The final financial amount and full details of the deal are yet to be worked out, since the two chip makers Tuesday only signed a memorandum of understanding. However, one informant said Micron is expecting to acquire the leading edge 0.17-micron processing fab for a quarter of the $1 billion to $1.2 billion cost of building a similar new fab from scratch.

Asked to comment, a Micron spokesman declined to discuss any purchase price that might be under negotiation. "But you can say that we expect to acquire Dominion Semiconductor assets in the most cost-effective manner possible," he added.

A negotiating team from Micron left Tuesday for Tokyo to nail down details of the MOU, according to the source.

Ironically, a delegation from Hynix Semiconductor Inc., the other major DRAM vendor negotiating for an alliance or fab sale to Micron, is in the U.S. this week to talk further with the U.S. chip maker, the same source said. A Micron spokesman declined to comment on both reports.

Micron agreed with the assessment of Toshiba officials that any final deal will still allow existing DRAM customers of the Japanese firm to replace their present OEM contracts with any memory chip vendor on the market. However, the source close to the scene said the final agreement will certainly lock inToshiba itself as a prime customer for Micron-made DRAMs, certainly a major buyer.

Once Micron takes control of the Dominion Semiconductor fab it is expected initially to continue making trench-capacitor design DRAMs that the facility already is producing. Micron uses a different stacked capacitor DRAM architecture. Micron reportedly will evaluate the Dominion trench-DRAM compared to its own design, and could either continue trench output or decide to phase over gradually to stacked DRAMs.

The Micron spokesman said it is far too early to make any such assessment. However, he did point out that trench DRAMs are not unknown at Micron, as the firm in the 1990s had a foundry agreement to make trench-capacitor DRAMs in its Boise, Idaho fabs for IBM.

Industry sources also speculated Micron might retain some trench capacitor DRAM production to keep a foot in this design camp.

Asked if Micron would acquire any Toshiba DRAM engineers in the deal, the spokesman said any such details remain to be negotiated.

He also said it was too early to comment on how distributor agreements might be harmonized between the two firms on commodity DRAM supply.

Toshiba Corp. Tuesday confirmed in Tokyo that it would sell its DRAM fab, Dominion Semiconductor LLC in Manassas, Va., to Micron Technology Inc. and exit the commodity DRAM business.

Immediately after the announcement, Infineon Technologies A.G. released a statement that talks to form a joint DRAM venture with Toshiba had collapsed.

EBN reported Friday that Micron was in secret negotiations to take over Toshiba's Virginia fab and convert it to its own DRAM production process. The Manassas fab consists of two segments, one of which Toshiba uses to make DRAM. The other is a joint venture with SanDisk Corp. dedicated to NAND-flash memory manufacturing.

Takeshi Nakagawa, president of Toshiba Semiconductor Group, said the NAND-flash memory portion of the Manassas fab would be transferred to Japan and consolidated with the company's Yokkaichi fab complex. Nakagawa said Toshiba would continue to make non-commodity DRAM at Yokkaichi, such as embedded DRAM and fast cycle DRAM for networking and communications applications. Rambus DRAM will also continue to be produced by Toshiba.

The Dominion fab in Virginia produces the equivalent of 6.5 million 64Mbit DRAM units a month, a Toshiba spokesman said. In Japan, Toshiba had scaled back production at Yokkaichi to the equivalent of 4.5 million 64Mbit units a month, down from 10 million in 2000. Toshiba also bought 9 million units a month from Winbond Electronics of Taiwan as part of an outsourced manufacturing partnership. That relationship will now be discontinued.

The Toshiba spokesman said the company would fulfill existing OEM contracts for its commodity DRAM but that customers would be required to find a new source of supply once contracts expire.

The news is a potential blow to Infineon, which had spent weeks negotiating a possible tie-up with Toshiba's DRAM operations. In an interview with EBN last week, Ulrich Schumacher, president of the Munich-based company, offered the first indication that talks with Toshiba were not going well when he indicated that any joint venture relationship with Toshiba would have to come at no additional operation cost to Infineon.

In a statement issued early this morning, Schumacher said he "was disappointed that we could not reach an agreement with Toshiba." Schumacher said Infineon would continue to explore alliances with other potential DRAM partners.

In an interview earlier this month, Steve Appleton, chairman, president, and chief executive of the Boise, Idaho, chipmaker, told EBN that Micron would not take on debt as a cost of acquisition.

"If a company is willing to exit the DRAM market and an acquisition makes sense for us, we'll always consider it," Appleton said at the time. "We want to eliminate a strong player, but in an advantageous arrangement. It does not make sense if all we're doing is relieving a problem for one of our competitors."

Micron did not say whether the purchase of the Dominion fab will have any bearing on its negotiations to acquire the DRAM business of Korea's Hynix Semiconductor Inc. Those talks have been underway for several weeks, and if they lead to a sale would make Micron the industry's largest DRAM producer on a unit basis.

In its announcement, Toshiba also said the company and Micron would discuss collaboration to develop and market application-specific DRAM. It wasn't immediately clear if that included fast cycle DRAM, which Toshiba licenses from Fujitsu Ltd. Micron itself makes a competitive network specific memory called reduced latency DRAM in cooperation with Infineon Technologies.

Still uncertain is which of the remaining DRAM suppliers will service the bulk of Toshiba's domestic Japanese customers. Toshiba had a 7% share of the global DRAM market based on 2000 revenues, the latest data available, according to Semico Research Corp., Phoenix.