Toshiba plans massive chip investment, JV with SanDisk

Toshiba and SanDisk are planning a joint venture chip factory, while Toshiba said it will also build two of its own.

Toshiba and SanDisk will build a new state-of-the-art flash memory chip factory together starting in 2009, and will share the output from it, the companies announced Tuesday.

Separately, Toshiba announced it will begin construction of two more chip factories of its own at the same time. One of the plants will be for NAND flash memory, while the second will be for other semiconductor products.

The three factories will make 300-millimeter (12-inch) wafers, which can cost up to US$3.6 billion each to build and equip with the latest technology. The companies did not announce the size of their investments.

All three will be built in Japan. No site in Japan has yet been determined for the joint Toshiba/SanDisk factory, while the two Toshiba-only factories will be built in Yokkaichi, Mie Prefecture, and in Kitakami, Iwate Prefecture.

Toshiba and SanDisk are just two players in a competitive NAND flash memory market. Other manufacturers include South Korea's Samsung Electronics; Japan's Elpida Memories; Taiwan's Powerchip Semiconductor, and a company jointly created by Micron and Intel of the U.S., IM Flash Technologies.

The new factories will help Toshiba cement its number one ranking among NAND flash memory makers, said Wayne Chen, NAND flash analyst at DRAMeXchange Technology, which runs an online clearing house for the chips. Samsung is Toshiba's fiercest rival in NAND.

The global memory chip industry is currently suffering from a production glut that has sent the prices of some memory chips down below their production costs. The glut seems set to continue, as a number of manufacturers either have new factories under construction or have announced plans for new production lines over the past several months.

Toshiba's factory announcement could further depress the NAND flash market psychologically because traders may believe the glut will continue due to more factory construction, said Chen. But output from the factories won't hit the market for years, he pointed out.

By targeting construction for 2009, Toshiba is signalling confidence that demand for flash memory, and NAND flash in particular, will rise to end the current glut. Production at the Toshiba-SanDisk plant will not start until 2010, according to their memorandum of understanding. The two Toshiba factories are also targeting production for 2010.

The good news for users is that the massive investments will keep the price of NAND flash memory down, which should lead to larger storage capacities in digital cameras, digital music players and other consumer devices.

NAND flash memory has grown in popularity over the past several years due to its ability to store songs, pictures and other data when power is shut off, as well as for its reliability in consumer devices such as Apple iPods and the iPhone. NAND manufacturers are targeting SSDs (solid-state disks) as another major product area of the future, to replace HDDs (hard disk drives). SSDs use less power than HDDs, an important difference in small devices, and are more reliable because they contain no moving parts.

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Dan Nystedt

IDG News Service
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