Infineon boosts memory chip output

The German DRAM (dynamic random access memory) maker announced Monday that it has inked a pair of deals with memory chip manufacturers that will boost its capacity by 20,000 wafers per month by 2003. The extra capacity roughly equals that of a midsize chip-manufacturing plant. A wafer, an 8-inch or 12-inch disc on which chips are manufactured, is the basic element of chip production.

The moves show that the ongoing consolidation among DRAM makers is continuing despite indications that the business is improving and a market recovery is around the corner. The consolidation, which most recently saw Toshiba sell its DRAM operation to Micron Technologies, will leave fewer players than before the market turned down at the end of 2000. The companies that survive stand to gain a much larger share of the profits once the market recovers.

The deal also girds Infineon for the potential impact of the long-expected agreement between Micron and Hynix Semiconductor. The two DRAM makers have been in discussions for months for Micron to buy Hynix's DRAM operation. Such an agreement would produce a DRAM giant, with Micron occupying the top spot in the market. Analysts rank Infineon as the No. 4 DRAM maker, behind Samsung, Micron and Hynix.

Infineon began its effort to boost capacity by modifying its 1996 joint venture with Mosel Vitelic, which is called ProMOS Technologies. Infineon began taking a larger share of the output from the ProMOS venture, up from 38 percent to 48 percent, beginning March 1. The ProMOS factory, located in Hsinchu, Taiwan, produces mainly 128-megabit and 256-megabit SDRAM (synchronous DRAM) and DDR SDRAM (double data rate SDRAM) chips.

Under a longer-term deal, Infineon will license its DRAM manufacturing technology to Hsinchu-based Winbond in exchange for access to resulting standard DRAM chips.

The deal will allow Winbond to manufacture SDRAM for sale to Infineon starting next year. The company will also be able to use Infineon's technology for other products. Infineon said it expects Winbond will begin by manufacturing 256-megabit DDR SDRAM chips.

While nether deal is "earth shattering," each serves the purpose of helping Infineon prepare for the future, said Andrew Norwood, an analyst with Dataquest.

The Winbond deal, for example, "helps Infineon in terms of capacity as we head toward the upturn, and it helps Winbond secure technology," Norwood said.

Indeed, Infineon executives believe the two agreements will help the company compete when the DRAM market strengthens again.

The company has already seen higher demand for its DRAM chips of late, a sign that the market has begun to turn, said Ulrich Schumacher, Infineon's president.

"We are convinced that this is part of an upturn," Schumacher said. The deals "will enhance our position in the upturn...and place us in a strong position, stronger than we are now."

Schumacher, however, declined to comment on how much of an increase in DRAM manufacturing capacity would be made possible by the deals.