Geneva, Switzerland, and Seoul, Korea, April 28, 2005
Following the announcement on November 16, 2004, of the signing of a joint venture agreement between two of the world’s largest semiconductor manufacturers, STMicroelectronics (NYSE:STM) and hynix Semiconductors (Bloomberg: 000660 KS), the companies today laid the first stone at the site of their front-end memory-manufacturing facility in Wuxi City, Jiangsu Province, China, in the presence of high-level municipal, regional, and state officials of China and Korea.
The new fab, which will manufacture both DRAM and NAND Flash memories, is a logical extension of the existing successful manufacturing relationship between hynix and ST and will provide both companies with front-row access to the rapidly growing Chinese market.
The Joint Venture is expected to be a firm base for hynix’s long-term competitiveness as the Company will be able to secure 12-in. manufacturing facilities with a minimum investment, utilize a cost-effective manufacturing environment and maintain its leading position in the fast-growing Chinese market.
The new semiconductor fab will also provide another global manufacturing facility to hynix that will resolve trade issues including countervailing duties imposed on the Company’s products in the U.S. and Europe. It will also position ST to better serve its key customers, especially in the Telecom and Consumer markets, allowing delivery of complete memory, multimedia processor, and system solutions in single packages, with leading-edge technologies and cost-competitive products.
In particular, the new fab will give ST access to high performance, low-cost DRAM chips, further enhancing its world-leading capabilities in delivering MCP (Multi Chip Package) stacked memories and SiP (System-in-Package) solutions. Ideally sited in Wuxi City, two hours from China’s most cosmopolitan and advanced city, Shanghai, the location features access to a large and highly-skilled labor pool, a robust and well-developed infrastructure, and room for expansion.
At the new fab site, an 8-in. wafer line is scheduled to begin production by the end of this year, initially with a stable manufacturing process transferred from hynix’ existing fabs in Korea. Shortly thereafter, a 12-in. wafer line will begin production in late 2006. Each line will supplement the world-class capabilities of both companies with extremely cost-competitive manufacturing capacity in the world’s fastest growing semiconductor and electronics market.
The China market is currently about 15% of the worldwide semiconductor market and is projected to grow at an annual rate of more than 20% through 2008. “hynix Semiconductor has obtained solid footing to be a global memory manufacturer as we have established a global manufacturing network that connects Korea, the United States and China.
Through the Joint Venture, hynix believes the cooperative relationship between ST, Wuxi and hynix will be further strengthened, and the new fab will be mutually beneficial for each party’s long-term growth,” said Eui-Jei Woo, Chairman and CEO of hynix Semiconductor. “With this Joint Venture, STMicroelectronics is further reinforcing its strong integrated presence in the world’s most exciting semiconductor market. Building on the successful collaboration that hynix and ST have already achieved in process and product developments that serve our complementary interests, this new venture in Wuxi City will make ST, which is already the second largest semiconductor supplier in China, even more competitive both here and around the world,” said Carlo Bozotti, President and CEO of STMicroelectronics.
The total investment planned for the project is US$2 billion. It will be financed with equity from both partners (hynix 67%, ST 33%), US$250M of long-term debt from ST, as well as a financing package from Chinese local financial institutions, which will involve debt and a long leasehold. ST and hynix are in the process of securing the required governmental approvals and financing package. In 2005, the equity investment from ST and hynix is expected to reach around US$375 million, split on a 1/3 – 2/3 basis.
