Taipei Times (TT): Speculation has littered local Chinese-language newspapers that Micron could sell its stake in Inotera (華亞科技), which has had losses for the past five quarters in a row. Can you comment on this?
Michael Sadler: From our perspective, we were looking for a partner to help share expenses of technology development with us and also a partner that has some good technical resources and also a partner who could help us share capital expenditures for manufacturing expansion.
Nanya Technology (南亞科技) and Formosa (台塑集團) are the best possible partners because obviously Formosa has been tremendously supportive in terms of providing capital directly into the manufacturing JV [joint venture], as well as helping us work with the banks to get loans and helping us to go to the public market to do equity sales.
Photo: Lin Cheng-kun, Taipei Times
We are extremely happy with the partnership and we have absolutely no intention, whatsoever, in selling a stake in Inotera, or reducing our stake at all.
TT: Can you talk about Inotera’s technology transition now?
Sadler: Our approach with Inotera is, as Inotera changes — Qimonda [AG] partnership to Micron partnership — our approach was to try and make that technology conversion from trench capacitor to stack capacitor and reuse as much capital equipment as possible at Inotera. We knew it was risky to do so, but the interest lied in preserving capital efficiency.
In some cases, that was probably not the best decision. It slowed the transition.
That’s why we have rocky transition on the 50 nanometer [nm] process and that is why the financial performance of Inotera was not as good as we would have hoped one-and-half-years ago.
Inotera is in much, much better shape in transition from 50nm to 42nm — roughly, one-third of Inotera’s wafers are on the 42 nanometer process and the plan is to reach full conversion to 42nm by the end of this year.
We are in the early stage in transferring 35nm technology to Inotera right now. I believe that pilot run will be set up in the middle of the year and then start conversion through the end of this year and to 2012.
TT: Will Inotera make memory chips other than PC DRAM chips?
Sadler: Our plan today is for Inotera only to manufacture DRAM. In the Qimonda ownership days, those DRAM products manufactured by Inotera were only going into one market — PC systems. Our plan is to use Inotera to manufacture those commodity DRAM chips for PC segment, plus low-power DRAM chips for the mobile phone segment and high-reliability DRAM chips for the server segment. So our plan is to create market exposure for Inotera into more value-added segments, not just the PC market.
TT: What will be the optimal product portfolio for Inotera?
Sadler: I can’t tell you the percentage of Inotera. I can give you a general idea what the percentage of Micron is. Roughly one-quarter of Micron’s DRAM revenues today come from the PC market and the PC market is the lowest margin. Industry-wide, the PC market represents around 60 percent of DRAM markets. Micron has done a very good job in minimizing its exposure in the PC market. I doubt Inotera will reach the same percentage.
TT: Is there any possibility for Micron to transfer NAND flash technology to Inotera?
Sadler: It is not in our plan right now. We also have a NAND flash technological development and joint venture manufacturing deal with Intel [Corp]. In our Intel deal, all the manufacturing for NAND flash by either Micron or Intel has to go through the JV.
All NAND flash technology is mandated to go through the manufacturing JV. Even if we want to today, we could not manufacture NAND flash in Inotera or anywhere outside the Intel partnership without Intel’s permission.
The demand profile for NAND flash over the next few years is going to be better, so there was certainly the need for greater capacity expansion to support the NAND market than the DRAM market.
TT: Can you talk more about IM Flash Technologies [the joint venture between Micron and Intel]? Do you think IM Flash will change the industry’s landscape?
Sadler: Today, it’s very small. It’s only running a few thousand 300mm wafers per month today, but it will eventually ramp up to 100,000 wafers per month over next couple of years, but it will have significant impact on the market in terms of growing Intel’s and Micron’s market share.
When that facility is fully ramped, it will essentially double our capacity from where it is today. So, if the market stays the same, it will double our market share as well.
TT: Will Micron consider building its next new NAND flash plant in Asia too?
Sadler: Next to the new plant in Singapore, we have a footprint of land available which we can replicate the Singapore facility right there in that space. We don’t have a plan to start construction of a new facility, but that would be a logical expansion to build another factory adjacent to the existing one.
Beyond that, there are also other possibilities. Taiwan certainly will be a possibility, if the structure of our deal with Intel changes.
I will not rule out an investment in China in the future either. We do not have a plan to do so yet.
We are of the opinion that we will need more NAND flash capacity and that will more likely be in Asia.
TT: Is Micron aware of any supply or demand disruption from the March 11 earthquake in Japan?
Sadler: We haven’t seen disruption in the supply chain side impact on demand yet. We’re not seeing any significant disruption in demand to our end customers yet. We are not aware of any disruption that will occur in six months in the future.
We haven’t seen any shortage of wafers yet. We spread our risk in terms of all materials, in particular, 300mm wafers, to multiple geographies.
I’m not sure this number is precise. Half of the world’s supply of 300mm wafers comes from Japan today. In Micron’s case, we have less than one-third of our supply coming from Japan.
TT: Did the supply of NAND flash become tighter after the quake curtailed production of some Japanese companies?
Sadler: I think Toshiba has about a third of the market share in the world and Toshiba said half of their supply will be out for two months. If that’s accurate, one-sixth of the industry supply will come out of the marketplace for a couple months.
Already, I believe there is some shortage of supply on the market.
TT: Is it likely that Inotera will make NOR flash for Micron?
Sadler: Ultimately, we think we need to put those mainstream NOR flash products to a 300mm manufacturing platform in order to maintain cost competitiveness. So, we do have the ability to make 300mm wafers at any fabs in the Micron network. The candidates today will be Micron Virginia, Micron Singapore and it could be Inotera, but we don’t have plans to do it currently.
Taiwan’s Macronix (旺宏) and Winbond (華邦電) are producing NOR flash chips on 300mm fabs. So, we need to transfer high-density NOR flash products that are going into mobile phones to 300mm factories and we will keep low-density NOR flash products at 200mm fabs.
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