Toshiba to provide SRAM knowledge to China's SMIC

Toshiba Corp. has signed its first semiconductor production technology transfer deal with a Chinese chip-maker, the company announced Thursday.

The deal provides Shanghai-based start-up Semiconductor Manufacturing International Corp. (SMIC) with production know-how for static RAM (SRAM) chips at the 0.21 micron level. Under the terms of the deal, Toshiba has rights to 2,000 wafers per month from SMIC, should it require them, and the Chinese company is free to sell excess chips to its own customers. Production is scheduled to begin in the second quarter of 2002.

SRAM is most commonly used in the cellular telephone handsets and Toshiba said the deal will help it benefit as the Chinese market for cell-phone handsets grows even larger. At present, Toshiba produces SRAM chips at its Yokkaichi plant in Japan, now the company's only semiconductor manufacturing base, at the deal with SMIC is intended to supplement that production.

"SRAM is a key component in mobile telephones and so we had to secure some manufacturing capability in China (that will supply chips) with a low price," said Kenichi Sugiyama, a spokesman for Toshiba. SMIC officials could not be reached for comment.

But Toshiba has its eye on more than just cell-phone memory chips. The company said the deal is "expected to open the way to additional potential technology and outsourcing partnerships in other product areas as well."

The value of the deal was not disclosed although Toshiba said it is accepting a "small stake" in SMIC as partial payment. Incorporated in the Cayman Islands, SMIC recently completed a US$1 billion financing round that included Shanghai Industrial Holdings Ltd., Goldman Sachs, H&Q Asia Pacific Ltd., Walden International and a group of Singaporean companies as investors, according to a company statement. SMIC said it is also seeking $480 million from domestic banks.

The company is currently building the first three of a planned six wafer fabs in Shanghai and production at the first fab began in September this year. The three fabs will have, in total, a monthly production capacity of 1.4 million 8-inch (200-mm) wafers per year using a 0.25-micron production process, according to one investor. SMIC is the first contract chip maker, or foundry, to begin production in China. However, several other groups have plans for similar ventures. They are hoping to mirror the success of Taiwan, whose semiconductor industry began with contract chip making plants and blossomed into one of the world's major semiconductor production bases.

In nearby South Korea, contract chip makers are also beginning to appear and Toshiba was also quick to enter that market when it stuck a similar technology transfer deal with Dongbu Electronics Co. Ltd., the country's first foundry. Toshiba also has a technology transfer deal with Israel's Tower Semiconductor Ltd. and previously had deals with Taiwan's Winbond Electronics Corp. and Worldwide Semiconductor Manufacturing Corp., although the latter two alliances have ended.

Among Toshiba's Japanese competitors, NEC Corp. has a joint venture semiconductor manufacturing venture in China, Shanghai Hua Hong NEC Electronics Co. Ltd.

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