Toshiba quits DRAMs, Micron to buy factory

Toshiba Corp. has become the latest Japanese casualty of fierce competition in the computer memory market, announcing Tuesday plans to end manufacturing of mass-market memory chips.

The company has signed a memorandum of understanding to sell Dominion Semiconductor LLC, a subsidiary based in Manassas, Virginia, to Micron Technology Inc. in January 2002 and will simultaneously begin winding down DRAM (dynamic random access memory) production at its plant in Yokkaichi, Japan. As a result, its commodity DRAM operations will cease, it said in a statement.

Toshiba had a 6.2 percent share of the world DRAM market in 2000, according to estimates from market research company Dataquest Inc.

Toshiba's withdrawal from the memory market will not be total. It will continue development of embedded DRAM technology, which is DRAM memory that is built onto system LSI (large scale integrated circuit) chips. Such chips, which are custom-designed to perform a specific task and often for a specific device, are seen as a major growth area and many require DRAM as one of a number of components that make up the chip.

The company also said it will keep a hand in the memory chip market by producing application-specific memories such as NAND flash chips, which are used in memory cards, high-density NOR flash chips, commonly used for application data storage, FCRAM chips (fast cycle RAM), a high-speed memory type, and customized DRAMs.

A key reason behind Toshiba's decision to exit commodity DRAM production is a long slide in DRAM prices that began in the summer of 2000, which has pushed prices to below-cost levels leaving Toshiba, and almost all DRAM makers, losing money on every chip they sell.

Since hitting a high of around US$9 per 64M-bit chip in 2000, the price has fallen to below $1 and newer, more advanced chips are also under price pressure. The spot price for 128M-bit DRAM chips in Asia on Monday was around $1.65, down from $6.70 at the beginning of this year, according to data from market watchers ICIS-LOR.

But the withdrawal comes as something of a surprise since the company previously announced that it was looking for a partner for its DRAM operations and, as late as last month, was reported to be close to merging its operations with those of Germany's Infineon Technologies AG.

For Micron, the purchase pushes it closer to the number one position in the DRAM market. That is currently held by South Korea's Samsung Electronics Co. Ltd., which had a 21.1 percent market share in 2000 according to Dataquest. Micron was ranked in second place with 18.9 percent.

While simple addition puts Micron in the lead, at least based on estimates for 2000, the turmoil of the last year and Micron's purchase of only Toshiba's U.S. operations makes it difficult to accurately estimate which company now has the lead in the market.

The key to the title of number one lies with Hynix Semiconductor Inc. The loss-making South Korean semiconductor company has been on the brink of failure several times, only to be bailed out by its creditors, but officials from Micron recently visited Seoul to take a close look at the company ahead of a "possible strategic alliance or other transaction," they said. Their visit came as domestic pressure grew, especially in the local media, on Samsung Electronics to save the company.

Toshiba is not alone in wanting to exit the commodity DRAM market. Earlier this year NEC Corp. said it would end DRAM production by 2004 and transfer all operations to Elpida Memory Inc., a joint venture formed with Hitachi Ltd. to insulate the two companies from the cyclical swings of the market.

ITworld.com

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