Taiwan’s memory chip suppliers are expecting strong demand in 2007 following the release of Microsoft’s new operating system, which is seen as a key driver of the market.
Japan’s memory chip maker, Elpida and Taiwan’s Powerchip Semiconductor Corp announced a $14bn joint venture on December 7. The project involves setting up four chip foundries in Taiwan with the aim of increasing the global market share in dynamic random access memory (DRAM) for both companies and overtaking Samsung, currently the number one supplier. The investment is expected to produce 240,000 12" wafers per month, making the site the largest concentration of 12" DRAM fabrication facilities in the world, according to Elpida.
The company has a pre-existing relationship with Powerchip, which currently manufacturers 30% of Elpida’s DRAM. This relationship was cited as being the main reason for making the investment in Taiwan.
Some analysts point out that DRAM manufactures usually invest when the market is strong and capacity is an issue. By the time investment had been completed and there is extra capacity, the market has often turned.
This year, DRAM is the fastest growing segment of the industry, as reported in local media. The forecast growth in DRAM is expected to be 15% in 2007 and Taiwanese DRAM manufacturers are expected to increase their global market share from 15% to 20% this year.
The release of Microsoft Vista is expected to encourage companies and consumers to upgrade their computer equipment and DRAM suppliers hope to benefit significantly. Some analysts have been cautious, explaining that the release of the latest Microsoft operating system took longer than expected to impact demand for new hardware.
If Vista fails to reach expectations and demand is not as high as predicted, some DRAM manufacturers are looking to hedge against the market and license NAND Flash technology, according to reports. This flexible strategy has been successful for Samsung in the past.
Flash memory is non-volatile, which means it retains data when it has no power. DRAM is faster than Flash but loses information when it is without power. DRAM is cheaper per byte than Flash.
Taiwanese DRAM manufacturers are also set to benefit from better government policies. They will now be able to move some of their older 200mm fabrication operations to China, where they will be able to take advantage of lower labour costs. It was announced in local media on December 8 that the Taiwanese government will give the go-ahead for Powerchip and Promos, another large chip manufacturer, to set up factories in China. Advanced Semiconductor Engineering, a major chip testing and packaging company, was also given permission to open a new factory in China, according to the local press.
Taiwanese computer manufacturers such as Acer and ASUSTek are expected to do well from the release of Vista. Observers have voiced confidence that Vista will increase demand for widescreen flat panel monitors. A report by Merrill Lynch, which was discussed in the local media on December 7, expects a 12% increase in liquid crystal display (LCD) shipments this year. This is expected to boost production and demand for local firm AU Optronics, Taiwan’s largest and a worldwide top 3 manufacturer of TFT-LCD high resolution flat panels.
