BANGKOK, Thailand Infineon Technologies' top boss said last week that the most advanced semiconductor production technologies should get a green light for export to China. "Effectively, China needs to be up to speed just like every other region," said chief executive officer Ulrich Schumacher.
Taking exception to the notion that China should be brought along slowly and denied the most cutting-edge chip-manufacturing technology, Schumacher said, "All this discussion about whether you should just transfer older technology and just let them do foundry with it just doesn't work." Companies like foundry newcomer Semiconductor Manufacturing International Corp., based in Shanghai, "will have 0.11-micron technology soon," he said. "If you know you cannot avoid that, and it doesn't make sense to avoid that, then it is better to join and to help."
Currently, through a largely voluntary pact called the Wassenaar Agreement, most countries do not export leading-edge equipment into China. Recently the agreement has begun fraying, pitting more ardent supporters, such as the U.S. government, against some governments in Europe that are more lax about granting export licenses for the specialized tools.
Commitment to Asia
Passing through Bangkok on his way back to Infineon's Munich, Germany, headquarters, Schumacher sat with reporters for a few hours to lay out the chip maker's strategy in Asia and answer questions about the future of Promos Technology. The joint venture Infineon runs with Mosel-Vitelic Inc. in Taiwan is floundering because of acrimony between the parent companies, and Schumacher said Infineon is in the process of selling off its shares.
Even as that partnership crumbles, however, Schumacher said Infineon is committed to fostering new ties with Taiwanese and Chinese chip makers and using those relationships to take advantage of increasing demand in the Asia-Pacific region, especially in China. The nation will drive chip demand in Asia for several years, said Schumacher, adding that Infineon expects the Chinese demand to raise its Asia-Pacific sales from about 30 percent of total revenue to nearly 45 percent in the next few years.
Acknowledging the uncertainties of the Chinese market, including intellectual-property protection, copycat business models and other pitfalls, Schumacher said that electronics companies still need to push their way in, even if the ground seems to shift constantly.
"China is a big question mark. Is it the market of the future? Is it the enemy of the future? Will these people kill you if you help them develop an industry? No one has a clear understanding of what is going to happen," Schumacher said. "But one thing is clear. You can't ignore them. Somehow you have to be part of the game."
Over the next few years, Infineon will ramp up its work force in China to about 2,500 people, from just a few hundred today. At least 1,000 of those will be engineers, tasked to develop firmware for wireless products and doing back-end design verification.
Schumacher also said that Infineon will build "a major back-end facility in this region." He declined to say where.
"We have to almost triple the production volume of DRAM chips for the back end. Today, we have the capacity for about 500 million to 600 million pieces and we have to go up to somewhere around 1.5 billion pieces," he said, noting that it will be part of a push to collectively control 30 percent of the DRAM market with partner Nanya Technology Corp. of Taiwan. The two now control nearly 20 percent.
Promos decision pending
Earlier in the week, Schumacher made an unexpected stopover in Taipei, Taiwan, for a meeting with Promos chairman Hu Hung-chiu, and reported that the two "talked about the future" of the company. While Promos executives characterized the meeting as "pleasant," Schumacher said little that would inspire confidence about a reconciliation. He set a deadline of March for a resolution.
Since at least October, Promos has been at the heart of a dispute between its two backers. Infineon and Mosel-Vitelic have been arguing over issues regarding chip pricing and Mosel's use of shares in the joint venture as collateral for bonds.
As the disagreement worsened, Infineon stopped transferring technology to Promos and then canceled its buying contract in January.
Despite describing Promos as "one of the best-performing fabs in Asia," Schumacher said that Infineon had little in common anymore with Mosel-Vitelic. When the Promos venture started, both parent companies wanted to be DRAM manufacturers, he said. Over the years, Infineon has stayed its course in DRAM, but Mosel has not.
"We are talking about a business where you are investing billions of dollars on technology, and you want to do that with a partner that has the same vision, the same commitment and the financial resources to do so," Schumacher said.
He likened the dispute to parents divorcing. "We have this daughter called Promos and we have to decide what to do," Schumacher said. "Because you can't split the daughter you say either you take it or we take it." Infineon owns 30 percent of Promos, he said, or about a $250 million stake.
"We have no interest in damaging Promos," he added. "Why destroy it?"
Nevertheless, he said, Infineon sees Nanya as its new primary partner and is undergoing the lengthy process of slowly selling its shares in Promos on the open market. "So this partnership [with Mosel] naturally ends, because we no longer have the same intentions. [Mosel] is more in the financial business and we are in the business of making DRAMs," he said, characterizing Mosel as more of a holding company than a technology company.
Infineon and Nanya are currently building a 50-50 joint-venture 300-mm wafer plant in Taiwan, called Hwaya Semiconductor. Total investment will top out at $2.2 billion. Pilot runs are scheduled to begin in March 2004. Four months later, the fab could produce 10,000 wafers per month and hit 20,000 per month by year's end, the companies say.