Infineon investing $1 billion in Richmond, Virginia DRAM plant

German memorychip maker Infineon has said that they are going to spend $1 billion to double their DRAM memory capacity at a U.S. factory by 2005, freeing up capacity at its plant in Dresden for logic chips.

The plant in Richmond, Virginia will start production of DRAM memory on 300mm wafers in early 2005, with initial capacity of 25,000 wafers per month.

"This initial expansion of capacity at Richmond will allow us to accelerate the shift of production from memory to logic products at our 200mm plant in Dresden," he added.

Von Witzleben's announcement came four weeks after the sudden departure of Chief Executive Ulrich Schumacher after what sources told Reuters was a boardroom rebellion over a "serious difference" of opinion on strategy with other executives.

Infineon says Schumacher, who has been replaced by interim CEO Max Dietrich Kley, left for personal reasons.

By 4:45 a.m. EDT Infineon shares were down 1.9 percent at 11.15 euros, underperforming a European technology index up 0.5 percent, as investors feared the extra capacity would coincide with the next expected downturn in the cyclical semiconductor industry.

"It will take until the middle of 2006 before full capacity is reached," Guenther Hollfelder of HVB bank said. "And the question is whether the upturn will last until then."

Andrew Griffin of Merrill Lynch said the net increase in Infineon's DRAM capacity would be just three percent and questioned whether Infineon's business in logic chips -- used in phones and cars -- could fill the new capacity at Dresden.

"At the very least we can say the investment suggests Infineon's logic customers are very confident about demand into 2005," he said in a note.

Logic chips fluctuate less in price than DRAM and they also offer higher profit margins.

Strong sales of logic chips helped Infineon to achieve forecast-beating quarterly profits this week. A company spokesman said the bulk of the investment costs for the Richmond plant would fall in its 2004/05 fiscal year, with the remainder in following years. This year's capital investments would remain at 1.2 billion euros ($1.4 billion), as planned.

Source: Reuters