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| Seen is a computer generated image of SK hynix's Icheon factory. / Korea Times file |
$10 billion needed for single chip-making plant
By Kim Yoo-chul
Technology giants such as Samsung Electronics and SK hynix, hit by the prolonged global economic slump, are now facing another headache because the cost of building new chip-making plants has been snowballing.
It's getting tougher for top-tier computer memory chip makers to build new advanced chip plants because a massive industry shift towards thinner and new manufacturing technology for making microchips with more functions at a low cost is calling them to make increased investments.
Engineers are working on each chip, to squeeze in more transistors, however, the pace of smaller chips is making the top-ranked chip suppliers invest more than $10 billion for a single plant, said a global securities and investment banking firm Jefferies & Co.
''We expect over $10 billion to be needed to construct an advanced chip-making plant next year from $7.4 billion in 2011 and $4.4 billion in 2009,'' according to a document titled ''Cost of building leading edge semiconductor factory'' written by Jefferies.
The document said the global semiconductor industry is experiencing faster consolidation mostly due to ''cost-driven'' reasons, which also means just a few chip-making plants will survive.
''The burden is on a big initial investment to see 'economies of scale', for smoother technology migration and a higher requirement of product quality from clients that are cornering second-tier chip-making companies, forcing them to consider whether or not to depart from the segment,'' said a senior executive at Samsung.
Samsung is applying a 30-nanometer level of processing technology as its mainstream chip. SK hynix, the runner-up of Samsung is also managing to produce that level of technology. But the two companies seek to advance technologies below the 10-nanometer level.
In the world of chip-making, thinner is better in terms of capacity and power consumption but this end result costs more to achieve. The main reason for this is that the development of so-called extreme ultraviolet (EUV) lithography technology costs too much.
''With the development of the perfect EUV technology postponed, many chip manufacturers will have to face rising investment costs to build new plants,'' said the Samsung executive.
Samsung isn't ready to build new plants next year for those reasons, according to Samsung officials. Rather, the company is in the process of renovating its existing chip-making facilities to produce profitable logic chips in an attempt to meet burgeoning demand for Web-connected devices.
''Instead of building new plants, Samsung is changing current memory chip-producing lines to those for logic chip lines even in Korea because that strategy does make sense considering the higher costs for new facilities,'' said Kim Ji-woong, an analyst at E-Trade Investment.
''It's highly unlikely that the global semiconductor industry will see another 'game of chicken' as the market is controlled by a few major companies. Chip suppliers won't make a huge investment in conventional products such as tech migration because it is more important for the leadership,'' said Kim.
With new investment costs soaring, global firms have opted to make joint investment. Samsung, Taiwan Semiconductor Manufacturing (TSMC) and Intel have already announced their participation in ASML-organized co-investment program.
''Intention is evident. Managing chip businesses with advanced lithography systems help shrink the size of chips while increasing capacities and speed for smartphones and tablets,'' said the Samsung executive.
