STMicroelectronics and Hynix combine memory resources in China
After a couple of years of mixed fortunes Hynix Semiconductor has had two pieces of good news this week with the company moving up the list of global DRAM suppliers and now the announcement with STMicroelectronics of the signing of a joint-venture agreement to build a front-end memory-manufacturing facility in Wuxi City, Jiangsu Province, China.
Hynix has attempted joint ventures and mergers in the past, most notably with its two biggest competitors, Infineon and Micron. Neither succeeded whereas the current venture involves complementary rather than competitive products. With Toshiba threatening patent action and accountancy scandals, this announcement is welcome to Hynix and its investors.
The new facility, which will include 8-in. and 12-in. manufacturing lines, is to be dedicated to DRAM and NAND Flash production. The new fab will be especially beneficial for Hynixs DRAM production growth and for ST to build up its NAND Flash capacity. The joint venture is also a logical extension of the successful NAND Flash process/product development and manufacturing relationship between the companies.
Construction of the leading-edge fab, with a clean-room space of more than 18,000 square meters, is slated to begin early in 2005. When complete, the fab will employ approximately 1,500 people and will initially feature two manufacturing lines offering an 8-in. wafer line that is scheduled to begin volume production in 2006 while a 12-in. wafer line will begin volume production in 2007.
Each line will produce, at capacity, 20,000 wafers per month. This new fab will supplement the capabilities of both companies while providing both with better access to the rapidly growing Chinese market.
The Chinese market is currently 14% of the worldwide semiconductor market and is expected to achieve a compound annual growth rate of more than 20% between 2003 and 2008; already, China accounts for approximately US$1.5 billion of STs sales.
“With this agreement STs relationship with Hynix rises to a full-blown industrial partnership, encompassing significant joint financial commitments,” added Pasquale Pistorio, president and CEO of STMicroelectronics.
“Hynix is glad to extend the partnership with ST in building a world-class manufacturing plant in China. Hynix believes this alliance will be mutually beneficial for each companys long-term growth. Having completed its business restructuring through the sale of its non-memory operations, and achieving record high profits in 2004, Hynix plans to extend its position in the memory market with the planned fab in China,” said Eui-Jei Woo, chairman and CEO of Hynix Semiconductor Inc.
The joint-venture will strengthen Hynixs competitiveness as the company will be able to secure 300-mm manufacturing facilities, and resolve the existing and potential trade issues. The joint-venture also assures STMicroelectronics of access to cost-competitive DRAM products and technology that ST can use in new designs and have manufactured to suit particular customer requirements.
The total investment planned for the project is US$2 billion. It will be financed with equity from both partners (Hynix 67%, ST 33%), US$250M of long-term debt from ST, as well as a financing package from Chinese local financial institutions, which will involve debt and a long leasehold. ST and Hynix are in the process of securing the required governmental approvals and financing package.
