Samsung
Economics Affairs Minister Yiin Chii-ming says the government will probably name a semiconductor expert this week to oversee the formation of a state-owned chipmaker. The plan may involve tie-ups with Japans Elpida Memory Inc. and U.S.- based Micron Technology Inc., according to Yiin.
The industrys biggest overhaul since 1999 may lead to the shuttering of older plants to ease a glut and help smaller chipmakers compete against Samsung Electronics Co. as they cope with the markets longest contraction in more than a decade. The global recession is threatening to prolong the slump as personal-computer shipments are projected to fall by a record 12 percent this year.
“Any elimination of players will help prices and boost chipmakers profitability,” said Daniel Chang, who heads Macquarie Group Ltd.s Taiwan research team. “The question is whether the government can obtain patents and manufacturing technologies through integration with foreign companies.”
Under Taiwans “Big Bang” plan, the government may create a holding company that would buy and consolidate Nanya Technology Corp., Inotera Memories Inc., Powerchip Semiconductor Corp., Rexchip Electronics Co., ProMOS Technologies Inc. and Winbond Electronics Corp., Morgan Stanley said in a Feb. 24 report. The holding company could then invest in Japans Elpida and collaborate with Micron, according to the report.
Losses Mount
The six Taiwanese chipmakers generated 23 percent of global dynamic random access memory sales during the fourth quarter, close to Samsungs 25 percent, according to Dramexchange Technology Inc., operator of Asias biggest spot market for chips. Including Elpida and Micron, the eight chipmakers accounted for 51 percent, according to the Taipei-based Dramexchange.
A combination of all eight companies may create a stronger competitor that would hurt Korean chipmakers in the long term, according to Jay Kim, an analyst at Hyundai Securities Co. in Seoul. Still, Micron, Nanya and Inotera may drop out because of differences over chip-manufacturing technology, Kim said.
Micron, based in Boise, Idaho, offered access to its production technology and the company has been in talks with Taiwan government officials for several weeks, Micron spokesman Daniel Francisco said this week.
Inotera President Charles Kau declined to comment on details of the government plan, as did spokespeople at Nanya, Powerchip and Rexchip. Mike Liu, a spokesman at Winbond, said the company is open to a state-led consolidation proposal. Elpida spokeswoman Kumi Higuchi wasnt available to comment.
Chip Losses
Taiwans five publicly traded DRAM makers, excluding Rexchip, the closely held venture between Elpida and Powerchip, racked up combined losses exceeding NT$94 billion ($2.7 billion) during the first nine months of 2008 after chip prices slumped.
Makers of the chips, which temporarily hold data and help computer processors run multiple programs simultaneously, lost a combined $12.5 billion in 2007 and 2008, the most ever, according to Andrew Norwood, an analyst at Gartner Inc. in London.
Economies of Scale
Samsungs lead has helped the company negotiate higher prices and produce chips at the lowest cost in the industry. Taiwanese manufacturers, who entered later than their Korean competitors in the last round of industry expansion in the 1990s, have lacked the scale to build multi-billion dollar chip factories at Samsungs pace.
“Local chipmakers are more vulnerable to an economic downturn than Samsung, because they lack price power,” said Cheng Cheng-mount, an economist at Citigroup Inc. in Taipei. “This is an opportunity for Taiwan to redefine the playing field.”
While the DRAM industry has been blighted by boom and bust cycles since Intel Corp. pioneered memory chips in the 1970s, global sales of the chip will fall 15 percent to $20 billion in 2009, rounding out the industrys first three-year slide since 1998, according to estimates at research firm iSuppli Corp. Global PC shipments will probably fall 12 percent this year, Gartner said this week.
Bankruptcy Protection
The slump forced Munich-based Qimonda AG to seek protection from creditors on Jan. 23, while Taiwanese chipmakers including Powerchip and ProMOS are asking for government funding and loan- repayment extensions.