By Yu-Tzu Chiu and Samuel K. Moore
First Published June 2009
(photo: patrick lin/afp/getty images): Taiwanese workers protested in Taipei last December.
The Taiwanese government is struggling to revive the nation’s dynamic-RAM (DRAM) industry, which has been bleeding losses quarter after quarter due to both slumping prices and substantial overcapacity. The industry desperately needs to acquire new technology from foreign partners to upgrade its products.
As part of a controversial plan, the government is setting up a new corporation, Taiwan Memory Co. (TMC). It is aimed at consolidating the industry and forging deals with foreign firms that would provide technology for coming generations of DRAM chips and provide the basis for Taiwan’s developing homegrown DRAM designs.
“We hope to achieve such goals within two years,” John Hsuan, the foundry industry veteran tapped to lead TMC, told reporters in April. If TMC succeeds in rounding up the local industry, it will leave the Taiwanese government in control of a substantial portion of global DRAM output. According to Hsuan, the government will hold fewer than half of TMC’s shares, but it would dominate strategic plans.
TMC took its first step by striking a technology deal with Japan’s Elpida Memory in early April. Even with Elpida on board, TMC is having trouble enticing the island’s DRAM makers to join up.
Taiwan accounts for less than 15 percent of the global DRAM market by revenue, but it is home to 6 of the 10 major manufacturers—Inotera, Nanya, Powerchip, ProMOS, Rexchip, and Winbond. Through various deals, foreign firms such as Elpida, Micron, and Hynix own stakes in several Taiwanese manufacturers and have transferred DRAM technology to them partly in exchange for a portion of their output. TMC won’t change that basic formula: It will sell products under its own brand for mobile devices or sell chips under the Elpida brand. It will also develop its own DRAM designs.
At this point, however, it’s unclear if TMC will have anything to sell. None of Taiwan’s DRAM makers have agreed to become part of TMC, and two have rejected it outright to form a competing bloc.
Boise, Idaho–based Micron Technologies was courted by TMC as a technology partner, but the American firm and its Taiwanese partners—Nanya Technology and Inotera Memories, Micron’s joint venture with Nanya—have ruled out joining the restructuring plan. Judging from Micron’s behavior during previous DRAM downturns, the firm is likely hunting for acquisitions among the other four Taiwanese firms, says Jim Handy, a director of the semiconductor market research firm Objective Analysis. “They’ve got some shrewd negotiators,” he says.
Consolidation is essential to survival in DRAM, according to Handy, who is based in Los Gatos, Calif. The rise in the cost to equip a fab for a new generation of chips (about 12 percent per year) is outpacing growth in the DRAM market (about 5 percent per year). On their own, none of the Taiwanese firms have enough market share to afford a next-generation fab.
Even so, they are trying. Nanya and Inotera have sought loans under a government program to help revamp their production to accommodate newer technology from Micron.“We hope the government would give our team at least the same level of financial support as it would have given to TMC,” Charles Kau, president of Inotera, told reporters.
Minister of Economic Affairs Chii-ming Yiin says that the government would deal fairly with all local players. However, Yiin notes that the alliance of Micron, Nanya, and Inotera has been in operation for a while and TMC is just getting started, so TMC might require more help.
Still, the end goal is a stronger Taiwanese DRAM sector. “If the existence of a TMC-Elpida partnership pushes Micron to transfer more advanced technologies to Nanya, I’ll say it’s a good thing,” Yiin says.
Sources say that Micron has begun to transfer a low-cost 50-nm technology to both Nanya and Inotera, hoping to launch pilot runs in the second and third quarters of this year, respectively. “We’re looking forward to seeing Micron’s 40-nm technology by the end of next year,” says a source inside Inotera, who declined to be identified.
With Nanya and Inotera out of contention for partnership with TMC, that leaves Rexchip, Powerchip, Winbond, and ProMOS. At press time, none had even hinted at wanting to work with TMC.