Taiwan Names Hsuan to Oversee Revamp of Chip Industry (Update1)
March 5 (Bloomberg) -- Taiwan named semiconductor expert John Hsuan to head a state-controlled company that will push six of the island’s computer-memory chipmakers to merge as the $23.6 billion industry grapples with record losses.
Taiwan Memory Co., to be headed by 57-year-old Hsuan, will be formed within six months and may merge with Japan’s Elpida Memory Inc. or Boise, Idaho-based Micron Technology Inc., Economics Affairs Minister Yiin Chii-ming said in Taipei.
Hsuan, an industry veteran at custom-chip maker United Microelectronics Corp., is charged with leading the semiconductor industry’s biggest overhaul since 1999. The government aims to help smaller makers of dynamic random access memory, or DRAM, compete against Samsung Electronics Co. as they cope with the market’s longest contraction in more than a decade.
“John Hsuan has experience in producing DRAM and he should be neutral in managing the new company,” Chen Liway, who rates the Taiwanese memory chipmakers “neutral” at Polaris Securities Co. in Taipei. “The challenge now is to try and manage different technologies from different sources.”
The government aims to complete talks with Elpida and Micron within three months, Hsuan said.
Micron declines to comment on the discussions, Singapore-based spokesman Ravi Rajoo said by telephone.
‘Master Plan’
“We will decide whether to join in the merger after studying the master plan carefully,” Elpida spokesman Michinari Tsurumaki said from Tokyo.
Hsuan was appointed to the honorary post of vice chairman emeritus at United Microelectronics in 2006 after 24 years with the company.
“We welcome John Hsuan and will cooperate with him” on the negotiations, Charles Kau, president of Inotera Memories Inc., a venture between Micron Technology and Nanya Technology. “It’s not going to be a state-owned company, which is a good thing.”
Under Taiwan’s plan, the government may create a holding company that would buy and consolidate Nanya Technology Corp., Inotera Memories, 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 Elpida and collaborate with Micron, according to the report.
Reform Industry
“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. The government will seek private investors for the venture, he said.
The six Taiwanese chipmakers generated 23 percent of global DRAM sales during the fourth quarter, close to Samsung’s 25 percent, according to Dramexchange Technology Inc., operator of Asia’s biggest spot market for chips. Including Elpida and Micron, the eight chipmakers accounted for 51 percent, according to Taipei-based Dramexchange.
Micron 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.
Combined Losses
Taiwan’s 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.
Samsung was last in the industry to hang on to profitability until the company’s chip operations posted a loss in the fourth quarter.
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.
Samsung’s 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 multibillion-ollar chip factories at Samsung’s pace.
To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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