April 6, 2005 - Japan's Elpida Memory Inc. plans to move the assembly and testing stages of memory chip production to two firms in Taiwan as early as fiscal 2007 in an effort to cut costs, the Nihon Keizai Shimbun reported.

This will mark the first time that a major Japanese chipmaker will shift all of the latter stages of production overseas. Its domestic plants are to specialize in the early phases of production, which involves fabricating integrated circuits on wafers.

Currently, the processes of cutting out each chip from wafers and finishing the products are handled by four companies at home and abroad. These processes will be consolidated at two Taiwanese firms: Walton Advanced Engineering Inc. and Powertech Technology Inc.

Elpida has just signed long-term business partnership deals with both companies. It will outsource work on DRAMs for digital home electronics to Walton and hand DRAMs for servers and personal computers to Powertech. It also plans to consign work on memory chips for cell phones to one of these partners.

Because two Japanese firms now handle about 20%-30% of its total production volume, Elpida hopes to improve its distribution efficiency by consolidating these processes at the two Taiwanese operations.

Elpida also plans to improve the production technology at its outsourcing partners' plants. It will send technicians to thoroughly manage operating conditions and other factors at these facilities in order to decrease the number of defective products.

In other news, Elpida will start volume production this month of DRAMs with a line width of 90nm at its wholly owned subsidiary Hiroshima Elpida Memory Inc.

The firm aims to boost its cost competitiveness by increasing the number of chips made from one wafer.

Hiroshima Elpida has a monthly output capacity of 49,000 300mm wafers, of which more than 25,000 will be allocated to the production of DRAMs with a line width of 90nm in the October-December quarter.

When DRAMs are produced with a 90nm line width, the size of a 512-megabit chip will be 69.9 sq. mm, the smallest mass-produced chip of that capacity. The microchips to be mass-produced will be DDR2 DRAMs for personal computers/servers and chips for cellular phones and digital home electronics.

Since the prices of DRAMs for PCs fluctuate wildly, Elpida will transfer production to two subcontractors -- Power Chip Semiconductor Inc. of Taiwan and Semiconductor Manufacturing International Corp. of China -- as soon as they improve their ability to make chips with 90nm line widths.