Siemens AG has not won universal applause for its plan to build a vast new chip plant in Dresden, Saxony, which was formally announced just before Christmas (CI No 2,323). Siemens has not made money from its semiconductor activities for years, and a year ago, it was indicating that it would scale them back. The research and production plant is due to start operating in 1995 with a workforce of 1,200, and will require investment of over $1,200m over the next 10 years, with the German state and the Land of Saxony putting up as much as 35%. Target annual sales at capacity are $470m to $590m. Siemens will assume majority partnership and management. At the same time, the company will welcome outside partners, Siemens chief Heinrich von Pierer said, adding that Siemens was in talks with several companies, including its memory chip partners Toshiba Corp and IBM Corp but the latter was quick to say that it would not invest in the new plant. Siemens and IBM began making 16M-bit chips in France at the beginning of last year, and are due to decide this year where and with whom they will build a plant for their jointly-developed 64M-bit chips. Toshiba was brought in to help develop the 256M-bit generation. Development and production of high-performance components based on 64M-bit technology and subsequent technological advances are also foreseen for Dresden, von Pierer said. This is likely to consume cash in a major way for the next few years, and the payback from it will be well into the second half of this decade, Andrew Haskins at brokers James Capel in London told Reuter. Glen Liddy, an analyst at Kleinwort Benson Research in London, was just as critical: Price erodes very rapidly in this kind of technology. And it’s technology anybody can produce. They have a worldwide market share of about three percent, which is very small. So they can’t be a price leader, he said. Siemens is forecast to cut its losses on chips to between $60m and $120m this year from $295m last.
