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Infineon to boost memory-making capacity

The German chipmaker will add a new RAM-manufacturing line to its Richmond, Va., facility, as part of a $1 billion expansion.

Infineon Technologies plans to pump $1 billion into expanding its memory-making capacity.

The German chipmaker, best known for producing the DRAM (dynamic random access memory) used in PCs and servers, said higher demand has prompted it to expand the capacity of its U.S. plant.

The expansion of the Richmond, Va., facility will enable Infineon to boost its DRAM production by adding a manufacturing line that uses larger 300-millimeter wafers--the silicon discs on which chips are manufactured--and at the same time free up manufacturing capacity in other plants. The investment also signals that the company believes that better times are ahead.

"Overall customer demand, both for logic as well as memory chips, is increasing at a strong pace. This initial expansion of capacity at Richmond will allow us to accelerate the shift of production from memory to logic products at our 200-millimeter plant in Dresden," Germany, Andreas von Zitzewitz, Infineon's chief operating officer, said in a statement.

Infineon began an expansion effort in 2000, but the company put the plan on hold because of the slowing economy. The resulting 2001 PC market downturn affected almost all chipmakers. Its effects were particularly hard on the DRAM industry. As demand fell, DRAM chipmakers cut prices to the bone in attempts to motivate customers to buy. Many put off expansion plans as well. The industry didn't begin to recover until last summer. Lately, rising prices and the beginning of production of a new kind of memory, DDR2--the second generation of Double Data Rate Synchronous Dynamic RAM--have created even more of an air of optimism among memory makers.

Infineon aims to begin production of DRAM chips with the new 300-millimeter equipment early next year. Ultimately, the chipmaker plans to be able to start 25,000 wafers down the manufacturing line each month.

Although the cost of building new chip plants or retrofitting existing factories is high--a new chip factory costs $2 billion to $3 billion--making the jump to 300-millimeter wafers allows chipmakers to increase manufacturing output and reduce their per-chip costs. The larger wafers yield far greater numbers of chips. Lower costs are of particular importance in commodity markets such as DRAM.

A number of chipmakers have been moving to 300-millimeter wafers, seeking cost and capacity improvements.

Intel, for one, operates four 300-millimeter plants, and earlier this week, the company announced that it had begun work to convert its "Fab 12" facility into its fifth 300-millimeter plant.

Intel will spend $2 billion to covert the plant, which is located in Chandler, Ariz., from 200-millimeter wafers to 300-millimeter wafers. Once finished, Intel said, its five 300-millimeter plants will turn out the same amount of chips as about 10 200-millimeter factories.

Meanwhile, Infineon's expansion will create new jobs for Virginia residents. The company said it expects to add 800 employees at the site, increasing the number of workers to 2,550 from 1,750.