The war of computer chips waged in secret

YOKKAICHI, Japan — Nestled in a valley in central Japan, surrounded by forested hills and terraced rice paddies, is one of the world's most sophisticated — and secretive — semiconductor plants.

Inside the windowless plant, built by the Japanese electronics maker Toshiba, tiny cranelike robots shuffle along automated production lines, moving stacks of silicon wafers the size of dinner plates. Masked technicians watch as rows of tall machines grind the wafers, etch circuits on their surfaces and cut them into tiny rectangular computer chips.

Inside, visitors are allowed to peek through windows at only a small part of the factory floor. Toshiba is anxious to guard the secrets beyond because it needs them to wage one of the most ferocious battles in today's electronics industry, for control of the fast-growing market for the advanced memory chips at the heart of portable music devices like the Apple iPod Nano.

The fight pits Toshiba and its partner, SanDisk of Sunnyvale, Calif., a maker of memory cards, against Samsung Electronics of South Korea. Both camps are spending billions to build new factory lines, hire engineers and develop more powerful chips in a bid to gain supremacy.

The chips, called NAND flash memory chips, differ from earlier computer memory chips in that data on them can be easily erased and replaced and they can store data even after the power is turned off. That makes them like miniature hard-disk drives, only much more durable because they lack moving parts. The newest flash memory chips are the size of a fingernail and can store 2 gigabytes, the equivalent of every word and image printed in nine years of a newspaper.

While Toshiba invented the chips more than a decade ago, Samsung has seized the lead with bigger production volumes and lower prices. In the three months that ended in September, Samsung had a market share of 50.2 percent of the $2.97 billion in total global NAND sales, according to iSuppli, a market research firm based in El Segundo, Calif. Toshiba's share was 22.8 percent. SanDisk is not included in iSuppli's figures because it does not sell its chips, but instead uses them all in its own memory products.

But Toshiba is fighting back. It plans, with SanDisk, to spend some $2.5 billion to expand the Yokkaichi plant, which is owned by Toshiba but is used by both companies to make the NAND chips. The new production lines will allow the plant to produce 48,750 wafers a month by March 2007, five times the current output. Each wafer yields hundreds of chips, though Toshiba will not say exactly how many.