TI, Hitachi plan $500M DRAM venture in U.S

Electronic News, August 8, 1994 by Reinhardt Krause

DALLAS, TEX.--In what could signal a new round of industry investment in 16-megabit DRAM capacity, Texas Instruments and Hitachi last week said they plan to expand their long-time memory-chip research and development partnership to include a $500 million joint manufacturing venture in the U.S.

TI and Hitachi said they hope to form a joint-venture facility in the first half of 1995, most likely in the Richardson, Tex. area. The wafer fab would manufacture 16-and 64-Mbit DRAMs using a 0.35-micron process.

Under a previous R&D pact, TI and Hitachi are developing a common design for the 64-Mbit generation; however, a Hitachi spokesperson last week said it had not been decided whose 16-Mbit design would be initially manufactured at the new fab.

Although TI and Hitachi last year expanded their R&D cooperation to include the 256-Mbit generation, that project would involve a 0.25-micron process. The new fab described last week is not directly connected to that DRAM generation and additional investments would be necessary.

TI and Hitachi have targeted initial production at the new fab for mid-to-late 1996--when the 16-Mbit DRAM market will be in full bloom. Victor de Dios, DRAM industry analyst based in Newark, Calif., said "I'm looking at this as the beginning of a second wave. When you look out in time we need that second wave of 16-meg DRAM fabs and then moving toward the 64-meg--if we are going to build the 16-meg market. There really isn't enough capacity in place to support late 1996, 1997 levels. This is the beginning. I think you'll be hearing of a lot more fab announcements from japanese companies and others."

Korea's Samsung, Hyundai and Goldstar are bringing on new DRAM capacity in the next 18 months, but industry observers have recently said that Japanese memory chip makers have lagged in making new capital investments--having used older production lines for the 4-meg generation.

Tom Engibous, president of TI's Semiconductor Group, said "The semiconductors produced by the joint venture (with Hitachi) would help meet the long-term demand for memory chips. Based on long-term growth, TI estimates that the industry will need at least 40 new DRAM manufacturing facilities equivalent to this one over the next five to six years, far more than currently are announced or under construction."

TI has already been planning 16-Mbit DRAM production at a 0.5-micron facility in Japan operated with Kobe Steel. By mid-1995, a new 16-Mbit DRAM fab will be coming on-line at TI-Acer in Taiwan; TI may also expand its facilities in Avezanno, Italy but has not yet decided. TI also has a joint venture fab, TECH Semiconductor, in Singapore.

Depending on how much capacity is added by its competitors, TI may be in a good position--if it chooses--to seek more DRAM market share in the 16-Mbit generation. TI declines to reveal its market share, but industry estimates have been at about six to eight percent.

TI's new investment could also pressure another U.S. DRAM manufacturer, Micron Technology. Micron plans to complete phase II of its expansion in Boise, Idaho next year, which will almost double its capacity. Micron has benefited from the extended ride for 4-Mbit DRAM chips. The company last week said it does not currently have in place plans for additional capacity in the 1996-97 timeframe.

According to TI's Pallab K. Chatterjee, senior VP and chief technical officer of the Semiconductor Group, recently said volume shipments of 16-meg DRAMs are expected to pick up in 4Q, coming somewhat later than the traditional "price crossover." The company is still seeing contract pricing for 4-Mbit DRAMs at about $13.50. The Semiconductor Industry Association, meanwhile this month said that 4-Mbit DRAM shipments had passed 280,000 units in the recent quarter--an all-time high.

Depending on what supplier base materializes for 16-Mbit DRAMs, some industry observers have said a shortage of the parts is even possible next year. Dataquest, for example, recently said year-end pricing for 16-Mbit DRAM will be higher than originally expected.

In addition to the Korean DRAM makers, NEC and Toshiba in Japan have positioned some capacity for the 16-Mbit generation. Hitachi and Fujitsu have thus far been less public about their plans.

TI and Hitachi, which have been cooperating on memorychip research and development projects since 1988, combined would hold the majority equity interest in the new facility, with the remaining equity interest held by other investors. All semiconductors produced by the joint venture would go directly to TI and Hitachi.

Dr. Tsugio Makimoto, executive managing director and general manager of Hitachi's Semiconductor & Integrated Circuits Division, said "Previous cooperation between Hitachi and TI has made it possible for our two companies to develop new products faster and at lower cost than if we had worked independently. Manufacturing through a jointventure facility strengthens our ability to provide customers with the products they need."

The TI/Hitachi manufacturing pact is the latest example of the partnering being done in the industry to support next-generation DRAM production. However, most of these relationships--such as IBM, Toshiba and Siemens--have involved development and not production--although that may change. Two rival Asian semiconductor suppliers--NEC and Samsung Electronics--also have signed a joint agreement to develop 256-Mbit DRAMs. Samsung had taken the top spot last year among the world's leading memory market vendors (EN, Feb. 28).