For Micron Technology, it is no longer meaningful to implement the "Inotera Memories model" in China, according to Mark Durcan, CEO for the US memory vendor.

The so-called Inotera model sees Micron receive licensing fees and a portion of memory production capacity from partners which lack sufficient technology but are capable of scaling up output with huge capital.

Micron already has enough DRAM production capacity and economies of scale, and having another partner like the pre-acquisition Inotera is no longer meaningful for the company, said Durcan. Micron's principle is to protect the interests of shareholders and the team, while avoiding destabilizing the industry supply-demand balance, Durcan continued.

In fact, the joint venture deal betwen Micron and Nanya Technology was quite successful. Inotera was allowed to expand its DRAM production capacity with technology licensed from Micron and capital from Nanya, and Micron and Nanya were both able to expand their respective output and global market share.

Nevertheless, the current circumstances are different as DRAM prices have become more stable, and Micron's production base worldwide has expanded substantially, Durcan said.

Micron recently completed acquiring Inotera, formerly a Taiwan-based production partner of the US firm. Previously, Micron took over Taiwan-based Rexchip Electronics as a result of its acquisition of Japan's Elpida Memory. Taiwan now accounts for more than 60% of Micron's overall DRAM production capacity, which is mostly Micron's leading-edge capacity, Durcan said.

At the same time, China is aggressively developing its homegrown chipmaking industry including the memory sector. State-backed Tsinghua Unigroup had previously proposed a more than US$20 billion bid for Micron, but the offer is believed to have been turned down. Nevertheless, China remains aggressive in building its homegrown technology for making DRAM chips.

China will definitely be capable of finding a partner like Micron to license technology and make joint investments with, but for Micron, it would be appropriate to implement such a model 10 years ago when the DRAM industry was still immature and very competitive, Durcan noted. The industry has now entered its mature stage, and the chip prices tend to grow at a relatively stable rate. For Micron, there is less reason to be in that kind of relationship than there was 10 years ago, Durcan added.

However, such a joint-venture model may make more sense in the NAND flash sector, where the chip prices remain volatile and suppliers require huge capital to expand their production capacity, Durcan indicated. In China, nevertheless, implementing the model could be complex since every group of investors has their own interests and values that have to be materialized, Durcan said.

In addition, Durcan commented that 2017 will be a "pretty good" year for the DRAM market as supply seems to be well-controlled and demand is strong. As for NAND flash, end-market demand is growing fast while suppliers are transitioning to 3D technologies. The NAND flash market for 2017 is more difficult to predict, Durcan said, but he believes the supply will still be tight at least for the first half of 2017.

The overall memory market outlook for the next 18 months is quite positive, said Durcan, adding that suppliers are more cautious about their investments and capacity expansions. At least spending from Micron's competitors tends to be more reasonable, Durcan said.

By: DocMemory
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