Elpida signs tech, production deal with China’s SMIC

Japan’s Elpida Memory Inc. has signed a deal with Semiconductor Manufacturing International Corp. (SMIC) to transfer advanced chip-making technology to the Chinese company and outsource some dynamic RAM (DRAM) production, it said Thursday.

The deal will last five years and covers Elpida’s 0.1-micron production process. A micron is a thousandth of a millimetre and the measurement refers to the smallest features that can be etched on the chip’s surface using the technology. A smaller number indicates a more advanced production process and most current production of advanced DRAM chips takes place at 0.13 micron.

Production of the DRAM chips, which are commonly used as the main memory in personal computers, is scheduled to begin in the fourth quarter of 2004 and the first chips manufactured under the arrangement are expected to be shipped from SMIC in the first quarter of 2005, said Yuko Takahashi, a spokesperson for Elpida in Tokyo.

The agreement updates a memorandum of understanding signed in January this year between the two companies that had originally called for SMIC to produce DRAM using a 0.13-micron production process from the third quarter of this year.

It is also a step towards Elpida’s goal of procuring around half of the chips it sells from outsourced production, it said in a statement. At present the company produces memory chips at its own facility in Hiroshima, Japan, and outsources some production to Powerchip Semiconductor Corp. in Taiwan.

The announcement comes less than a week after Elpida and Taiwan’s Promos Technologies Inc. ended negotiations over a similar deal.

The two companies signed a memorandum of understanding in May 2003 under which Elpida would transfer 0.1 micron-class chip-production technology to Promos. The Taiwanese company would then manufacture DRAM chips using the technology and sell them back to Elpida.

A September deadline for a definitive deal between the two passed with no agreement and talks continued into at least October. An end to the talks was signaled earlier this week by Elpida when it announced negotiations had been halted on the mutual agreement of both parties. That announcement came less than a week after Promos signed a technology licensing deal with one of Elpida’s competitors, South Korea’s Hynix Semiconductor Inc.

Elpida was formed in late 1999 through a merger of the DRAM businesses of NEC Corp. and Hitachi Ltd. The company became Japan’s only major DRAM maker in 2003 when Mitsubishi Electric Corp. exited the sector and transferred its operations to Elpida.