Siemens AG has started to cut back its memory chip production capacity, with the closure of its 1,100 employee North Tyneside, UK plant. The factory opened in May last year to produce 16bit DRAM chips and, more recently, 64bit DRAM chips, a spokeswoman said. The continued downward spiral in semiconductor prices, which has sent the price Siemens can get for 16 Mb chips below the cost of manufacturing them, is what sealed the plant’s fate. The closure of the UK DRAM plant knocks out between 15% and 20% of the company’s overall memory production capacity, but further cuts will have to be made if the DRAM price erosion continues. Siemens’ semiconductor division said during the recent announcement of its third quarter results that the fall in chip prices will lighten its coffers by 1bn deutschmark. The closure of the UK plant will cost a further 1bn deutschmarks, although this time the burden will be absorbed by the Siemens group as a whole, the spokeswoman said. Siemen’s memory plants around the world include its solely owned German manufacturing unit in Dresden, a joint venture with Motorola Inc in White Oaks, a joint venture in Taiwan with Mosel Vitelic and a partnership with IBM in Corbeil, France. IBM, which makes 16Mb chips with Siemens was unavailable for comment. The North Tyneside plant, which was built with the help of a 50m pound grant from the UK government, will phase out production in September of this year. Although the glut of memory chips means Siemens can rule out much hope of finding a buyer, the UK government is exploring options for retaining the location. Siemens is now turning its attention to the logic market.
