Taiwan-based DRAM makers will find themselves at a disadvantage to migrate their production to 20nm and below processes, as they struggle to preserve cash for the expenses needed to buy extreme ultraviolet (EUV) lithography systems.
Costs for EUV tools hit as high as US$100 million per set, and the installation of such equipment also requires a considerable capex. Samsung Electronics and Hynix Semiconductor have already placed orders for the equipment paving the way for their node advancement ahead of rivals. The pair already led in terms of a transition to sub-50nm production, with their enormous resources and strong cash position.
Recent DRAM price declines have sown pessimism regarding Taiwan-based chip suppliers' profitability. The technology adopted by those resource-constrained players lags behind that of Korea-based competitors by two generations at least.
Most of Taiwan's DRAM makers have just started taking delivery of immersion scanner equipment, a key tool for ramping production on sub-50nm processes. Nanya Technology and Inotera Memories were ahead of their domestic peers, having installed their first sets of immersion tools in late 2009.
Immersion scanners cost NT$1-1.5 billion (US$33.6-50.4 million) per set. When DRAM manufacturers began to enjoy the financial benefits of a chip price rebound in the second half of 2009, the equipment saw constrained supply due to a sudden upsurge in demand.
Among all major DRAM producers in Taiwan, Inotera has the most immersion scanners with a total of nine sets installed at its facilities. Rexchip Electronics has six sets.
But the good times did not last long - not long enough for Taiwan's DRAM makers to save enough cash. Contract prices for 1Gb DDR3 chips have dipped below US$1 in the second half of December. Prices in the spot market have also trended downward continuously, with 2Gb DDR3 parts now quoted below US$2.
Market watchers expect none of Taiwan-based DRAM makers to report profits for the fourth quarter of 2010. They even predict that the companies will remain in the red through the first quarter of 2011.
Rexchip could be the only players to remain profitable in the fourth quarter, as a shift to a 45nm process allows its cash production costs to drop below selling prices. The company reportedly is the only Taiwan-based DRAM makers to make an early reservation for EUV lithography tools, but sources speculate the delivery may not take place until 2014.