By Mark LaPedus
Altera has entered into an agreement for the future manufacturing of its FPGAs based on Intel’s 14nm tri-gate transistor technology. Intel will provide foundry services for the FPGA giant. That puts the processor giant on a collision course in the foundry business against the likes of GlobalFoundries, Samsung, TSMC and UMC

The Altera-Intel deal could change the landscape in the foundry business, in which Intel will likely become a much bigger player in the arena. But does Intel have staying power to remain in the foundry business? Added John Vinh, an analyst from Pacific Crest Securities: Altera’s “foundry agreement with Intel is exclusive for the foreseeable future. We believe Altera will have exclusive access versus Xilinx at 14nm and effectively have the right of first refusal at 10nm. Strategically, we believe this is likely the most significant aspect of this agreement in that it prevents Xilinx from having access.”

At SPIE, ASML Holding disclosed various milestones with its extreme ultraviolet (EUV) lithography technology. ASML’s EUV production tool, dubbed the NXE:3300B, has demonstrated resolutions of 13nm for lines and spaces and 18nm contact holes. In addition, ASML demonstrated a 40-Watt source with dose control and under good collector protection conditions in six 1-hour runs. It also demonstrated a 55-Watt source in a 1 hour run. But that’s a far cry from the eventual goal. By 2015, ASML hopes to deliver a 250-Watt source for the NXE:3300B, thereby enabling a throughput of 126 wafers an hour.

With the help of self-aligned double patterning (SADP), sometimes called spacer, ASML’s NXE:3300B also demonstrated the ability to print lines and spaces down to 9nm. The work was done in conjunction with ASML, Applied Materials and Imec.

At the International Semiconductor Strategy Symposium in Europe (ISS Europe) on Feb. 24-26, the European semiconductor industry discussed 450mm fabs and other chip topics. In addition, European Commissioner Neelie Kroes floated the idea of creating an “Airbus for chips,” a European initiative for the semiconductor industry comparable to the launch of the Airbus in the aviation industry.

Also at ISS Europe, Malcolm Penn, chairman and CEO of Future Horizons, said that the decline of the major European chip makers has been a result of a defeatist attitude, not necessarily fundamental structural issues. He suggests European chip makers should build a 450mm fab jointly and operate it as a foundry.

SEMI has announced the release of “Global Trade War and Peace: Unified Approaches to a Global Solar Energy Solution,” a white paper containing recommendations to move beyond trade litigation and encourage an accelerated path towards dispute resolution.

In case your calendar has turned into a blur, take note: Semicon is near! SEMI, in collaboration with leading investment groups, has announced the Silicon Innovation Forum (SIF). The forum will bridge funding gaps for new and early-stage companies with manufacturing and technology solutions. SIF will be held in conjunction with Semicon West, on July 9 at the Moscone Center in San Francisco.

At the Mobile World Congress in Barcelona, Peregrine Semiconductor rolled out its latest version of its UltraCMOS process technology, dubbed Semiconductor Technology Platform 8 (STeP8). UltraCMOS is a variant of silicon-on-insulator (SOI) technology called silicon-on-sapphire (SoS).

Also in Spain, Skyworks Solutions said it is ramping several antenna-tuning products with leading smartphone manufacturers. The tuning devices are based on SOI technology.

The RATP Group, the fifth-largest urban transport operator worldwide, has awarded Soitec and Philips/Step an LED lighting contract for its metro and network stations.

Soitec and Medina College of Technology have signed a cooperative agreement for concentrating photovoltaic technology in Saudi Arabia.

GT Advanced Technologies has entered into a development and licensing agreement with Soitec to develop and commercialize a hydride vapor phase epitaxy (HVPE) system for producing GaN template substrates.

Mentor Graphics announced record financial results for the company’s fiscal fourth quarter and year ended Jan. 31.

During a conference call, Walden Rhines, chairman and CEO of Mentor, said the quarter was an all-time revenue and EPS record. Rhines also has a mixed forecast for the overall IC industry in 2013. “For next year, the analysts project mid-single-digit growth, but the general attitude is less positive,” he said.

Mentor Graphics rolled out the Kronos Cell Characterization and Analysis platform.

A blogger discusses Applied Materials, saying the company is at the cyclical trough and its prospects should improve with an increase in equipment spending.

Applied Materials announced that Bob Halliday has been named senior vice president and chief financial officer. Halliday previously was executive vice president and chief financial officer of Varian Semiconductor Equipment Associates prior to Applied’s acquisition of the company in November 2011.

Micron Technology announced the Tokyo District Court’s issuance of an order approving Elpida’s plan of reorganization. Elpida’s plan of reorganization calls for Micron to acquire Elpida. In addition, mixed-signal foundry specialist LFoundry has acquired Micron’s fab in Italy.

Whatever happened to Conexant Systems? The chipmaker recently went private to avoid a takeover. Now, the company this week implemented a restructuring agreement. As part of the plan, Conexant voluntarily filed protection under Chapter 11 of the United States Bankruptcy Code.

Photomask maker Photronics has announced its intent to acquire the shares of its majority-owned Taiwan subsidiary, PSMC.

