Micron Fires Salvo at Taiwanese Memory Consortium

Micron Technology and its Taiwanese partners will not join the government-led company formed to bail out the island's indebted DRAM industry, they said Thursday.

Instead, the U.S. memory chip maker and partners Nanya Technology and Inotera Memories will create their own research and development alliance and invite other Taiwanese companies to join.

The proposal could throw a wrench into the government's plans for Taiwan Memory Co. (TMC), which it formed to lead consolidation of the island's ailing DRAM industry.

The government wants the consortium to beef up the technology prowess of Taiwanese memory chip makers, which had been manufacturing chips using technology from foreign companies. It has pledged to back TMC with at least NT$30 billion (US$886.8 million).

TMC too plans to focus on research and development, its head has said, as well as ask other companies to join. Last week, TMC announced it had chosen Japan's Elpida Memory as its main technology partner.

That's an obstacle for Micron: The main reason it doesn't want to work with TMC is that it fears losing its technology to Elpida, said Fred Fishburn, an assistant vice president at Micron.

But in creating a separate alliance, "Micron requests the same support from the Taiwan government that TMC is getting," Fishburn said.

The group Micron is leading pledged to build a technology center in Taiwan to focus research and development efforts on chip manufacturing technology.

The manufacture of integrated circuits on 18-inch silicon wafers will be one focus for the group, said C.C. Wu, chairman of Nanya Technology. Chips today are produced on silicon wafers 12 inches in diameter or smaller.

It's not clear how well the Micron alliance thought through the request for matching government support. At the Thursday news conference, executives from the three alliance members failed to answer a question about whether or not they would offer the government a shareholding in return for financial support.

The government will be a major shareholder in TMC.

Taiwan's Economics Minister Yiin Chii-ming said competition between TMC and the Micron alliance will be good because it will cause Micron to bring more technology to Taiwan. He also said the Taiwanese government has not made any promises to the Micron alliance.

Taiwan's decision to build TMC to consolidate its DRAM industry came amid a global recession that has seen other nations such as the U.S. spend billions of dollars bailing out banks and auto makers. Taiwan may be the first to agree to a technology industry bailout, but it faced few palatable choices.

A memory chip glut caused DRAM companies globally to start posting losses nearly two years ago and their problems have worsened with the global recession. Although companies have cut back on chip production and shut older factories, falling demand for PCs, where most DRAM chips go, have further hurt the market, and new loans to finance factory improvements have become difficult to obtain.

Earlier this year, Taiwanese officials said they had to do something about their DRAM makers because they hold so much debt, an estimated NT$430 billion, much of it owed to Taiwanese banks. A DRAM default could add to woes to the island's financial industry.

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