Fujitsu, Toshiba tie-up on joint chip plant likely

Edmund Klamann

TOKYO: Japan's Fujitsu Ltd. will likely join with Toshiba Corp to build a cutting-edge chip plant, aiming to share the burden of increasingly costly investments, a senior Fujitsu executive said. A formal decision by the two companies, which announced an alliance in system chips in June, is likely by next March or April, Fujitsu corporate vice president Toshihiko Ono told Reuters in an interview.

Despite the tightening ties with Toshiba, however, Ono said his company, Japan's fifth-largest chipmaker, was not discussing combining chip operations with Advanced Micro Devices Inc, its long-time partner in flash memory chips. "There is no movement toward integration," Ono said, when asked about recent media reports that Fujitsu and the U.S. chipmaker would join their businesses in flash memory, used widely in cellphones and consumer electronics.

The plant under discussion with Toshiba would use 300 millimeter wafers, which industry executives say could give cost savings of up to 30 percent since they yield more than twice as many chips as the standard 200 mm variety. Japan's chipmakers, struggling to recover from last year's record losses, have been chided by foreign rivals such as industry leader Intel Corp for investing too little in advanced manufacturing, including 300 mm wafer equipment.

Pricey Plants

Japanese companies are finally moving toward the costly investments, which can go as high as $1.6 billion to $2.4 billion for a single plant, although they have tended to split the expense by investing jointly with their peers. Fujitsu's collaboration with Toshiba targets the fast-growing market for system chips, which combine memory, processing and other functions on one piece of silicon and are used to run a wide array of products from digital cameras to photocopiers.

The two gave an initial glimpse last month of how their planned cooperation would work, although it was short on specifics and focused on technologies such as encryption or video processing, or moving to narrower circuitry widths.

With AMD, Fujitsu has a joint venture in Japan that makes flash memory chips, used heavily in cellphones and consumer electronics, and the two cooperate in technology and development. "We often have meetings with them and discuss various matters on a daily basis," he said. "From the start we've had a division of labor....If we joined together, things would still be the same."

Media reports in the past two months have said Fujitsu was poised to merge its flash memory operations, which account for about one-third of its chip revenues, with AMD. AMD is the world's second-largest flash memory maker and Fujitsu ranks third, although combined they still fall short of sector leader Intel.

© Reuters