After a loss and a proxy battle, Aetrium is considering options that may include a sale or other disposition of one or both of its reliability test and test handler product groups.

According to IHS, the competitive landscape of the cell-phone integrated circuits business has completely transformed over the past five years, with Qualcomm and Samsung capitalizing on the rise of smartphones and 4G.

By Mark LaPedus
Apple, the world’s largest chip buyer, this year is expected to procure nearly $28 billion worth of semiconductors, up 15% from $24 billion in 2011, according to iSuppli. Apple is set to expand its lead in global chip purchasing in 2013, with growth of 12.3%.

Apple posted mixed results. “Our most recent checks confirm a lull in Apple’s iPhone production in 2Q12, down roughly 22% sequentially toward 29 million units,” said Craig Berger, an analyst with FBR. “Checks suggest Apple securing monthly iPhone 5 production capacity of 18 million to 20 million units, well ahead of Street sales estimates.”

Apple has also acquired fingerprint security company AuthenTec for $356 million.

SEMI reported that more than 60% of semiconductor equipment and materials companies say IP challenges have had an adverse impact on their companies.

GlobalFoundries is moving forward with the final construction for the extension of Module 1 at its Fab 8 campus in New York.

Rambus and GlobalFoundries disclosed the results from their collaboration on two separate memory architecture-based silicon test chips at 28nm.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and ARM announced a multi-year agreement extending their collaboration beyond 20nm to deliver ARM processors on finFET transistors.

Rohm has taken a step in the foundry business. Under an agreement, the Japanese company will manufacture FRAMs for Ramtron.

Korean foundry vendor Dongbu HiTek has been certified to implement high-reliability ICs per the MIL-PRF-38535 standard.

Toshiba will cut production by 30% within its NAND flash memory fab in Japan amid a downturn in the sector.

Micron Technology’s recent purchase of bankrupt Japanese entity Elpida is a risk, according to iSuppli.

IC Insights forecasts the automotive IC market will grow 8% to $19.6 billion in 2012, up from $18.2 billion in 2011.

Samsung maintained its LCD TV leadership amid dismal market conditions.

Synopsys has completed the acquisition of Ciranova, a privately held electronic design automation (EDA) company.

By Mark LaPedus

MEMC rolled out FOX-Si, a silicon wafer offering designed for delivering advanced finFET technology with oxide dielectric isolation (FOX). Utilizing MEMC’s silicon-on-insulator (SOI) technology, MEMC can offer FOX-Si wafers at competitive prices.

In Taiwan, capital equipment spending is expected to reach about $9 billion in 2012, an increase from $8.5 billion spent in 2011, according to SEMI.

Worldwide photovoltaic manufacturing equipment billings declined for the third consecutive quarter, falling another 20% for the quarter and 60% from the same quarter last year, according to SEMI.

Photovoltaic polysilicon prices are forecast to drop 48% and wafer prices 56% in 2012, according to Solarbuzz. With such severe price declines, only 12 Chinese PV polysilicon manufacturers are still producing, and more than half of these companies are running at reduced utilization rates. Wafer plant utilization is forecast to average only 53% in 2012, according to the firm.

Global semiconductor sales increased in May, according to the SIA, but the industry is likely to see only modest IC growth in 2012. C.J. Muse, an analyst at Barclays, warned: “Weakening end market trends are starting to show up in the SIA data, with May semi revenue reverting back to negative. We could see semi revenues tracking flat to slightly negative for 2012, versus our official forecast of flat to up +4% Y/Y.”

Tablet shipments will surpass notebook shipments in 2016, according to NPD DisplaySearch.

In a survey, Gartner found that the main activities moving from PCs to media tablets are checking email (81% of respondents), reading the news (69%), checking the weather forecast (63%), social networking (62%) and gaming (60%).

With its planned purchase of Elpida Memory, Micron Technology will become the world’s second-largest supplier of DRAMs, according to IHS iSuppli.

The Hybrid Memory Cube Consortium (HMCC), led by Micron Technology and Samsung Electronics, has announced some new members: ARM, HP and SK Hynix.

Struggling Renesas Electronics is looking at more layoffs and fab closures.

Ramtron, a developer and supplier of nonvolatile ferroelectric random access memory (FeRAM), has rejected an unsolicited takeover offer from Cypress.

United Microelectronics Corp. has licensed IBM’s technology to expedite the development of the foundry’s next generation 20nm CMOS process with FinFET transistors. This agreement between UMC and IBM is only inclusive of IBM’s 20nm CMOS and FinFET. A spokesman for UMC said: ”UMC will continue with standard CMOS at 20nm and finFET.”

Synthetic diamond process enables quantum computing
There is a growing interest in the area of quantum computing. A quantum computer works by storing the 0s and 1s of information in quantum superposition states. They could one day solve problems that are impossible for even the fastest conventional supercomputers.

In one of the latest efforts, Element Six, Harvard University, the California Institute of Technology and Max-Planck-Institut für Quantenoptik, have devised a single-crystal synthetic diamond to enable the development of a quantum-bit memory. Using Element Six’s synthetic diamond technology and its chemical vapor deposition (CVD) process, the researchers also demonstrated a quantum bit memory that exceeds one second at room temperature.

