In Taiwan Government to Invest in DRAM Industry we observed the Taiwanese gvt. was looking to invest in and consolidate the on-island memory industry to give it a more competitive structure and to help it obtain some of its own IP so marginal costs could be reduced through eliminating the licensing of patented technologies. In The Dream is Gone: No Gvt. Backed Merger for Taiwanese Memory Industry we quoted a Bloomberg article that suggested there would be no gvt. backed merger of the on-island DRAM industry and that Taiwan Memory would be an independent company. Today Taiwan News has an article on the restructuring plan of Taiwan Memory. According to Taiwan News:
Newly-established Taiwan Memory Co. (TMC) has officially filed its business plan with the Ministry of Economic Affairs (MOEA) to participate in a government project to restructure the DRAM industry, Vice Minister Hwang Jung-chiou said Tuesday.
The MOEA first put forth in March the idea of setting up the TMC as part of its efforts to consolidate Taiwan's ailing dynamic random access memory, or DRAM, industry. The company has recently completed its establishment, with registered capital of NT$500,000 (US$15,244).
Under a project unveiled in July, the government will allocate a maximum of NT$30 billion to support one or two local DRAM companies to compete with their foreign counterparts, particularly those in South Korea.
Companies interested in obtaining the government funding should apply with the MOEA within three months, after which the ministry will review their qualifications.
"TMC is a bellwether, and we hope it will pass the screening, " Huang said.
Huang, however, would not disclose the amount of investment requested by TMC.
To qualify for the funding, the applicants should have the ability to efficiently acquire overseas intellectual property and technology usage rights, as well as fair and balanced research and development records from both domestic firms and overseas partners, according to requirements set by the MOEA.
The MOEA also demands that the international collaboration must provide adequate training of local talent and that the re-structuring plan must aim to improve existing corporate structures and broker possible mergers and acquisitions.
TMC, which aims to develop its own technologies in collaboration with Japan-based Elpida Memory Inc., is so far the only company that has filed its business plan to bid for the funding.
MOEA officials said they believe the Formosa Plastics Group will also file an application.
Two of Formosa's affiliates -- Nanya Technology Corp. and Inotera Memories Inc. -- have maintained a partnership with U.S.-based Micron Technology Inc., a leading DRAM technology provider.
TMC originally hoped to cooperate with both Elpida and Micron, but Micron turned down the proposal in April and decided instead to further reinforce its long-term cooperation with Nanya and Inotera.
Nanya and Inotera executives have urged the government to give the Micro-Nanya-Inotera alliance the same level of support it would have given to a Micron-TMC venture.
Oversupply in the memory industry dates back a few years now to the first proposed launch of Windows Vista and the memory makers have been struggling ever since. Samsung, Elpida and Micron all have their own patented technologies but the big DRAM makers in Taiwan are manufacturers and while I am sure they do have some patents, the core technologies required to make DRAM chips must be licensed from one of the other companies. It is good to see the gvt. is urging companies to develop their own IP and have tied the financial assistance that will be allocated to the industry to both the development of local Taiwanese talent and also to encouraging companies to develop their own IP. In my view this will ensure the companies have a far more sustainable business model and ensure their per-unit marginal costs are comeptitive. However, R&D is typically expensive but if other companies can do it why not the Taiwanese. Taiwanese companies have already shown tremendous innovation in other areas of the high-tech sector. I don't doubt they can innovate in this sector too with the right motivation.
As for who gets the money, I would suggest Taiwan Memory will at least get some of it. It does seem to be the favored company with the head/founder John Hsuan being appointed by the gvt. to take over. As for the other alliance (Nanya/Inotera/Micron) well I suppose that would depend on their relationship to the key players in the gvt. We will be interested to see if the money does flow the other way (it is possible) but it may defeat the aims of the gvt. to establishing a competitive Taiwan based DRAM company on the island. Two or three DRAM companies may be one or two DRAM companies too many and therefore the gvt. may have little interest or motivation to invest/support a second alliance. We will see. Only time will tell.
As always your comments/observations are welcome.
Taiwan News: Taiwan Memory Co. files business plan for DRAM restructuring
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