infoTECH Feature

December 28, 2010

Toshiba Taps Samsung's Foundry Service for Logic Chips

Citing Japan’s Nikkei business daily as its source, international multimedia news agency Reuters reported the world’s No. 3 chip maker, Toshiba Corp.,will outsource production of some leading-edge logic chips to South Korea’s Samsung Electronics. In addition, it plans to sell a production line to Sony Corp., as the company cuts its non-memory chip operations.

In fact, according to Reuters (News - Alert), Toshiba is restructuring its chip making operations after the business reported an operating loss of 280 billion yen ($3.4 billion) in fiscal 2008 amid the global financial crisis.

As per the report in Reuters, Toshiba (News - Alert) will design cutting-edge system chips but will outsource production to Samsung, and maybe other foundries to avoid costly capital investment outlays.

However, the analysts see this as a right move for the company as it will free up resources for other projects. Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets, commented in Nikkei business daily last Friday, "Thanks to this tie-up, Toshiba will gain a stronger position. In a situation when bigger capacity is required, the burden of capital investment can be too big for one company, so the accord is a positive factor for Toshiba."

Toshiba said it would sell to Sony its system chip production line in Nagasaki prefecture, a deal which an industry source has estimated at 50 billion yen or $0.6 billion. The line produces chips for Sony PlayStations and is housed in a factory owned by Sony.

According to the Nikkei business daily, as reported by Reuters, Samsung (News - Alert), with an 11 trillion won ($9.6 billion) investment budget for semiconductors this year, was chosen for its advanced technologies and the capacity to produce high-performance chips at low cost in volume.

Meanwhile, revenue for foundry service providers, who manufacture semiconductor chips for fabless companies, is projected to rise by 42 percent this year to $28.9 billion. And reach $33.7 billion next year, according to market watcher iSuppli.

Ashok Bindra is a veteran writer and editor with more than 25 years of editorial experience covering RF/wireless technologies, semiconductors and power electronics. To read more of his articles, please visit his columnist page.

Edited by Tammy Wolf

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