This is said to be the first time that such long memory times have been reported for a material at room temperature, giving synthetic diamonds an advantage over rival materials and technologies, such as cryogenic cooling.

Mikhail Lukin of Harvard’s Department of Physics, said: “These findings might one day lead to novel quantum communication and computation technologies, but in the nearer term may enable a range of novel and disruptive quantum sensor technologies, such as those being targeted to image magnetic fields on the nano-scale for use in imaging chemical and biological processes.”

Element Six’s synthetic diamonds are ideal for applications that require extreme hardness and thermal conductivity. Applications include semiconductors, lasers, quantum computing, and magnetometry and bio-medical sensors.

ReRAMs take another step towards commercialization
R&D organization IMEC recently presented improvements in performance and reliability of resistive RAM (ReRAM) cells by process improvements and stack engineering. RRAM is a promising next-generation memory technology that could replace NAND flash.

IMEC demonstrated asymmetric bipolar RRAM cells with high-performance and ultra-low operation current at <500nA. A hafnium scavenging layer was proven to be key in the stack asymmetry of defect distribution and in the forming process. The state resistances were controlled by introducing aluminium oxide as insert layer, hafnium oxide was kept as a buffer material for further improving the filament resistance control, and stack thinning allowed a lower forming current.

These results were obtained in cooperation with IMEC’s key partners in its core CMOS programs, including Globalfoundries, Intel, Micron, Panasonic, Samsung, TSMC, Elpida, SK Hynix, Fujitsu, Toshiba/SanDisk, and Sony.

Micron Technology Inc. has confirmed it is engaged in discussions with Elpida Memory Inc.’s trustees to acquire Elpida’s business.

Micron is offering more than $2.5 billion (200 billion yen) as well as assurances of the continued operation of Elpida’s operations in Japan, according to several reports from Japan-based sources.

The U.S. memory maker made the announcement following a May 10 approval by the Tokyo District Court allowing Elpida’s trustees to negotiate an agreement with Micron, pursuant to which Micron would become Elpida’s sponsor and acquire Elpida’s entire business in accordance with the corporate reorganization proceedings.

Elpida, a semiconductor DRAM memory manufacturer, filed a petition for commencement of corporate reorganization proceedings with the Tokyo District Court under the Corporate Reorganization Act of Japan on Feb. 27, 2012, which proceedings have been commenced.

SK Hynix issued a regulatory filing last week saying it was no longer in the running to buy Elpida. Toshiba is said to be out of the running to buy Elpida. Private equity firm TPG Capital and Chinese fund Hony Capital have submitted a joint bid.

The addition of Elpida’s capacity would give Micron roughly a 25 percent share in the worldwide DRAM market, according to IHS iSuppli, making it the second-largest DRAM maker after Samsung and moving beyond SK Hynix. Elpida has a large fab in Hiroshima, in southern Japan, and a smaller packaging operation in Akita in the northern part of the country.

Elpida is Japan’s last remaining maker of DRAMs, a sector Japan-based companies dominated in the 1980s and for most of the 1990s. Elpida was established in 1999, originally as NEC Hitachi Memory, Inc., and took on the Elpida name shortly thereafter. In 1993, it took on the DRAM operations of Mitsubishi Electric Corp., and began working together with Taiwan-based Powerchip Semiconductor (PSC). In early 2007 Elpida and PSC set up a DRAM manufacturing joint-venture company, Rexchip Electronics Corp.

By Mark LaPedus

The IC industry must embrace — and become more active — in the standards process to help jumpstart the 2.5D/3D chip era, according to a panel at the recent Mentor Graphics User Group Meeting in Santa Clara, Calif.

One of the members of the panel also challenged conventional wisdom, saying that 2.5D devices based on interposers could be more difficult to develop than true stacked 3D chips. If anything, 2.5D chips might be more difficult to devise and commercialize, according to one panelist.

Clearly, it’s taking longer than expected for 2.5D/3D chips based on through-silicon vias (TSVs) to enter mass production. Supply chain and technology issues are among the challenges. The temporary bonding/debonding steps and test are among the stumbling blocks on the manufacturing front.

The bottom line is cost. Before the technology is viable, “3D must hit a certain price point,” said Riko Radojcic, director of engineering for Qualcomm Inc., during the panel at the event. “We will start seeing products at the high-end,”  Radojcic said, but the devices  “will trickle down” to more mainstream applications once the costs drop.

So, the market will evolve in steps, in which 2.5D chips will appear first, followed by stacked 3D devices, said Matthew Hogan, Calibre marketing engineer at Mentor. “2.5D will go on for a long time as a placeholder,” Hogan said during the panel.

Qualcomm’s Radojcic believes the development of 2.5D chips could be more challenging than previously thought, saying the technology “has more difficult problems to solve.”  For example, these devices include the silicon interposer. “How do you test it?” he asked.

