Hyundai sets $3.6B Scotland fab

Electronic News, Oct 14, 1996 by Crista Hardie

Dunfermline, Scotland--Jockeying for position as the world's second largest memory chip producer by 1999, Hyundai Electronics Industries Ltd. set a $3.6 billion, two-phased investment over the next three to four years to build its first European chip manufacturing facility--a two-fab complex for 64-and 256-megabit DRAM production expected to create about 2,000 jobs.

The project ranks as the largest capital investment by a single company in Europe, according to Locate in Scotland, the U.K. government's development agency for Scotland. Previously, another Korean memory chip maker, LG Semicon, held that distinction, with a recently announced $2.5 billion manufacturing investment in Newport, Wales, by parent company LG Group (EN, July 15).

Hyundai's first-phase investment, reported to be between $1.55 billion and $1.7 billion, will roughly equal the total planned capital investments in Scotland announced in the year ending March 31, 1996, Locate in Scotland said.

The move by Hyundai had been expected, as a number of Asian chip makers look to penetrate the European semiconductor market and avoid prohibitive tariffs on imported electronics goods (EN, Antenna, July 22). Samsung, the worldwide leader in memory chip sales, is also rumored to be shopping for European real estate, but no details are yet available.

According to Mark Ellsberry, Hyundai Electronics America VP of memory marketing, Hyundai had been eyeing Europe for some time. "It's been part of the plan for a couple of years. Any company that aspires to be a world-class supplier has to have manufacturing in certain political areas," he said.

Now that Europe has stated its intention to rapidly eliminate taxes on high-tech products (EN, Antenna, Oct. 7), most likely before Hyundai's first Scottish fab ramps production, tariffs are not as hot an issue, but "it also puts us in a good position to meet the delivery requirements of our European customers," Mr. Ellsberry said.

Slating a $3 billion investment seems ambitious at a time when some industry analysts say the memory market remains saturated and future demand is uncertain. A few recent fab announcements looked like a ray of hope after a six-month ordering slump prompted production slowdowns and halted some expansion plans; however, VLSI Research senior economist John Chen said capacity from all those fab expansions announced in the past year will peak sometime next year. He doesn't expect a renewed flood of capital spending until the end of 1998 or early 1999.

"A year ago, we were going to be in shortage for the rest of our lives. This year, we're never going to be short again. People tend to overstate the situation," Mr. Ellsberry remarked. "In reality, we're experiencing between 60 and 70 percent growth in bit demand."

By the end of 1998, when the first phase becomes operational, 64M DRAMs should be reasonably mainstream, and 256M will be just starting its ascent, he said. Hyundai has already provided a few customers with working samples of 256M DRAMs, and plans to make the market introduction next year.

Phase one, a 200-millimeter (eight-inch) wafer fab, will have a capacity of 30,000 wafers per month using line geometries down to 0.18 micron. The technology to be applied in phase two, estimated at a cost of $2.1 billion, hasn't even been developed yet, Hyundai said.

"We could be talking about 12-inch wafers, or we could be talking about geometries smaller than 0.18, higher memory densities or any number of innovations," Mr. Ellsberry said. "The idea of the 12-inch wafer is clearly something being studied closely by the industry. But it's a question of when the market will be ready to make the transition. It's generally estimated somewhere between 1998 and 2005."

Meanwhile, Scotland is campaigning to become a leading semiconductor producer, and has established two microelectronics university facilities in the last few months. Presently, Scotland is home to plants owned by Motorola, NEC, National Semiconductor, Seagate Technology, Hughes Microelectronics and Semefab, and employs about 8,000 manufacturing and support workers. Although Scotland represents only 1.5 percent of Europe's population, it accounts for 13 percent of Europe's semiconductor production capacity, according to Locate in Scotland.