Memory Manufacturers Merge to Save Selves

A chip industry veteran will now lead a new Taiwan-based, state-backed company that merges six memory chipmakers into one collective--the TMC.

While the $23.6 billion computer memory industry struggles to stay afloat, Taiwan's economic affairs ministry elected former United Microelectronics Corp. executive John Hsuan to head a new state-backed memory manufacturer, according to Bloomberg. The 57-year-old semiconductor expert will oversee Taiwan Memory Co., set to launch within six months and partly funded--but not owned--by the Taiwan government. This will be the biggest overhaul seen in the semiconductor industry since 1999.

Economics Affairs Minister Yiin Chii-ming said that the new company, comprising of Nanya Technology, Inotera Memories, Powerchip Semiconductor, Rexchip Electronics, ProMOS Technologies, and Winbond Electronics, will possibly merge with Japan's Elpida Memory Inc. or Micron Technology Inc., although talks with both companies are predicted to come to a close in three months. As it stands, one of the two will either merge into the collective, or collaborate with the new company separately.

“We will decide whether to join in the merger after studying the master plan carefully,” Elpida spokesman Michinari Tsurumaki said from Tokyo.

By creating Taiwan Memory Co., the Taiwanese government focuses on helping the smaller manufacturers of memory to better compete with Samsung Electronics Co despite current losses reported by Samsung and even Micron. And while John Hsuan's experience with DRAM is expected to keep him neutral while managing the new company, it's speculated that the conglomerate will see challenges ahead while managing different technologies from different sources.

“The formation of TMC will help to reform the DRAM industry and build our own intellectual property rights and raise the competitiveness of the industry in the global arena,” Yiin said. He also said that the government will seek private investors for the venture.

Although all six Taiwanese DRAM companies generated 23 percent of the global sales in Q4, their combined earnings were just shy of Samsung's overwhelming 25 percent in the same period. Nanya Technology, Inotera Memories, Powerchip Semiconductor, ProMOS Technologies, and Winbond Electronics also saw a combined loss of $2.7 billion during the first nine months of 2008. Overall, the industry suffered its biggest loss ever recorded: $12.5 billion during in 2007 and 2008.

Will the formation of TMC reboot the DRAM market and even bring the industry back into the black? It will be interesting to see in a year's time, especially if TMC becomes Borg-like.