Memory loss“It is no fun losing in a big sector like memory.” Dr Ulrich Schumacher of Siemens is not happy with the state of the market, especially the Korean influence on it. Roy Rubenstein explains why. Wafer fabrication plants are a bit like weddings: however well planned, the climate cannot be known until the great day. A timely example is the opening of White Oak Semiconductor, the Siemens Semiconductor/ Motorola $1.5bn joint venture fab in Richmond, Virginia (see Electronics Weekly, May 6). At the fab’s inception over two years ago the DRAM market was at a high. Since then DRAM prices have collapsed, with the average selling price dropping fourfold. The reason for this is simple: too many companies wanting a slice of a lucrative market has led to manufacturing overcapacity. The situation has been made even worse by the Asian crisis, with Far Eastern firms clearing inventory to raise much needed cash. Dr Ulrich Schumacher, president and CEO of Siemens Semiconductor, is particularly critical of the role of South Korea in destabilising the DRAM market. He cites as evidence their increase in DRAM wafer output from 80,000 wafers a month to 120,000. He is also concerned that the Koreans will use IMF funding to further destabilise the market. “I hope they don’t get money to play this silly game but I can’t be sure.” The opening of the White Oak fab could not have come at a worse time. “Everyone is making a loss, even Micron,” admitted Schumacher. Dr Andreas von Zitzewitz, Siemens’ president of memory products is even more candid: “We are more than suffering, it is no fun losing in a big sector like memory.” Yet if these are troubled times, Siemens has never questioned continuing with the White Oak fab. It is Siemens first US fab, and the US market – and White Oak in particular – is an integral part of the company’s goal of tripling its revenues to $9bn in the next three years. “The US – at 36 per cent of the world market – is not a market that should be ignored,” he said. White Oak also gives Siemens fabs in three continents – North America, Europe and Taiwan – with a 0.25?m process. Having an efficient process is one way of limiting losses; freezing investment at its existing sites is another. “In North Tyneside we could manufacture 10,000 wafers a week. Instead we are processing the minimum of 2,700 wafers,” said Schumacher. At Siemens’ Dresden fab 10,000 wafers a week are being produced: “We could do 14,000, instead we are using the spare capacity for our pilot 300mm process line.” All this is part of a delicate balancing act: avoiding at all cost fab closures and the loss of well-trained employees while preparing for when the market picks up. Siemens does not expect to need any new fab sites for the next decade now that it has White Oak. It will add modules to its existing fabs to increase capacity, thereby avoiding the huge ramp-up costs associated with new fab sites. Schumacher believes there are good reasons to be optimistic for a market upturn next year. But he has a stark warning if the DRAM market continues to be destabilised “It won’t be just us that close fabs”.