Taiwan is playing a pivotal role in a growing trend for Japanese companies to move production overseas to shield their operations against the risk of disaster after the March 11 earthquake and tsunami devastated Japan’s industrial heartland.
Japanese companies are being forced to liberalize their long-term protectionist policies as they build up overseas manufacturing sites by exporting core technologies, because doing so poses less of a risk to their survival than natural disasters and a strengthening yen, not to mention the deteriorating DRAM industry.
The government should stop daydreaming about gaining control of the world’s DRAM chip market by developing its own DRAM technologies through collaboration with foreign strategic partners such as Elpida Memory Inc, Japan’s biggest memorychip maker. Elpida’s local partners Powerchip Technology Corp and ProMOS Technologies Inc are already exiting the market.
On Saturday, the Ministry of Economic Affairs said it had approved a “landmark” proposal from Elpida to invest billions of NT dollars to set up a research and development center in central Taiwan to develop next-generation technology for DRAM chip manufacturing in Taiwan and Japan.
“This facility will be the first R&D center Elpida has launched overseas,” a government official told the Taipei Times. “Discussions on its establishment started in the second half of last year. However, Elpida decided to speed up the process in March” after the earthquake.
As part of the project, Elpida also agreed to allow local partners to make chips using the same advanced technology its Japanese plants would use, when migrating to next-generation process technology, or 30-nanometer technology, the official said.
“Through this project, Taiwanese DRAM companies will be able to develop their own technologies and save some [royalty] costs,” the official said.
It seems that the Elpida plan is a resumption of the government’s failed effort to revive the nation’s shaky DRAM sector, especially as ProMOS faces insolvency, with banks considering blocking the chipmaker’s proposal to sell new shares to pay part of its NT$60 billion (US$2.02 billion) outstanding loans.
Since 2002, about 32 foreign companies, including US chip giant Intel Corp and PC maker Dell Inc, have set up 50 research and development centers in Taiwan, but these centers still failed to propel Taiwanese chipmakers or PC makers to global success.
Taiwan is just one part of the world’s industrial food chain, and Elpida is planning to build a research and development center here simply because it needs to better utilize local factories, owned by either itself or local chipmakers, to counter operational risks caused by the wobbly US economy and the eurozone debt crisis, which have cut chip demand and exacerbated DRAM overcapacity.
That is why Elpida announced on Thursday that it was considering shifting some production to Taiwanese subsidiary Rexchip Electronics Corp from its Hiroshima plant as part of a broader plan to tackle the deteriorating DRAM market and a stronger yen.
Eplida owns a 63 percent stake in Rexchip, while Powerchip holds less than 30 percent.
Powerchip and ProMOS are merely factories that Elpida can use whenever it needs without facing the operational risk it does in Japan. Elpida is now Powerchip’s sole DRAM client.
The government must face the facts. Taiwan’s role in the world’s DRAM market is diminishing and it wasted its last chance to do anything about that in the latest industrial slump.
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