“Interposers are very large,” said Ruben Fuentes, senior director in the Technology and Platform Development group at Amkor Technology Inc., during the panel. “They are very complex.”

Not all is lost and there are solutions to the 2.5D/3D chip era. For example, researchers are working on the design and thermal issues in the arena. Fab tool vendors are working on the bonding/debonding, test and related manufacturing issues. On the EDA side, there is also progress. For example, Qualcomm and Mentor are working on the necessary tools in the arena, such as a stress checker, chip-level stress simulation, package-level simulation and a stress hot-spot checker.

Still, there is yet another missing and overlooked piece of the puzzle: standards. “We need more participation” on the standards front, Radojcic said. “It’s a must or (the 2.5D/3D chip era) isn’t going to happen.”

In fact, there are a multitude of standards being hammered out for 2.5D/3D chip designs. Some have already been ratified. Several more are still on the drawing board. Here’s a look at five key 3D standards — and commentary based on recent interviews:

3D Test and IEEE 1838

In some circles, test is the biggest challenge to enable 2.5D/3D chips. There is no silver bullet. Chip makers will require a range of technologies and strategies, such as boundary scan, built-in-self-test (BIST), test compression and others, said Walden Rhines, chairman and CEO of Mentor, during a keynote at the user event.

To enable test in 3D designs, the 3D Test Working Group within the IEEE is hammering out a proposed standard called IEEE 1838. The proposed standard hopes to define the architecture and description language for the “test access” architecture within a 3D device. The test access architecture is critical, because it can be used to test and ensure the quality of a 3D device during the IC flow.

IEEE 1838 is expected to be based on one of two technologies. The group may standardize the technology based on the IEEE 1149.1 boundary scan standard or the IEEE 1500 embedded core architecture scheme. It is unlikely that the group will endorse both technologies.

Besides 1838, there are other key test technologies.  For example, IEEE P1687 is also a major enabler for 3D designs, said Geir Eide, product marketing manager for Silicon Test Solutions at Mentor.  IEEE P1687 aims at providing a standardized interface between the 1149.1 test access port (TAP) and on-chip embedded test, debug and monitoring logic, such as scan-chains and temperature sensors.

The three standards can be used in a “mix and match” format to test a 2.5D/3D device. Now, the real trick is the ability to develop a standard to support heterogeneous die from multiple vendors. That’s where 1838 comes into play.

Design and Exchange Formats

Qualcomm’s  Radojcic  is seeking more participation in standards, including one critical area: design and exchange formats. Chartered by the Si2, the Open3D Technical Advisory Board (TAB) hopes to define flows for the design of 3D chips. The Open3D TAB will define standard interfaces to enable the transfer and storage of design and model data throughout interoperable 3D design flows.

The group hopes to devise standards for a list of issues: thermal design, power design, physical design, electrical design and stress design. It hopes to define standards for model formats. The eventual goal is to “select an expert to propose and champion a given exchange format,” he said at last year’s Design Automation Conference.

Wide I/O

In December, standards body JEDEC passed and ratified the Wide I/O memory standard, dubbed “JESD229: WIDE I/O SINGLE DATA RATE (WIDE I/O SDR).” This standard defines the Wide I/O specification, including features, functionality, packages and micropillar signal assignments. It covers 1- through 32-Gbit SDRAM devices, with 4 x 128 wide channels using direct chip-to-chip attach methods.

Diagram of Wide I/O device (Source: JEDEC)

Many agree that there is a need for Wide I/O DRAM technology on the mobile front. Current mobile DRAMs require more bandwidth for current and future smartphones and tablets. But Wide I/O DRAMs for mobile applications could appear later than sooner.

Today, portable systems are using mobile DRAMs based on two interfaces. This includes the LPDDR2 interface technology and a low-power version of desktop DDR3. Following those schemes, the next mobile DRAM technology on the roadmap is called LPDDR3.

Elpida, Hynix, Micron and Samsung have all announced LPDDR3-based mobile DRAMs. But right now, there is only one application processor/baseband vendor that supports LPDDR3, said Mueez Deen, director of mobile DRAM marketing at Samsung Semiconductor Inc.

Others will support LPDDR3 in the future. So, mobile DRAMs based on LPDDR3 are not expected to move into mass production until 2013, Deen said.  “There is a lot of design activity going on now,” he said, “but a lot of our partners are not ready.”

Source: JEDEC

After LPDDR3, the industry was immediately expected to make a jump to Wide I/O, according to a roadmap from JEDEC. Using stacking techniques and TSVs, Wide I/O mobile DRAM is expected to improve the bandwidth, latency and power over today’s LPDDR technology.

However, there are some fears that Wide I/O technology could be too expensive — or too costly to make — at least in the short term. The proposed chip-to-chip attach methods are slow and expensive. This is prompting the industry to talk about the need for a new, evolutionary interface: LPDDR4. In other words, the industry could adopt mobile DRAMs based on LPDDR4 after LPDDR3, thereby pushing out Wide I/O.

