percent to 5,300 yen, underperforming the Tokyo market's electrical machinery index (.IELEC.T: Quote, Profile, Research), which fell 0.63 percent.
($1=117.26 Yen)
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