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Nanya inks fab deal with Infineon

taiwan market
Taiwan's market has rallied this year, but it closed at 5,895.06 on Thursday as investors reacted to Hynix  


Alex Frew McMillan
CNN Hong Kong

TAIPEI, Taiwan (CNN) -- Taiwanese chipmaker Nanya Technology says it signed a deal on Thursday with German chip giant Infineon for the companies to build a chip factory together.

Fast-growing Nanya said after the close of trade that it and Infineon had finalized their agreement.

It is technically a memorandum of understanding (MOU) to build the plant -- a "fab" in chip-industry jargon. An MOU allows either side to walk away from the deal.

The companies, who will split the fab 50-50, also agreed to share technology.

Analysts say Nanya, Taiwan's biggest maker of dynamic random access memory (or DRAM) chips, is setting itself up to gain from Infineon's technology.

Infineon, meanwhile, would corner capacity at a time its largest rival, U.S.-based Micron Technology, has just seen its own deal to buy most of Hynix Semiconductor fall through.

Hynix board nixes sale

UMC
Taiwan's chipmakers like UMC specialize in high-volume contract chip production  

Micron's unsuccessful approach to Hynix would have made Micron the largest DRAM chip maker in the world, surpassing Samsung Electronics. But the board of South Korea-based Hynix this week nixed the deal (full story).

Now Nanya and Infineon plan to construct a plant in Taiwan to make 12-inch wafers. Construction is slated to start this summer, with the factory ready to run in 2003.

Prior to the deal, local media reported the combined stake will be $10 billion. The companies would own even shares of the factory.

Other estimates suggest the figure is much lower, perhaps $6 billion. No terms were revealed, but local media reported the companies would build two factories, ahead of the deal.

In March, Nanya declined to comment on a report in the Chinese-language Economic Daily News that it was in talks with Infineon to sell stock to the German company, in return for the investment in two 12-inch wafer plants.

Nanya confirmed the deal on Thursday afternoon in Taipei. It only mentioned one factory.

Another Taiwan capacity deal for Infineon

Infineon was also in talks with Hynix, as a shakeout rattles the memory-chip industry. But after months of talks, Micron appeared to have sealed a deal to take over most of its capacity.

DRAM chips are relatively cheap chips that go into personal computers as well as laptops, cell phones, game consoles and many other gadgets, including computerized guidance systems for cars.

But the bottom fell out of the memory-chip market in 2001. In light of what producers call their worst year ever, experts believe there is too much capacity on the market.

Now many chip makers are looking to merge or exit the business. Japan's DRAM chip makers first mulled suing their Korean competitors for illegal dumping of cheap chips. But chip companies such as Toshiba have instead sold their DRAM production, in Toshiba's case to Micron.

Taiwan's chipmakers specialize in high-volume contract chip production. The five biggest DRAM producers have around 15 percent of the world market.

Infineon already has deals to get production from Nanya's Taiwanese peers, Mosel Vitelic and Winbond Electronics.

Stock down on Hynix surprise

On Thursday afternoon, Nanya Tech stock closed down 6.9 percent at T$37.70. That helped drag the main index in Taipei 3.3 percent lower, to 5,867.83, on a day most Asian markets climbed.

Investors in Taiwan on Thursday had their first opportunity to react to the collapse of the Micron-Hynix deal, which was expected to reduce capacity. Taipei's stock market was closed on Wednesday for the May Day holiday.

Nanya is the high-tech arm of Formosa Plastics Group, researching and making chips. It also has design centers in Silicon Valley and Houston in the United States.

According to Nanya management, Dell Computer has just become Nanya's biggest customer. It also supplies other computer makers such as IBM, Toshiba and Compaq.



 
 
 
 


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