Planning for the day when memory chips are again in relatively short supply, Elpida Memory Inc. is offering to ensure future orders for customers willing to make investments in the company and become small-equity holders.
In crafting the plan, Elpida's new president, Yukio Sakamoto, appears to be borrowing from a strategy widely used by semiconductor foundry service providers. Indeed, prior to joining Elpida, Sakamoto was head of the Japanese operations of Taiwan foundry United Microelectronics Corp.
"Customers tell us they're worried about future supply, particularly of DDR [SDRAM], so we're asking them for some small investment to guarantee capacity," Sakamoto said in an interview with EBN, adding that the Tokyo-based DRAM maker has yet to strike any such deals.
Customer forecasts supplied to Elpida indicate that DRAM demand, measured in bits, will increase 60% to 70% in 2003, up from about 50% this year as memory content increases in desktop and laptop PCs and wireless portable devices.
Having recently struck a deal to take over the DRAM business of Mitsubishi Electric Corp., Elpida has been rumored to be in the market for additional chip partners. However, Sakamoto said Elpida isn't actively looking to expand. Rather, the company is focused on integrating Mitsubishi's DRAM operations and putting enough capacity in place to support anticipated demand, he said.
To that end, Elpida has completed construction of its 300mm-wafer fab in Hiroshima, and production is slated to begin in January, according to Jim Sogas, vice president of the company's North America sales in Santa Clara, Calif.
The new fab is a start toward Elpida's goal of obtaining half of its production needs internally. Today all of the memory maker's production comes from foundry sources, primarily Hitachi Ltd. and NEC Corp., the original partners in the DRAM joint venture that now also includes Mitsubishi. A recently announced foundry pact with Taiwan's Powerchip Semiconductor Corp. will provide a second source for Elpida's 300mm lines, which initially will run on a 0.11-micron technology process, Sakamoto said.
Asked whether Powerchip will formally join Elpida, Sakamoto didn't rule it out. "We may discuss with Powerchip a further alliance, but today they're just a foundry," he said.
The plan calls for completing the transition of Mitsubishi's DRAM product lines to Elpida by January. Of foremost concern is ensuring continuity of supply for legacy products as Mitsubishi's business is consolidated with Elpida's, Sogas said.
Under the agreement, Elpida can begin accepting DRAM orders from Mitsubishi customers in April.
Now the fifth-largest DRAM supplier, counting Mitsubishi's DRAM business, Elpida is aiming to become a Top 3 player within two or three years by maintaining equilibrium between internal and foundry supplies and by focusing product development on fast-growing non-PC applications.
"Our product development strategy is this: If we develop 10 devices, at least five of them must have No. 1 market share worldwide," Sakamoto said.
"Today 80% of our business is in PC applications, but the mobile and consumer markets are expanding rapidly," he said. "These markets are where
Japanese companies are traditionally strong. We plan to capitalize on this inherent strength."