TOKYO Nearly a year after agreeing to merge their respective DRAM operations into a single company, Hitachi Ltd. and NEC Corp. announced the name and product strategy of the company on Thursday (Sept. 28). The 50-50 owned spin-off, Elpida Memory Inc., will open its doors for business at the start of next year, and hopes to capture 20 percent of the DRAM market in the next few years. But company executives left unanswered many questions about their product and capacity plans.
At a press conference, Elpida president Kenji Tokuyama (from NEC) and executive vice president Tokumasa Yasui (from Hitachi), emphasized Elpida's intention to quickly move to 0.13-micron production. That process technology will provide the underpinning for jointly developed 256-Mbit DRAMs that will be introduced by the second quarter of next year.
In his presentation, Yasui highlighted Elpida's planned move to 256-Mbit devices in the first half of 2001, starting with 133- and 166-MHz synchronous DRAMs and double-data-rate (DDR) SDRAMs. An NEC-developed technology, the 256-Mbit virtual-channel DRAM, is also scheduled to be introduced in the second quarter. And by around mid-2002, Elpida expects to introduce a faster version of DDR known as DDR-2.
Less clear is Elpida's plans for Rambus DRAMs. The company's 256-Mbit RDRAM, based on 0.13-micron design rules, is slated to come out in the fourth quarter of 2001, according to the road map presented by Yasui. However, this differed from a road map later provided to the press, which showed the 0.13-micron 256-Mbit RDRAM being introduced at the same time as the DDR and SDRAM products.
The discrepancy stems from unresolved licensing and royalty issues between Rambus and the new company, an Elpida spokesman said. Both Hitachi and NEC have signed royalty payment agreements with Rambus Inc. covering RDRAM, SDRAM and DDR technologies, but those agreements are due to expire by year's end when Elpida takes over the product lines.
"We don't have a strict schedule for Rambus [DRAM] because we need to get an agreement with Rambus," an Elpida spokesman said. "We are trying to start negotiations that will influence the start of the development."
Yasui said he'd like to come to terms with Rambus before the end of the year, a schedule that would avoid a legal battle like those that have erupted between Rambus and memory makers Micron, Infineon and Hyundai.
Hitachi, which ended its own bitter legal dispute with Rambus earlier this year when it agreed to pay SDRAM and DDR royalties, is not producing RDRAMs. NEC, however, introduced a 0.18-micron 288-Mbit RDRAM earlier this year, and has championed the part for high-end workstations.
While RDRAM is on Elpida's road map, the company said it will emphasize a faster 166-MHz version of SDRAM as well as DDR DRAM, and this may complicate its negotiations with Rambus. As a way to encourage greater RDRAM production, Rambus' licensing and royalty strategy charges its highest royalty fee for DDR, less for RDRAM and still less for SDRAM.
Rambus considers standard SDRAM a moribund technology and no threat to RDRAM. Not so with DDR, however. "The reason we're asking for higher royalty on DDR is because we feel it was introduced to compete with RDRAM using innovations created for RDRAM," said Avo Kanadjian, vice president of marketing for Rambus, in a recent interview.
While Elpida works on its relationship with Rambus, it is considering ways to build up enough manufacturing muscle to compete against bigger rivals Samsung, Hyundai and Micron. Last year, NEC and Hitachi together accounted for 13.6 percent of the DRAM market, and Elpida's goal is to reach 20 percent by 2003. Yet even with the upswing in DRAM prices this year, Elpida's sales forecast of $3.25 billion made last November for fiscal year 2001 has not changed.
Elpida officials acknowledge they are behind the big-three DRAM makers in terms of capacity, and are urging their parent companies to increase volume. One way would be to use 300-mm wafers, a move now being planned for NEC's high-volume DRAM plant in Hiroshima, which is to start using 300-mm wafers in the second half of 2002. Another improvement would come by switching to a finer process technology ahead of competitors.
On this score, Elpida claims it will be the first to market 0.13-micron 256-Mbit DRAMs, which should halve the die size of today's leading-edge 0.18-micron devices. The shift to 0.11 micron at NEC's Hiroshima plant is scheduled to begin by the second half of 2001.
Elpida executives, however, did not say specifically what the parent companies have in mind for increasing DRAM wafer output. Right now, the two main DRAM plants owned by Hitachi and NEC are together producing 50,000 wafers per month.
NEC's Hiroshima plant is expected to reach 60,000 wafers/month by the end of this year, and will more or less stay at that level for the next two years until the facility's 300-mm wafer line is introduced in the second half of 2002. No data was provided on Hitachi's main DRAM fab in Singapore.
Officials declined to say how much NEC and Hitachi plan to spend for the following fiscal year, when many analysts believe DRAMs will continue play in a seller's market. Elpida may not be able to answer questions about funding. While DRAM sales, product development and R&D or NEC and Hitachi will shift to the new company, the fabrication facilities will remain under the control of the parent companies. And even though NEC and Hitachi have pumped up their semiconductor capital spending this year, there has been a tendency among Japan's chip companies to spend more on logic and system-on-chip technologies than on DRAM.
Accordingly, Elpida executives are talking more about turning a profit than turning up production volumes. Yasui said the question is "how to get a good profit with certain capacity. Basically we need to concentrate on the server market."
But process shrinks and larger wafers may not be enough to nab 20 percent of the DRAM market in the face of bigger rivals. One way to crank up capacity would be for Elpida to build its own fab, an option that is being considered. "In the future, in order for us to be good in the DRAM business we need to think about having our own capacity," Yasui said.
With new fabs costing well over $1 billion, such a move would require a huge capital investment. If Elpida decides on that course, it may have to consider an initial public offering. "In order to get the money to invest and to encourage people we need to think about an IPO," Yasui said.
Another option would be for Elpida to buy the DRAM fabs from NEC and Hitachi outright. However, the Japanese tax code discourages the transfer of large assets to other companies, said Masahiko Ogirima, senior vice president of Hitachi, when asked recently about the possibility of such transfers.
As Elpida works out its product and capacity issues, it is moving forward with plans to consolidate its sales and administration operations. Taking into account both parents' worldwide sales divisions, the new company will reduce its sales force head count by 30 percent globally. A Hitachi spokesman was unsure how many employees affected by the cut would be transferred to other positions or laid off.
Elpida plans to employ a total of 750 workers, 500 of whom will be involved in product design and development and based in Japan. One-hundred workers, also in Japan, will work in sales and administration, while 150 salespeople will work at branch offices in the United States, Europe, Taiwan, Hong Kong and Singapore.