Low-Power Wide I/O and 3D-based DDR3/DDR4

JEDEC is also quietly devising another standard, entitled “3D Memory Stack for DDR3 and DDR4 using TSV.” This standard, which is on the drawing board, defines a scheme for stacking current and future DRAMs based on conventional  DDR3 and DDR4 interface technology. This, in turn, could also delay the need for Wide I/O, especially in high-end servers.

Wide I/O, however, could also find a home in high-end servers as well. Within JEDEC, there is another standard is entitled, “Wide I/O DRAM Memory Specification – Low Power DRAM: Generation 2.” This low-power technology is a follow-on to JESD229. The standards debate has just started for this scheme.

This Wide I/O effort could be targeted for mobile and server applications.  Like mobile systems, servers are in need of a new technology. Today’s DRAMs are power hungry devices that are becoming harder to scale and are running out of bandwidth. Wide I/O addresses some of those problems, but there are cost issues with the technology. And chip-to-chip attach methods are slow and expensive — the industry has been begging for a cheaper wafer-to-wafer attach technique.

For this reason and others, Micron Technology Inc. is lukewarm about Wide I/O. Instead, Micron is developing the Hybrid Memory Cube (HMC), a rival 3D DRAM technology. Rival Samsung Electronics Co. Ltd., has Wide I/O and HMC on its roadmap. Samsung and others are also looking to develop DRAMs based on the evolutionary DDR4 interface, which is due out in 2014.

DDR4, HMC and Wide I/O address several needs, including a power crisis in today’s datacenters.  Datacenter energy is doubling every five years, according to Samsung. In total, datacenters consume 195 terawatt hours (TWh) of power, which is more power than the nations of Austria and Argentina combined, according to analysts.

Before the market jumps on these newfangled memory technologies to help solve the datacenter power crisis, server vendors must still use today’s DRAMs based on DDR3 and DDR2 for some time to come.  And DRAM vendors are working hard to address the power concerns.

Today, the mainstream server DRAMs are 30nm-class, 1.35V products based on DDR3, which have a 67 percent power savings over 50nm-class, 1.5V products, said Sylvie Kadivar, director of DRAM strategic marketing at Samsung.  Expanding its DDR3 lines, Samsung recently rolled out a 20nm-class, 1.25V DRAM, which should save more power. “The market is hungry for higher-density, lower-power devices,” she said.

Japan’s Toshiba Corp. will join the bidding race to buy Elpida Memory Inc., according to reports from Reuters and Nikkei. In another report from Reuters, SK Hynix will also make a bid for Elpida.

Elpida sought bankruptcy court protection after racking up debts of 448 billion yen ($5.4 billion). It continues to operate, however, and is hoping to complete a restructuring plan by this August.

The last Japan-based DRAM maker is hoping that it will be acquired by Micron Technology or another bidder. Intel Corp., SK Hynix and Toshiba are reportedly in the mix, according to the reports. Recently, South Korean mobile company SK Telecom took a controlling interest in Hynix Semiconductor Inc., which is now called SK Hynix.

Elpida operates a large DRAM fab in Hiroshima, Japan, and another, smaller fab in Taiwan through its subsidiary there. As reported, shares of Elpida will be delisted as expected Wednesday (March 28) from the Tokyo Stock Exchange (TSE).

By Mark LaPedus

The rumors are intensifying regarding the fate of Elpida Memory Inc., including ongoing reports that Micron Technology Inc. will make a bid for the troubled Japanese DRAM maker. Some even wonder if Apple Inc. should make a bid for Elpida.

As reported, the DRAM industry remains in flux, as struggling Elpida, Japan’s sole DRAM maker, in February filed the equivalency of bankruptcy in that nation.

Even before the filing, Micron was reportedly looking to buy Elpida. Others think Micron will only buy Elpida’s assets in Taiwan. Still others believe Elpida will restructure and get a favorable loan.

One observer believes there is another remote possibility: Apple could buy Elpida. Elpida is one of Apple’s key suppliers for mobile DRAM products for the iPhone and iPad. That scenario, however, is highly unlikely. Apple could find other sources of supply if Elpida goes under.

“Elpida is expected to solicit bids from investors over the coming weeks and potential buyers are scheduled to enter the first round of bidding in March, with (the) second round in April with a decision made by May,” said C.J. Muse, an analyst with Barclays Capital, in a new report.

“The key question will be whether the trustee can get debt holders to sign off on this,” Muse said. “Importantly, though, we think the process could take some time, which means a resolution might not come until the July/August time frame.”

Still, the question is what will eventually happen to Elpida. According to Digitimes, a Taiwan Web site, Micron reportedly offered $1.5 billion to buy Elpida.

“We note that a potential sale price of $1.5 billion is inline with the $1.2-to-$1.9 billion range we have been highlighting, suggesting 20-to-30 cents on the dollar based on Elpida’s total capacity,” Muse said.
Barclays estimates that new leading edge capacity costs about $30 million per 1,000/wafer-starts-per-month (1K/wspm), with a next generation node shrink costing about $7.5 million per 1k/wspm.

Elpida has one 300mm fab in Hiroshima, Japan. The company also has a 300mm fab subsidiary in Taiwan, dubbed Rexchip. “Considering Hiroshima currently has (about) 120,000 wspm and Rexchip (about) 85,000, this suggests (that) new capacity would cost (about) $6.3 billion,” according to Barclays.

