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Taiwan's DRAM makers Come Out Fighting
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Wednesday, May 19, 1999
Like most DRAM makers, Taiwan's merchant suppliers would like to forget about 1998.
Having entered the once-prosperous DRAM industry in the early to mid-1990s, Taiwan's small but ambitious DRAM vendors were stung by losses and overcapacity last year. And to add insult to injury, Micron Technology Inc. last year filed a complaint with the International Trade Commission, claiming that Taiwan's DRAM makers were dumping their products in the United States.
In 1999, however, Taiwan plans to fight back. In fact, local DRAM suppliers are ramping up their production at an astonishing rate, while also receiving their first orders from foreign OEMs-Compaq, Hewlett-Packard, IBM, and others.
But in a more dramatic move, the Taiwan Semiconductor Industry Association (TSIA) last month filed a complaint with the Taiwanese government in which it claims that five DRAM suppliers from Japan, Korea, and the United States dumped their products on the island from 1997 to 1998.
Acting on behalf of Taiwan's DRAM makers, the TSIA-a Hsinchu-based trade organization that represents the island's IC industry-filed the complaint against Hyundai Electronics Industries Co. Ltd., IBM Microelectronics, Micron Technology, NEC Corp., and Samsung Electronics Co. Ltd.
Are Taiwan's DRAM makers simply protecting their home turf with this dumping case? Or are they entering a new period of aggression on both the legal and product fronts?
Morris Chang, the elder statesman of Taiwan's IC industry, indicated that local DRAM vendors were forced to use such legal tactics to protect their future interests in the memory business.
"Taiwan's DRAM industry has a good future-we need to defend ourselves, " said Chang, chairman of foundry giant Taiwan Semiconductor Manufacturing Co. Ltd. and Taiwanese DRAM maker Vanguard International Semiconductor Corp.
Chang, like most chip executives on the island, denied charges that Taiwan's DRAM companies had been dumping their products in the U.S. market.
Taiwan's DRAM industry has been rather colorful since its inception in 1990, when Texas Instruments Inc. and Taiwanese PC powerhouse Acer Inc. formed a joint DRAM manufacturing venture in Hsinchu called TI-Acer Inc. (TI last year sold its shares in the venture to Acer as part of its exodus from the DRAM business.)
Then, hoping to strike it rich in the DRAM industry, about a dozen Taiwanese companies in the mid-1990s announced plans to enter the business. And among the newcomers were some surprising aspirants-outfits with little or no experience in the semiconductor industry.
For example, Taipei-based Tatung Co., a consumer-electronics company known more for its rice-cooking equipment, announced plans to build a DRAM fab in the mid-1990s, but the company got cold feet and never broke ground on the proposed plant.
Meanwhile, however, the more serious Taiwanese DRAM concerns began to pour billions of dollars into new fabs, while also licensing some cutting-edge memory technology from Mitsubishi, Siemens, Toshiba, and other foreign chip makers.
Suddenly, Taiwan was labeled the wild card of the DRAM industry: Armed with the latest technology and an endless stream of capital, local suppliers had the potential to disrupt the delicate balance between supply and demand in the worldwide DRAM market.
According to one local memory company's internal forecasts last year, Taiwan would produce 24.8% of the world's DRAMs by 2000, up from a mere 1.4% in 1991. Taiwan's DRAM output in 2000 would equal that of Japan, and would trail only Korea, which would hold 25.2% of the worldwide market. The forecasts saw U.S.-based companies accounting for 20.1% of the global market.
Just how realistic are these projections?
Bob Merritt, an analyst with Semico Research Corp. in Mountain View, Calif., said Taiwan's DRAM efforts have been stunted by the lengthy downturn in the worldwide memory market, but believes the island will become a major factor in this arena over time.
At IC Insights Inc., Scottsdale, Ariz., analyst Brian Matas had a different view. "Taiwan's DRAM companies compete at the noise level right now," he said. "In the foreseeable future, I don't see any of the Taiwanese companies as a direct threat to the leaders in the business, such as Micron, Samsung, or Hitachi."
Other analysts noted that most of Taiwan's DRAM makers have shifted a small portion of their capacity to foundry work, thereby limiting their own efforts in the memory market.
Actually, Taiwan had only 7% to 9% of the worldwide DRAM market in 1998, according to Matas, who expects the island's 1999 market share to be flat with the previous year. And no Taiwan-based DRAM maker has ever cracked the top-10 list of suppliers in terms of global market share.
The worldwide DRAM market declined from $19.8 billion in 1997 to $14.1 billion in 1998, Matas said. But IC Insights projects a rebound this year, with the market growing by at least 25% over 1998.
With a possible upturn ahead, many Taiwanese DRAM makers should move back into the black this year, according to William Chen, executive vice president of Hsinchu-based Mosel-Vitelic Inc., which is fast becoming the island's leading merchant memory supplier.
Until recently, Mosel-Vitelic focused its efforts on the specialty-memory business. But in 1996, the company entered the mainstream DRAM business by forming a joint venture in Hsinchu with German electronics giant Siemens AG.
The venture, ProMos Technologies Inc., makes 64-Mbit SDRAMs based on Siemens' technology. Mosel-Vitelic and Siemens sell the output from this fab under their respective logos.
ProMos, which went into production in 1997, plans to boost its output of 64-Mbit SDRAMs from just under 2 million units per month in 1998 to about 9 million units per month this year. Chen said the company will begin to produce 128-Mbit SDRAM devices by the third quarter.
In terms of volume, Hsinchu-based Vanguard is the leading DRAM maker on the island. To date, however, Vanguard has derived most of its sales from low-margin 16-Mbit SDRAM products, of which it made about 8 million units per month last year.
Rick Tsai, Vanguard's president, said the company plans to offer higher-value products this year. "This June, we will start shipping our first 64-Mbit SDRAMs," Tsai said. "And by the third quarter of this year, we will begin producing 128-Mbit SDRAMs."
Also this year, Vanguard hopes to become the first Taiwanese DRAM company to produce Direct Rambus DRAMs, Tsai said. Of course, much hinges on whether Rambus Inc. and its major partner, Intel Corp., can solve some of the technical issues related to the new memory, analysts said.
Another local DRAM hopeful with aggressive plans is Nanya Technology Corp., which licensed advanced memory technology from IBM Microelectronics last year. Nanya-a subsidiary of Taipei-based conglomerate Formosa Plastics Group-has been producing 16-Mbit DRAMs since it opened its doors in 1994.
This summer, Nan Ya will start shipping 64-Mbit SDRAMs built with IBM's 0.2-micron process technology, said Charles Kau, executive vice president of the Taoyuan-based company. "Our 128-Mbit SDRAM products will be available this December, with volume shipments slated for the first quarter of 2000, " Kau added.
Two other Hsinchu-based chip makers, Powerchip Semiconductor Corp. and Winbond Electronics Corp., sell limited quantities of DRAMs on the merchant market; in Winbond's case, this amounts to 10% to 15% of its total DRAM production, according to vice president Hander Chang. For the most part, these two companies produce DRAMs on a foundry basis for their respective technology partners (see sidebar below).
By: CST Staff
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