Infineon seals deal with SMIC

PUBLISHED : Tuesday, 10 December, 2002, 12:00am
UPDATED : Tuesday, 10 December, 2002, 12:00am

German memory chip giant Infineon Technologies has sealed a production deal with Semiconductor Manufacturing International Corp (SMIC).

Under the agreement, the world's third-largest dynamic random access memory (dram) chipmaker will transfer its 0.14-micron dram technology to SMIC. Infineon will also have the option of transferring its cutting-edge 0.11-micron technology to SMIC in the future.

SMIC will use Infineon's dram technology and its existing 200mm chip facility in Shanghai to produce industry-standard 256-megabit double data rate memory chips exclusively for Infineon.

The Infineon-SMIC pact is being seen as a blow to Taiwanese chipmakers, with the mainland firm securing the big contract instead of its cross-strait rivals.

China's government aims to copy Taiwan's success in the chip-making industry.

SMIC is backed by the Shanghai municipal government-controlled red-chip conglomerate Shanghai Industrial Holdings.

Its investors also include United States investment bank Goldman Sachs, fund manager H&Q Asia-Pacific and venture capitalists Walden International and Vertex Management.

Infineon spokesman Ralph Heinrich said SMIC was due to start producing memory chips in the middle of next year, and gradually ramp up production capacity to 20,000 wafers a month by 2005.

The deal allowed Infineon to expand its global memory chip production capacity by a 'low double digit' without the direct investment in building up a foundry, he said.

Analysts have been estimating that Infineon's global production capacity will reach 200,000 wafers a month by the third quarter next year.

Mr Heinrich said the partnership with China's leading semiconductor foundry SMIC was aimed at enhancing Infineon's market share in the region, especially in China.

'We want to improve our positioning in China. That's one reason to come together with SMIC. We want to gain market share in Asia, especially in China because it is a growing country.'

China is the world's largest importer of semiconductors, with about 85 per cent of the chips consumed in the domestic market coming from overseas, according to Ministry of Information Industry statistics.

Research house Gartner Dataquest has estimated the semiconductor market in China will grow from US$16 billion this year to US$31 billion in 2006.

Infineon has a 14 to 15 per cent share of the global dram market. 'We anticipate the expansion in our production capacity through the partnership with SMIC will increase our share in the global memory market by a single-digit percentage,' said Mr Heinrich.

A semiconductor analyst said Infineon would benefit from the deal as it would improve its return on capital employed and lower investment risk.

SMIC president and chief executive Richard Chang said the industry was moving towards greater outsourcing of production.


The pact gives Infineon greater market share in China

China hopes to mimic the success of the semiconductor industry in Taiwan

Analysts estimate Infineon's global production capacity will reach 200,000 wafers next year