cwlogo

切換側邊選單 切換搜尋選單

Micron Technology

A Taiwan-US Coalition?

精華簡文

A Taiwan-US Coalition?

Source:CW

Bullish about DRAM and Taiwan’s technological capabilities, Micron Technology is going forward with NT$120 billion acquisition of Inotera Memories, dashing the hopes of potential buyers in China.

Views

99+

A Taiwan-US Coalition?

By Echo Chu
From CommonWealth Magazine (vol. 613 )

With the first cold front of the winter bearing down, the CEO’s office at Inotera Memories Inc. headquarters in Taoyuan feels especially cold and empty. Inotera’s last serving CEO, Lee Pei-ing, has cleared away his personal effects, leaving just one old photograph on the desk and a 2016 calendar on the wall.

“Now is an exciting time for DRAM,” says Wayne Allan, vice president of global manufacturing at Micron Technology, the world’s third-largest memory manufacturer, during an exclusive interview with CommonWealth. After a full year in the works, Micron has finally completed its stock swap for control of Inotera, the DRAM manufacturing arm of conglomerate Formosa Plastics Group. With the successful acquisition, Micron Technology now holds the distinction of being the foreign entity with the largest investment and most staff in Taiwan.

Micron Plant in Taiwan

  Two days before our interview, Micron CEO Mark Durcan flew to Taiwan to headline the merger celebrations together with President Tsai Ing-wen and numerous memory industry luminaries. The Inotera sign in the lobby of the company’s Taoyuan facility has already been changed to Micron.

“We are going to create an end-to-end center of excellence in Taiwan,” says Allan, for the first time acknowledging Micron’s plans to establish a DRAM packaging and testing plant in Taiwan. The location of the facility has not been confirmed at present, but the buzz is that it will be situated near the 12-inch fab in Houli outside Taichung formerly operated by Rexchip, which was acquired by Micron in 2013. The new facility is expected to be completed in one year to 18 months.

Currently living and working in Singapore, Allan relates that Micron decided to replicate the Singapore plant model in Taiwan in order to respond to the demands for customization and rapid delivery in the market. Micron’s Singapore facility, which manufactures NAND flash, is a wholly integrated operation from front-end R&D to back-end packaging and testing. As consumer products like smart phones and the Internet of Things comprise the bulk of memory demand, the end-to-end operational model is best suited to the demands of high customization and shortened delivery time.

“For Micron, Taiwan offers strong geographical strategic significance,” says a former top DRAM executive who requested anonymity. In fact, Micron previously boosted its investments in Taiwan with an eye to becoming a member of the TSMC semiconductor cluster, he adds.

TSMC ventured into the packaging and testing market last year, and has poured over 10 percent of its capital - around US$1 billion, into back-end packaging, testing and TMAs this year. The A10 chip powering the latest iPhone7’s processor is packaged with TSMC’s InFO technology, demanding high integration with memory.

Micron began as the main memory supplier for the iPhone7. If Micron and TSMC establish a closer collaborative relationship, they will have a better chance of knocking chief rival Samsung down a rung and win more Apple orders with the next-generation iPhone.

While not denying this interpretation, Allan could not divulge further details of the company’s partnerships, saying that the demand for highly customized smart phone memory is growing, and that Micron will concentrate its full efforts on whatever technology its clients favor.

 “Right now DRAM is in the midst of a stable period of development, and businesses have begun integrating upstream and downstream supply chains to stabilize profits,” says  Avril Wu, assistant vice president of DRAMeXchange, adding that the triumvirate of Samsung, SK Hynix, and Micron dominates the current industry landscape. Wu further offers that there will be no appreciable increase in DRAM manufacturing in 2017, and that manufacturers will focus efforts on high-yield customized DRAM products with unique specifications.

Bullish on Merger Despite Potential Losses

The decision to invest over NT$100 billion to acquire Inotera had many analysts shaking their heads at Micron, a publicly traded company in the U.S.

A memory chip manufacturer headquartered in Idaho, Micron has relied on a streamlined acquisition strategy since its acquisition of seven Texas Instruments memory manufacturing plants in 1998 to become the world’s third-largest memory chip manufacturer.

In 2008, Micron purchased 30 percent of Inotera’s shares from German company Qimonda. Four years later, in 2012, it acquired Elpida Memory, a bankrupt Japanese memory company, for US$750 million, continuing its program of purchases at bargain basement prices. However, the company suffered losses in the first half of 2016, forcing it to announce layoffs and cutbacks. Still, it managed to acquire Inotera at NT$30 per share, totaling around NT$120 billion and for an equity premium of 30 percent.

Micron’s persistence in going ahead with the acquisition despite sustaining losses had analysts at Micron’s most recent investor conference asking, “Micron (and Inotera) engaged in technical cooperation for the past seven or eight years, yet the merger overturns that strategy. Is this a simple financial investment? What makes you so confident?”

Durcan bent over backwards to explain that Micron only decided to go ahead with the investment after pinching every last penny, that the Inotera acquisition is one element of Micron’s development strategy, and that the pace of high-value acquisitions is set to slow down. Durcan stressed that while Micron has enjoyed a good relationship with the Formosa Plastics Group over the past eight years, “we believe that there is more value we can bring as sole owners than as board members and operational partners.”

US-Taiwan Cooperation Thwarts Chinese Company

Still, the Big Three DRAM manufacturers are all looking to consolidate their upstream and downstream industry chains, and even Chinese companies are looking to get into the thick of it.

When Zhao Weiguo, chairman and CEO of Tsinghua Unigroup, which at one time had designs on acquiring Micron, took the helm this past May at Yangtze River Storage Technology, a government-invested enterprise, there were rumblings that he sought to follow the Inotera model and work out a technology licensing agreement with Micron.

However, as with any subject connected to Chinese enterprises, Allan, who is Micron’s second in command in charge of manufacturing, coyly claimed uncertainty, declining comment.

“Given the current state of U.S.-China relations, do you think that’s possible (technology licensing)?” asked the unnamed high-ranking memory executive, implying that U.S.-Taiwan cooperation was a certainty.

Avril Wu agrees, noting that, if the world’s top three memory manufacturers engaged in technology licensing with China, it would be akin to introducing new competitors to disrupt the existing market balance. Consequently, it is very unlikely that Micron would turn around and cooperate with China in the wake of significant investment in Taiwan.

Observers are still befuddled by the arranged U.S.-Taiwan union facilitated by acquisition experts. Given that Micron has outsourced its packaging and testing orders in Taiwan, observers are concerned about the impact on Taiwan’s existing packaging and testing businesses if Micron establishes its own facilities in Taiwan.

Addressing these concerns, Allan stated unequivocally, “That is not our intent. We plan to continue the relationship.” He explained that Micron’s new packaging and testing facility will be used for high-end technical R&D, and that production would still be outsourced even after mass production is achieved.

Allan stressed that Micron has invested over US$10.4 billion in Taiwan to date, with nearly 6,000 employees in Taiwan, and plans to further increase that number by 1,000 over the next 18 months. “The performance of a merger is not measured by how much you increase production capacity, but by how well you utilize people,” he says.

Dr. Nicky Lu, CEO of Etron Technology, is sanguine about the merger. Believing that it helps enhance the competitiveness of Taiwan’s semiconductor industry, Lu emphatically states, “Taiwan has never fallen behind in this area.”

Translated from the Chinese by David Toman

Keywords:

好友人數