Hans Mosesmann, an analyst with Raymond James & Associates Inc., poses another scenario. “Micron has not shied away from consolidation opportunities in the past, and we believe they may end up picking up Elpida’s assets, preferably in Taiwan, but only at the right price,” he said.

“Note that Micron could potentially convert the capacity into NAND at a much lower cost, with that conversion process taking between 9-18 months depending on ramp intentions. We also believe Micron would be content to pass on Elpida if the asking price is too high, and would instead deploy capital in higher margin areas” such as NAND, Mosesmann said.

David Motozo Rubenstein, an analyst with Religare Capital Markets in Japan, outlines another possible scenario for Elpida: The troubled DRAM maker can be salvaged.

There are various possibilities in this scenario. One or two bidders could “lend Elpida money, but not take over the company,” Rubenstein said. In this case, Elpida could continue as a DRAM player “with infusion from government or other investors.”

Elpida could also dump its DRAM business and focus on NAND flash or the foundry business, he said. Not long ago, Elpida and Spansion Inc. signed an agreement to co-develop low-density NAND. The other possibility for Elpida is to “cease operations” and sell the assets, he added.

By Mark LaPedus, SemiMD senior editor

The fallout from Elpida Memory Inc.’s bankruptcy filing, announced earlier this week, has begun to surface and the supply chain is bracing for the worst.

Spot prices for PC DRAM jumped by more than 15 percent in just one day following the news, according to research firm IHS iSuppli, although memory prices leveled off during this week. And in what is good news for DRAM makers — and bad news for OEMs — average selling prices (ASPs) for DRAMs could jump in the long run, according to IHS iSuppli.

Elpida’s filing also sent shock waves to Taiwan, in which one group — Powerchip and its affiliates — could collapse like a house of cards. One DRAM vendor in the group — Taiwan’s Rexchip Electronics Corp. — remains in limbo. Rexchip, a DRAM foundry that is technically a subsidiary of Elpida, this week halted all shipments to Elpida, a Rexchip spokesperson told SemiMD.

A-Data, Powertech and others are reportedly owed huge sums of money by Elpida, according to reports.  And semiconductor equipment and materials suppliers, which do business with Elpida, are still assessing their exposure to the Japanese DRAM maker. Applied, Advantest, ASML, FormFactor, Intermolecular, TEL and others sell equipment or provide services to Elpida.

The rise and fall

As reported, the DRAM industry remains in flux, as struggling Elpida, Japan’s sole DRAM maker, Monday (Feb. 27) filed the equivalent of bankruptcy in that nation after it failed to secure a bailout. Elpida, the world’s third largest DRAM maker, supplies parts to a number of customers. In fact, Elpida supplies an inordinate amount of mobile DRAMs to Apple Inc.

For some time, Elpida has been engulfed by the “perfect storm,” which includes the “strong yen, collapsing DRAM prices, and an oversized debt load,” according to VLSI Research Inc. As of Friday (March 2), Elpida was still in the beginning stages of its reorganization plan. And there are still reports that Micron Technology Inc. may buy Elpida — a move that could change the DRAM landscape.

Elpida’s move to file bankruptcy protection will benefit the remaining DRAM players, such as Hynix, Micron and Samsung. It is expected to reduce overall DRAM supply, while boosting pricing and revenue in the second half of the year, according to IHS iSuppli.

If more than 25 percent of Elpida’s manufacturing capacity is taken offline, the global ASP for all DRAM shipments is projected to rise to $1.21 by the end of 2012, up 15.5 percent from $1.05 at the end of the first half of the year, according to the firm.  Without such a reduction in capacity, pricing would rise to $1.13 at the end of the year, up just 8.5 percent from the price at the end of the first half, according to the firm.

“A meaningful reduction in Elpida’s manufacturing will cause the DRAM market to go into a state of undersupply, causing prices to increase,” said Mike Howard, senior principal analyst at IHS.

“Shipments likely will decrease because of the Elpida bankruptcy, even though the resulting increase in revenue — driven by higher prices — will cause the market to perform better than expected in 2012,” he said. “The ultimate fate of Elpida’s manufacturing assets, which remains to be decided, will be the major factor impacting pricing and revenue growth in 2012. But one thing is certain: Elpida’s bankruptcy means the remaining DRAM players can look forward to a much rosier 2012 than they did just one week ago.”

IHS conservatively estimates that 2012 DRAM revenue will exceed $30 billion, compared to the previous forecast of $24 billion.

Elpida is still in operation, but it “will look very different on the other side of bankruptcy. Not only will the company have to deal with its massive debt load of more than $5 billion, it also must deal with the challenges of manufacturing in the high-cost regions of Japan,” according to IHS iSuppli.

“If all of Elpida’s fabs — such as its Hiroshima facility — cease making memory permanently, then the chronically oversaturated DRAM industry may finally reach a state of supply/demand equilibrium,” Howard said. “While it’s unlikely that all of Elpida’s production will disappear, this development could mark a new era for the DRAM market — one marked by stronger pricing power for suppliers.”

