DRAM maker Powerchip doubles 2006 spending plan

Powerchip Semiconductor, Taiwan’s largest dynamic RAM chip maker by revenue, became the second company from the island to announce significantly higher projected 2006 capital spending on Wednesday, doubling its spending plan to $1.88 billion.

Increased capital spending by companies such as Powerchip helps ensure that component prices, and therefore gadget prices, continue to fall at a healthy pace. DRAM in particular has already started the new year with a bang, with prices of Double Data Rate 2 memory chips rising because of tight supplies. Prices are expected to continue to remain strong throughout the first half of this year.

Powerchip, which had previously forecast 2006 spending on new plants and equipment at NT$30 billion, also said it signed a memorandum of understanding to cooperate with Macronix International on new product development and chip production. As part of the deal, Macronix will sell Powerchip an unfinished 12-inch chip plant, currently just a factory shell and clean room, for NT$5.3 billion.

The deal for the finished factory shell gives Powerchip a head start in moving forward on its aggressive plans to increase DRAM output. Late last year, the company said it planned to build four state-of-the-art 12-inch chip plants over the next six years to keep up with rising demand and become one of the world’s leading DRAM makers. The company did not attach a price tag to the plan, but in an investment proposal sent to local authorities, it estimated spending NT$312 billion.

One of Powerchip’s main rivals in Taiwan, ProMOS Technologies, earlier this week nearly doubled its capital spending forecast for 2006 to $2.3 billion, from an earlier forecast of $1.2 billion.

The two companies are both focusing spending on building 12-inch chip factories. The plants take their name from the flat, 12-inch round silicon wafers from which chips are made. The larger wafers enable producers to cut costs by around 30%, by allowing them to make more chips from each wafer than they could using older, 8-inch wafers. Thousands of DRAM chips can be made on a single wafer.