Mon, Jul 09, 2012 - Page 8 News List

EDITORIAL: Huge shake-up in DRAM industry

In the latest shake-up in the global DRAM industry, it is evident that Taiwanese firms are reduced to playing a marginal role.

Specifically, local firms that survived a severe industrial slump have wound up as bench players on Micron Technology’s team to challenge industry leader Samsung Electronics, following Micron’s announcement on Monday last week that it had clinched a US$2.5 billion deal to buy out beleaguered Elpida Memory.

At the same time, the US memory chip-maker offered to buy a 24 percent share of Rexchip Electronics Corp from Taiwan’s Powerchip Technology Corp for US$334 million, to complete is acquisition of Elpida. Rexchip is a DRAM venture formed by Powerchip and Elpida in 2006. That makes Nanya Technology the sole DRAM chip-maker fully owned by Taiwanese.

Certainly, Micron will be the biggest beneficiary from the acquisition, as its market position will jump to No. 2 from fourth place following the transaction, giving the US firm a greater influence over the DRAM market. The deal will also raise the chance for Micron to win mobile DRAM orders from Apple, as it could integrate its flash memory chips with Elpida’s mobile memory, local market researcher TrendForce Corp said.

Scant benefits can be found, at least in this initial stage, for Micron’s local partners.

However, some patriotic reporters have hyped the potential of technology transfer and business growth through this US-Japan-Taiwan camp tie-up and its competition with the South Korean camp. They are wrong.

First, no change in market share will be seen for local DRAM chipmakers in the short term. Nanya Technology, which will stick to its 4.5 percent share, has its lips sealed about a potential collaboration with Micron.

“Our partnership with Micron is intact,” Nanya Technology vice president Pai Pei-lin (白培霖) said.

The collaboration between Nanya Technology and Micron is only in the DRAM area. The two companies agree to develop next-generation technologies to make cost-effective DRAM chips and share Inotera’s capacities. That is it for now.

Second, Powerchip, Elpida’s local partner, will see its market position weakened after selling its Rexchip stake and will transform into a contract chipmaker like Taiwan Semiconductor Manufacturing Co, rather than a memory chipmaker.

Powertech, which supplies memory chip testing services for Elpida, is facing a long-term risk of a decrease in orders since Micron usually does more of its testing in-house after acquisitions, Credit Suisse said in a report.

There will be a benefit, of course. As the world’s DRAM market will be dominant by the big three — Samsung, Micron and Hynix Semiconductor — there will be no crazy price cuts like last year’s annual 50 percent reduction.

As long as prices can remain steady, DRAM makers will have a bigger chance to make profits, ending several years in the red.

Shares of Nanya Technology edged up 0.8 percent on Monday last week, following Micron’s announcement. The deal also boosted stock price of Inotera up 3.06 percent to NT$7.08.

There might be no absolutely promising prospect for local DRAM chip suppliers. However, as long as they can face the fact that they have to work on their own, they can forge a road for themselves. Nanya Technology seems to have a clearer head than local media. It is diversifying as much as it can from commodity PC DRAM chip manufacturing amid falling demand for PCs after the rise of tablets and smartphones.

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