Filing hits Taiwan

Elpida’s filing could have dire consequences in Taiwan: Part of the island’s DRAM industry could collapse. “The future of Rexchip is also uncertain,” according to VLSI Research.

In 2006, Rexchip was established as a 300mm DRAM manufacturing joint venture between Taiwan’s Powerchip Semiconductor Corp. and Elpida.  At the same time, Taiwan memory house Powerchip was also serving as a DRAM foundry for Elpida. During that period, Elpida was looking for a way to gain cheap capital and fab capacity to keep up with its rivals in Korea. The Japanese DRAM maker found a suitable partner in Powerchip.

But for some time, Powerchip has been hit hard by the DRAM downturn and a worldwide economic crisis. In 2009, Elpida increased its stake from 48 percent to 52 percent  in Rexchip. As a result, Rexchip became a subsidiary of Elpida.

Last year, Rexchip completed a pilot run of Elpida’s 30nm 2-Gbit DDR3 products. Then, Elpida shifted a large percentage of DRAMs for desktops to Rexchip. In turn, Elpida shifted its production of higher-margin mobile DRAM within its 300mm fab in Japan, in a move to serve Apple and other OEMs.

According to a report from Dow Jones, Powerchip this week sold $130.9 million worth of shares in Rexchip to Powertech, a chip-packaging house with close ties to Elpida. Elpida, Powertech and UMC are working together to develop 3D DRAMs based on through-silicon-via (TSV) technology.

The move reduced Powerchip’s stake in Rexchip to 21.31 percent. Elpida still owns 64.7 percent, Powertech now owns 9.32 percent, and the rest is owned by Rexchip’s employees, according to the report.

Like Rexchip, Powerchip’s future is unclear. Loss-ridden Powerchip is still making mobile DRAMs on a foundry basis for Elpida. Last year, Powerchip branched out into the specialty foundry business. It is providing some 300mm foundry capacity for analog giant Maxim Integrated Products Inc.

Two other Taiwan DRAM makers — ProMOS Technology Inc. and Winbond Electronics Inc. — also make DRAMs on a foundry basis for Elpida. ProMOS and Winbond have less exposure to Elpida. However, ProMOS’ days could be numbered. According to DigiTimes, GlobalFoundries was interested in buying a 300mm fab from ProMOS. A spokesman from GlobalFoundries declined to comment.

Tool vendors brace for the worst

Elpida’s filing could also have a ripple effect among fab tool and electronic materials suppliers that do business with the Japanese memory firm. But it’s too early to tell if vendors will be impacted.

On the ATE side, Advantest Corp. and FormFactor Inc. issued statements. “Elpida Memory, Inc. and Akita Elpida Memory, Inc., customers of Advantest, have filed for corporate reorganization,” according to a statement on Advantest’s site.

“Any effects of this on Advantest have yet to be determined, but Advantest and affiliated companies holds about 300 million yen ($3.7 million) in accounts receivable from Elpida Memory and Akita Elpida Memory,” according to the ATE giant. “Also, Advantest has invested 800 million yen ($9.8 million) in Elpida Business Solutions, Inc., a subsidiary of Elpida Memory.”

Regarding Elpida, probe card maker FormFactor said the event is not currently expected to have a material impact in the near term on its financial position or results of operations.  Sales to companies in the Elpida group represented 18.2 percent of FormFactor’s 2011 revenues, including sales to Rexchip and Tera Probe Inc., which are not directly involved in the corporate reorganization proceedings.

FormFactor said it has a long standing relationship with Elpida and added it remains committed to supporting Elpida’s wafer test requirements as it works through its corporate reorganization.

Others are also assessing the fallout from Elpida. “It’s unclear how that will impact DRAM spending for the year,” said George Davis, executive vice president and chief financial officer at Applied Materials Inc., during a presentation at this week’s 2012 Morgan Stanley Technology, Media and Telecom Conference in San Francisco.

Hamid Zarringhalam, executive vice president for Nikon Precision Inc., said: “I can’t discuss customer specific situations.”

A spokesman for ASML Holding NV said: “I don’t have any details on Elpida, but (I) do know that there is no material consequence for ASML as a result of their bankruptcy filing.”

R&D foundry Intermolecular  Inc. (IM) does business with Elpida, but IM sees no impact in the short term, according to a spokesman for IM.

By Mark LaPedus, SemiMD senior editor

The DRAM industry remains in flux, as struggling Elpida Memory Inc., Japan’s sole DRAM maker, Monday (Feb. 27) filed the equivalent of bankruptcy in that nation.

The move was not a surprise, as the memory maker has been hit hard by massive debts and the ongoing DRAM downturn. It also follows a recent move by SK Telecom to gain a controlling interest at memory rival Hynix Semiconductor Inc. And what’s more, the filing could accelerate Micron Technology Inc.’s reported move to acquire Elpida — an event that could shake up the DRAM landscape.

