Timing crucial to DRAM consolidation, says A-Data chairman Simon Chen

Digitimes recently talked to Simon Chen, chairman of A-Data Technology, about the Taiwan government's bailout program for the island's fragile DRAM industry. According to Chen, the Taiwan government should speed up its bailout efforts, and in the process push for some consolidation among makers from Japan, Taiwan and the US.

Timing matters

The Taiwan government should emphasize its supporting role in rescuing the island's DRAM industry and accelerate the implementation of its rescue plans, in order to effectively tackle the urgent financial needs of some local DRAM players, in particular ProMOS Technologies.

Originally the industry expected integration links to emerge first between Japan's Elpida Memory and Powerchip Semiconductor Corporation (PSC), which would have then triggered consolidation processes among the other non-Korean DRAM manufacturers. However, the timing for such a turning point has been missed or pushed back due to the government's passivity, as well as the inability for PSC and ProMOS to reach common ground. The two players are still proceeding to apply to the government separately, despite that their respective proposals are built in part on partnering with Elpida.

While the potential for a consensus between Elpida, PSC and ProMOS has come to a standstill, Taiwan's government may consider pushing forward merger talks between US-based Micron and Nanya Technology in order to promote collaboration between Taiwan-based players and their technology partners.

Why not invest directly in Elpida and Micron instead?

Since the government's aim is to shift technologies as well as ownership of overseas memory chip suppliers to Taiwan, the government could alternatively consider injecting capital directly into Elpida and/or Micron as the first step to throwing its weight behind homegrown technologies. With the government taking controlling shares in Elpida and Micron, local DRAM makers would be able to gain access to technological developments. And once home-grown technologies are established within the Taiwan DRAM industry, local DRAM makers would no longer have to spend time and resources negotiating licensing fees for every process generation.

But still timing would play a crucial role. For example, Samsung missed an opportunity to buy memory card maker SanDisk in 2008, any recent market developments now make any potential acquisition unlikely, at least for the near term.

Not a game of chicken

It is important for Taiwan's DRAM makers to collaborate, instead of competing in a race for bailout cash. Consolidation has become necessary in order for Taiwan's DRAM industry achieve long-term sustainability and become more competitive internationally. Individual makers need to be aware of this fact. If the local DRAM industry fails to make progress towards integration this year, it will be 10 years before another such opportunity arises. However, the issue then becomes, how many of the current players will be around then, and by what degree will business thrive and grow in the intervening decade? In both cases the current outlook suggest the answer would be not a lot.

It is essential to establish some confidence-building measures among local DRAM players prior to applying for bailouts from the government. Taiwan makers need to consider win-win strategies and embrace any common ground, instead of courting uncontrollable risk built on selfishness.

Chen's comments have be translated from their original Chinese.

A-Data chairman Simon Chen
Photo: CJ Liu, Digitimes, January 2009

Source: Company sources, compiled by Digitimes, January 2009

Source: Companies, compiled by Digitimes, January 2009

Article translated by Jessie Shen