After the stock market closed on June 30, local time in the United States, Texas Instruments (TI), a major analog chip manufacturer, announced that it has signed an agreement with Micron Technology to acquire Micron’s 12-inch wafer fab located in Lehi, Utah, for $900 million. Upon completion of the transaction, the Lehi fab will become TI’s fourth 12-inch wafer fab, following DMOS6, RFAB1, and the soon-to-be-completed RFAB2.
According to reports, the Lehi fab was originally used by Micron to produce 3D XPoint products. The 3D XPoint technology is a revolutionary storage technology co-developed by Intel and Micron, with both companies investing $1.2 billion each to establish a joint venture (IM Flash Technologies) in 2006 to develop the 3D XPoint technology, which was first publicly announced in 2015. In 2018, the two companies ended their joint development efforts, and Micron bought out Intel’s stake in the joint venture for $1.5 billion.
However, on March 16 of this year, Micron announced the immediate cessation of all product development based on 3D XPoint technology and plans to sell the Lehi fab, which primarily produces 3D XPoint flash memory products. The reason cited was insufficient demand for 3D XPoint, lacking a large enough market scale to justify continued investment in the large-scale commercialization of 3D XPoint technology.
Although Micron had announced several storage devices based on 3D XPoint flash memory, such as the X100, none have officially hit the market, making Intel the sole supplier of products using 3D XPoint flash memory chips. It is reported that Micron has incurred a loss of $400 million in its 3D XPoint product line over the past year.
Currently, Intel continues to rely on the supply of 3D XPoint flash memory chips from Micron’s Lehi fab for its Optane product line, but the supply agreement between the two companies will end this year. After that, Intel plans to produce 3D XPoint flash memory chips for its Optane product line at its fab in New Mexico.
While Micron has halted the development of 3D XPoint technology and is selling the Lehi fab, it retains all intellectual property related to 3D XPoint. The company will redirect its resources to focus on the development of memory products that accelerate support for the Compute Express Link (CXL) standard.
Regarding the sale of the Lehi fab, Micron’s CFO Dave Zinsner stated that the $900 million sale price is below the book value of the assets, resulting in Micron needing to recognize approximately $330 million in asset impairment expenses after tax.
Texas Instruments plans to complete the acquisition by the end of 2021. After the acquisition is finalized, TI will renovate the Lehi fab to enable the production of TI’s analog chips and embedded processing products using 65nm and 45nm processes, with the potential to transition to more advanced processes if necessary.
TI CEO Rich Templeton stated that this investment is part of TI’s long-term capacity planning and will continue to strengthen TI’s competitive advantage in manufacturing and technology.
Micron CEO Sanjay Mehrotra mentioned during the earnings call that TI will invite all team members from the Lehi fab to join Texas Instruments after the acquisition is completed.
Since the second half of last year, due to strong market demand, global wafer manufacturing capacity has been continuously tight, leading to significant chip shortages and price increases. In this context, as the world’s largest analog chip manufacturer and the fifth-largest automotive chip manufacturer, TI’s chips are also in high demand, with many of its chips experiencing severe shortages and price hikes, with some chips’ delivery times extending to 36 weeks.
Clearly, the acquisition of Micron’s Lehi 12-inch wafer fab will help TI further enhance its capacity and increase the supply of 65nm and 45nm process analog chips and embedded processing products. Moreover, the $900 million price is significantly cheaper compared to the tens of billions of dollars typically required to build a new mature process 12-inch wafer fab.
However, UBS analyst Tim Arcuri previously pointed out that the Lehi fab, originally producing 3D XPoint storage products, would not easily transition to producing logic or analog chips, with the cost of equipment elimination and replacement potentially reaching around $3 billion.
Additionally, due to the production line renovation, TI estimates that it will incur $75 million in low utilization costs for the Lehi fab each quarter in 2022.
TI expects the Lehi fab to start contributing revenue from early 2023. Although it will take two years for the Lehi fab to contribute revenue, it is still much faster than building a new fab from scratch.
Editor: Chip Intelligence – Wandering Sword
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