TOKYO ( ChipWire/EET) -- Built in the dark days of the U.S.-Japan semiconductor trade war, 12-year-old Tohoku Semiconductor awaits the outcome of talks that could result in Toshiba Corp. selling its 50% stake in the fab to its partner in the venture, Motorola Inc.
"A buyout from the point of view of Motorola is definitely part of the agenda," a Toshiba spokesman confirmed today.The negotiations come as Toshiba seeks ways to realign its production capacity with a slimmed-down capital-spending budget and Motorola tries to bolster its presence in Japan, particularly in communications-related devices.
Still, a deal has not been finalized, and a buyout "is one option; there are many options to improve the status of Tohoku Semiconductor," said a spokesman from Motorola Japan Ltd.
The facility, located in Japan's Miyagi Prefecture, was established in 1987 at a time when Motorola was interested in strengthening its position in DRAMs and Toshiba needed a partner to help it enter the market for microprocessors and microcontrollers.
Since then, business has changed for both companies, putting Tohoku's future in question. Motorola has pulled out of the DRAM market to focus on logic and system-on-chip devices. Toshiba, meanwhile, has stopped making DRAMs at Tohoku, and is producing its MIPS-based Tx MPUs at two other more-advanced fabs in Japan.
Establishing Tohoku was also something of a symbolic gesture to help assuage a U.S.-Japan trade war over charges that Japanese firms were dumping DRAMs in the United States and that Japan's markets were closed to foreign-made semiconductors.
Since then, U.S. manufacturers -- with the notable exception of Micron Technology Inc.-- have almost entirely withdrawn from the DRAM market and both countries agreed this year to let a bilateral trade agreement expire. That accord had helped foreign semiconductor manufacturers reach a 20% share of the Japanese market, which has been maintained for several years now.
"The significance of the joint venture has changed over time, and both companies from their respective point of view are reviewing the meaning of the JV," the Toshiba spokesman said.
The buyout could be beneficial for Motorola in making inroads into the market for chips used in communications products, particularly cellular phones. Recently, in a bid to establish its MCore as the primary processor for wideband-CDMA cell phones, Motorola said it would offer its 32-bit MCore processor core royalty-free for customers building and selling systems in Japan.
"In general, we are always looking for chances of growing any product area," the Motorola spokesman said. "Most of our focus is on system-on-chip, and we are shifting more to high-value products."
The Tohoku facility is now producing MCU and ASIC products with 0.4-micron production tools at a time when the industry is upgrading to 0.18-micron design rules. Having a domestic fab with a finer process technology would ostensibly give Motorola an edge in penetrating deeper into the Japanese market.
Toshiba itself has been trying to upgrade its fab capacity geared toward more-profitable semiconductor areas as the chip market improves in Japan and abroad. But the company, which has converted to a so-called in-house company system that puts its semiconductor division under more pressure to make a profit, is attempting to do so without purchasing new fabs and without spending more than its $900 million capital expense budget, which represents a cut of about 15% from the prior year's budget, a spokesman said.
Earlier this year, Sony Computer Entertainment Inc. announced it would spend $1 billion to upgrade Toshiba's Oita facility to 0.18-micron to make 128-Mbit CPUs for the next Playstation game console.
And in July, Toshiba announced it would buy IBM's stake in their jointly owned Dominion Semiconductor in Manassas, Va., to boost production of 128-Mbit DRAMs and NAND-type flash-memory chips. At the time, Toshiba the purchase would not lead to an increase in the company's capital expenditure budget.
Asked whether a Motorola buyout would help pay for Toshiba's purchase of IBM's share of the Dominion plant, the Toshiba spokesman said "it would help our cash flow, but at this point it's only hypothetical."
Spokesmen from Toshiba and Motorola were unsure when the two companies would finalize a deal, and neither would comment on any proposed sale price for Toshiba's 50% share in Tohoku. A Toshiba spokesman said the companies have been negotiating for several months. Since late May, the Japanese yen has strengthened from nearly 125 yen to the dollar to the current 111 yen, which would ostensibly cause Tohoku's assets to rise in dollar value.