Micron to buy Toshiba's commodity DRAM business, Virginia fab

Micron to buy Toshiba's commodity DRAM business, Virginia fab
BOISE, Idaho--Micron Technology Inc. today announced it will acquire Toshiba Corp.'s commodity DRAM business, including the company's Dominion Semiconductor LLC manufacturing facility in Virginia. Terms of the acquisition agreement were not released, but knowledgable sources said Micron will pay between $250-to-$400 million for the Virginia wafer fab.

The purchase agreement was struck after weeks of negotiations between Toshiba and Infineon Technologies AG of Munich, which had been attempting to strike a strategic relationship or another arrangement in DRAMs but failed to work out a deal.

Toshiba said it will terminate its commodity DRAM business and gradually phase out commodity DRAM production at its Yokkaichi operations in Japan. That facility will take over all flash memory production for a joint venture between SanDisk Corp. and Toshiba. Production for the FlashVision joint venture will be transferred from the Dominion facility and consolidated at the Yokkaichi site, where Toshiba is already producing 0.16-micron NAND flash wafer for the venture with SanDisk, (see today's story).

The Dominion facility was originally a joint-venture plant between Toshiba and IBM Corp. It began full-scale wafer production in 1997, but in 2000, Toshiba purchased IBM's interest. The proposed sale to Micron does not include the flash manufacturing equipment at the facility. Toshiba said it will transfer the flash manufacturing systems to Yokkaichi for the FlashVision joint venture.

DRAM manufacturers worldwide have reported huge losses in the downturn of 2001, and total revenues for dynamic random-access memories continue to shrink much faster than the rest of the chip industry. Revenues for DRAM are expected to plunge 60% to just $12 billion in 2001, compared to a 31% drop for chip sales overall, according to the latest forecast from the Semiconductor Industry Association. DRAM sales peaked in 1995 at over $40 billion, but a series of downturns, too much production capacity, and the lack of new computer software requiring more memory has caused total sales to shrink in the past six years.

"We have decided to withdraw from commodity DRAM business, which means that Micron's business strategy fits ours," said Takeshi Nakagawa, president and CEO of Toshiba's Semiconductor Co. "This, alongside respect for one another's technological capabilities, allowed us to quickly close a deal, even though we had never worked with one another before." He added that he looked forward to "a future opportunity to discuss business collaboration."

Nakagawa said Toshiba would continue to make non-commodity DRAM at Yokkaichi, such as embedded DRAM and fast cycle DRAM for networking and communications applications.

For Micron, the deal promises to expand its DRAM muscle. "Similar to prior transactions, we believe this acquisition will better position the company to more cost-efficiently produce its products and to establish new customer relationships throughout the world," said Micron chairman and CEO Steve Appleton.

Meanwhile, Infineon said it remains open to further negotiations with other memory manufacturers after failing to strike a deal with Toshiba. However, any cooperative arrangement must not adversely impact Infineon's cash position, emphasized the Munich company.

"I regret that the mutual talks will not continue and that we could not achieve the results we were looking for," said Ulrich Schumacher, president and chief executive officer of Infineon. The CEO added that Infineon believes it will have a competitive advantage with its 300-mm wafer plants as the memory business undergoes a consolidation.

The Dominion fab in Virginia produces the equivalent of 6.5 million 64-Mbit DRAM units a month, a Toshiba spokesman told EBN in a phone interview. In Japan, Toshiba had scaled back production at Yokkaichi to the equivalent of 4.5 million 64M-bit units a month, down from 10 million in 2000. Toshiba also bought 9 million units a month from Winbond Electronics of Taiwan as part of an outsourced manufacturing partnership. That relationship will now be discontinued.

The Toshiba spokesman said the company would fulfill existing OEM contracts for its commodity DRAM but that customers would be required to find a new source of supply once contracts expire.

Micron did not say whether the purchase of the Dominion fab will have any bearing on its negotiations to acquire the DRAM business of Korea's Hynix Semiconductor Inc. Those talks have been underway for several weeks, and if they lead to a sale would make Micron the industry's largest DRAM producer on a unit basis.

The Virginia DRAM fab that Micron will take over uses a trench capacitor architecture, as opposed to the stacked capacitor design used by Micron. However, in an interview with EBN earlier this month, Appleton said a trench capacitor DRAM fab would pose no problem for Micron, which could modify the process. Industry sources also speculated Micron might retain some trench capacitor DRAM production to keep a foot in this design camp.

In its announcement, Toshiba also said the company and Micron would discuss collaboration to develop and market application-specific DRAM. It wasn't immediately clear if that included fast cycle DRAM, which Toshiba licenses from Fujitsu Ltd. Micron itself makes a competitive network specific memory called reduced latency DRAM in cooperation with Infineon Technologies.

Still uncertain is which of the remaining DRAM suppliers will service the bulk of Toshiba's domestic Japanese customers. Toshiba had a 7% share of the global DRAM market based on 2000 revenues, the latest data available, according to Semico Research Corp., Phoenix.

--Reporting provided by Jack Robertson in the U.S. of EBN, a sister publication of Semiconductor Business News.