Japanese PC memory maker Elpida Memory and Taiwan's Powerchip
Technology have reached a non-binding understanding that Elpida will purchase all DRAM products that Powerchip will manufacture, including the current portion which Powerchip has been selling as Powerchip branded products.
Elpida will sell those products as Elpida's house brand products.
It seems that Elpida is looking for alliances to bolster its
competitiveness in a market torn by oversupply and depressed prices.
Elpida currently has a foundry agreement with Powerchip for PC DRAMs
and purchases half of what Powerchip manufactures at their fabs in
Hsinchu, Taiwan. Powerchip currently has 80,000 wafers per month
capacity for commodity DRAM production and licenses from Elpida the
right to distribute the other half of the products as their own
branded products. Powerchip also has a right to purchase
approximately 30,000 DRAM wafers fabricated at Rexchip Electronics
Corporation, a joint venture between the two companies, and sell
those DRAMs to their customers as their own branded products.
When a final agreement is reached, Powerchip will phase out the sales
of own branded DRAMs and Elpida will purchase all PC DRAMs from
Powerchip to sell them as its own branded products. In other words,
the new agreement will enable Elpida to expand its production
capacity without capital expenditures. The technology migration at
Powerchip's fabs for DRAM production, which will be conducted by
Powerchip, will require relatively small capital spending as those
fabs use Elpida's efficient process technologies.
Furthermore, demand for power-saving Mobile DRAMs used in smartphones
and tablet PCs has been increasing rapidly, forcing Elpida's
Hiroshima Fab to allocate its capacity for these products and less to
PC DRAMs. Elpida can compensate a declining portion of PC DRAM
production at Hiroshima by increasing procurement from its foundry
partner to maintain and improve its presence in the DRAM industry.
Powerchip plans to shift towards a Foundry Model by expanding its
foundry production portion to Elpida as well as other semiconductor
products and customers. Furthermore Powerchip and Elpida also intend
to work together to continue support for Powerchip's existing
Taiwan had previously planned
to set up a new firm to
incorporate the country's chipmakers as well Japanese mempry makers,
in a move that would give Taiwanese DRAM makers access to key
intellectual properties related to DRAM. The new firm was to have
formed a capital tie with Elpida and share technology, but the deal
fell apart after the Taiwanese government scrapped a plan to inject
funds into the firm.