Kioxia to spend US$8b on chip plant as industry bulks up

[SAN FRANCISCO] Flash-memory maker Kioxia Holdings is committing about 1 trillion yen (S$11 billion) to build a new plant for its most advanced products, part of the chip industry's efforts to cope with booming demand for data storage.

The former unit of Toshiba is putting the factory on the same site as its Kitakami facility in Iwate Prefecture, Japan. Construction will start in April and finish sometime next year, Kioxia said.

Kioxia is the second-largest maker of flash memory - a technology it invented - behind South Korea's Samsung Electronics. Like many of its peers, the chipmaker is stepping up spending on production as a wide range of industries struggle with shortages of electronic components.

The Japanese company is looking to make sure it stays at the forefront of technology and capacity. Greater scale brings better returns for memory chipmakers, executive chairman Stacy Smith said in an interview.  

"We're seeing a significant market opportunity so we're going to move pretty fast," Smith said. "We are neck-and-neck with Samsung in this market, and our stated goal is to hold share."

From the US and Europe to Japan and China, governments around the world are seeking to increase chipmaking output and avoid further disruptions. Companies such as Intel and Taiwan Semiconductor Manufacturing are being courted with subsidies and other incentives to build factories in key markets.

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Japan, once a chip powerhouse, is pushing to boost its domestic industry in part to protect the critical automotive industry from the shortages, which curtailed production at giants such as Toyota Motor. The government has already prepared more than US$5.8 billion in financial incentives, which helped draw a new joint factory project from TSMC, Sony Group and Denso. Prime Minister Fumio Kishida has been saying his administration will consider further support to rebuild the nation's chip industry.

Smith said that Kioxia is engaged in talks with the Japanese government and is confident that "they'll be helpful".

Japanese chip industry veterans, such as Kioxia chief executive officer Nobuo Hayasaka, say they want the government to provide a variety of long-term support, including tax incentives, to prove Japan is serious about making the nation's chip industry globally competitive again. The Nand flash memory chips that Kioxia produces haven't seen demand outpacing supply, but revenue is projected to grow steadily as global tech giants build more data centres for services like cloud computing.

Kioxia will fund the investment with cash generated from its operations. It's also talking to partner Western Digital about how much the US company will invest in the building and the running of the new plant. The 2 are in a joint venture agreement that gives Western Digital guaranteed supply from Japanese factories in return for capital expenditure and operational funding.

Kioxa's products have graduated from being the main storage in mobile phones to replacing spinning magnetic disks as a way to hold data in computers. They've also benefited from the growing storage needs of other products, such as cars. BLOOMBERG