Toshiba, SanDisk expand NAND flash production with new fab

The companies extend their longstanding NAND flash partnership, announcing plans for a new joint venture and fab in Japan. Toshiba separately announces a second fab for additional semiconductor capacity.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 2/19/2008

Toshiba Corp and SanDisk have signed a non-binding memorandum of understanding to form a new production joint venture and construct a new 300-mm wafer fab in Japan to meet the anticipated future demand for NAND flash memory.

The move is an extension of a longstanding flash partnership between Tokyo-based Toshiba and Milpitas, Calif-based SanDisk. Indeed, the two companies in 2000 formed FlashVision, a 200-mm NAND flash joint venture that brought together Toshiba's advanced semiconductor process technologies and SanDisk's original multilevel cell technology. Then in 2004, the duo formed Flash Partners and a coinciding $2.6 billion fab. And later in 2006, Toshiba and SanDisk announced a $3 billion 300-mm NAND wafer fab in Japan for their joint venture Flash Alliance. Earlier this month, Toshiba detailed its 16-Gb NAND flash memory chip, manufactured on its 43-nm process technology co-developed with SanDisk, during the International Solid-State Circuits Conference.

Such an emphasis on NAND is not unwarranted. Memory-market intelligence and analysis company DRAMeXchange in January  projected that demand bit growth for NAND flash is expected to surpass 130% year over year in 2008 as shipments of the four major applications of NAND -- handset, MP3/PMP, digital camera, and USB flash drives -- are expected to increase. Demand is also expected to increase from Apple Inc, which recently announced doubled memory in its NAND-based iPod touch and iPhone consumer electronics.

“NAND flash memory is enjoying rapid growth and is expected to expand with new applications in coming years,” Shozo Saito, president and CEO of Toshiba’s semiconductor company, said in a joint company statement today. “The new fab will build on the strong record of success we have achieved with SanDisk in flash memory product development and production, and further strengthen our partnership.”

Half of the new fab’s production capacity will be allocated to the new unnamed joint venture and within the joint venture the parties will equally share wafer output and funding for the equipment, Toshiba and SanDisk said. The remaining 50% of the fab’s production capacity will be managed by Toshiba and half of the output will be provided to SanDisk on a committed foundry basis.

The agreement also provides SanDisk an option to convert its committed foundry capacity into the joint venture or to convert to a non-committed foundry arrangement.

“We are very pleased with the financing structure in the new agreement which maintains our guaranteed 50% of the capacity output while reducing substantially our capital expenditure commitments for funding the new fab NAND manufacturing equipment,” Eli Harari, chairman and CEO of SanDisk, said in the statement. “We believe this will allow us to meet our forecasted customer needs in 2010 and beyond, while freeing up cash flow for investments in new products and in growth markets.”

Further details from Toshiba and SanDisk were few and far between. The companies said they expect to sign a definitive agreement later this year, but did not estimate when. The two companies also said they are targeting construction start in 2009 and production start up in 2010, but withheld estimates on the fab’s capacity. And while they jointly said they will now select the plant site, Toshiba separately today announced that plans to construct two fabs, one in Yokkaichi, Mie Prefecture, and one in Kitakami, Iwate Prefecture, Japan.

The new fabs will be built on the site of Iwate Toshiba Electronics Co, a Toshiba consolidated subsidiary, and adjacent to Toshiba’s Yokkaichi Operations, where four NAND flash fabs are already in operation.

Toshiba said that the SanDisk agreement pertains to one of the fabs and that it plans to discuss with SanDisk its interest in participating in the other new fab at some point in the future.

Withholding specific details, Toshiba said that one of the fabs -- presumably the SanDisk joint venture -- will initially produce advanced generations of NAND flash memory and is also expected to produce future memory. The other fab will provide capacity to meet Toshiba’s future semiconductor requirements.

Toshiba said that construction of the second fab, like the SanDisk joint venture fab, is expected to start in the 2009, targeting completion in 2010.

The company believes that by building two production facilities in parallel, it will be positioned for a timely response to surges in demand and will further strengthen its competitiveness in the semiconductor business.