At a board meeting on Feb. 27, 2012, Elpida resolved to file a petition for the commencement of corporate reorganization proceedings and filed the same with the Tokyo District Court. As part of the move, subsidiary Akita Elpida Memory Inc. has simultaneously filed a petition for the commencement of corporate reorganization proceedings.

“We have concluded that, if we continue the business by ourselves, we will face cash shortage soon,” according to statement from Elpida regarding the filing. “Moreover, we assumed that, if we left this situation and then cash shortage would become reality, the corporate value of our company must significantly fall, there must be no way to be supported by any sponsorship, and the people concerned such as the creditors must suffer more inconvenience.”

“Elpida has  about $5.5 billion of debt and most of the discussions with banks, suitors, and customers have so far been unsuccessful,” said Vijay Rakesh, an analyst with Sterne Agee.

If Elpida goes under, it would provide fewer choices for DRAM customers. But it would have a positive impact on the other DRAM players, such as Hynix, Micron and Samsung. There is too much worldwide DRAM capacity right now, and the demand picture is changing from a PC- to a mobile-centric world.

“We believe with Elpida filing for bankruptcy protection, especially with cash constraints to pay creditors, could imply some capacity coming out of DRAM,” Rakesh said. “Elpida has two fabs, one in Hiroshima, Japan and the other is the Rexchip fab in Taiwan; both are 300mm and have 100K wfpm (wafers-per-month) capacity each. We believe, like the Qimonda  bankruptcy in 2008, Elpida could sell off some of its assets, potentially the Hiroshima fab, to pay off creditors and even sell some additional 300mm fab equipment as was the case in the Qimoda bankruptcy.”

Elpida’s move could also fuel the reported acquisition talks with Micron. For some time, Micron has been in talks with Elpida, according to sources, although many view this as a “bad deal” for the U.S. DRAM maker.

“One of the potential concerns was a ‘bad deal’ by Micron, but we view this announcement as signaling Micron’s conservative approach here (which is) preferring an asset purchase at discount as opposed to any other solution like an equity/debt purchase,” said C.J. Muse, an analyst with Barclays Capital, in a report that addresses Elpida’s bankruptcy filing.

“Our understanding is that Micron has delayed delivery of immersion litho tools to IMFS and view this as indicative of Micron thinking that it may be able to secure leading-edge memory capacity on the cheap over the near to medium term,” Muse said. He was referring to IM Flash Singapore (IMFS), a joint NAND venture between Micron and Intel.

A possible merger between Micron and Elpida has the potential to redraw the competitive landscape in DRAMs, possibly challenging Samsung. A union between Elpida and Micron would catapult the newly consolidated entity to second place in the global DRAM market, with a combined capacity of 374,000 wafer starts per month (WSPM), according to IHS iSuppli.

The newly merged company would have a 28 percent share of worldwide DRAM manufacturing capacity, placing it just behind leader Samsung, currently with 433,000 WSPM or 33 percent share of global capacity, according to the firm. On their own, Elpida and Micron usually place in the No. 3 and No. 4 spots, respectively.

A combined Elpida-Micron duo could leapfrog Hynix in the DRAM world. Last year, South Korean mobile carrier SK Telecom Co. purchased a 21 percent stake in Hynix Semiconductor for $3 billion. SK has essentially taken a majority interest in Hynix. SK Group Chairman Chey Tae was recently named co-CEO at Hynix, according to reports. Hynix has been reportedly renamed SK Hynix, sources said.

“Overall, a Micron/Elpida merger would present Samsung with its most powerful rival yet,” said Mike Howard, senior principal analyst for DRAM & memory at IHS, in recent report. “Samsung is usually 10 percentage points ahead of its next competitor, but the merger would trim its formidable market share lead by half, to 5 percentage points.”

Samsung dominates DRAM share (Source: IDC)

The rise and fall of Elpida

Elpida was established in 1999, when NEC Electronics and Hitachi jettisoned their DRAM units. In 2005, Elpida formed Tera Probe, Inc., a company specializing in wafer probe testing. It also established Akita Elpida Memory, Inc., a back-end subsidiary. And it also established Rexchip Electronics Corp., a joint DRAM venture company with Taiwan’s Powerchip.

Over the years, Elpida and other DRAM makers were hit hard by the down cycles. “At the beginning of 2007, the price of DRAM started falling sharply and, combined by a significant decrease of demand for the products due to the global economic downturn begun in the fall 2008, such price further declined,” according to the statement from Elpida regarding the bankruptcy filing. “In the fiscal year ended March 2009, we were forced to experience a significant deterioration in business results compared with the previous year.’’

Hard hit by the downturn, Elpida in 2009 received an approval on a business restructuring plan under the Act on Special Measures Concerning Revitalization of Industry and Innovation of Industrial Activity from the Ministry of Economy, Trade and Industry.

Still, “the circumstances around our company turned from bad to worse due to the factors such as the record-breaking strong yen against the U.S. dollar, and the steep fall of the price of DRAM products by fiercer competition in the DRAM industry,” according to the statement. “Within such continuing harsh management environment, an additional negative factor, which is a stagnation of demand for DRAM due to the great flood in Thailand in 2011, has arisen.”