Micron Makes Inotera a Wholly Owned Subsidiary to Ensure Total Cooperation from the Taiwanese DRAM Foundry, TrendForce Reports

Major U.S.-based DRAM manufacturer Micron Technology will buy the remaining share that it does not own in its Taiwanese foundry partner Inotera Memories via a share swap transaction, according to a joint statement made by the two companies today (December 14). The latest report from DRAMeXchange, a division of TrendForce, places Micron third in market share for DRAM based on revenue. The U.S. memory maker is behind the two South Korean rivals SK Hynix, which sits at the No. 2 spot with an estimated 28% of the DRAM market, and Samsung, which tops the ranking with around 46.7%. Taiwanese memory maker Nanya Technology is ranked No. 4 with a mere 3% of the market share. Both Inotera and Nanya are partially owned by Formosa Plastics Group.

Micron’s current total DRAM capacity is about 310,000 wafers per month. Production facilities obtained by Micron in its acquisition of Elpida supply about 100,000 wafers to the total capacity. Another 80,000 wafers are provided by the added capacity from the Rexchip acquisition. As a dedicated server and PC DRAM supplier for Micron, Inotera provides about 100,000 wafers to its partner’s total DRAM capacity.

Presently, Formosa Plastics and Micron are the largest shareholders in Inotera with stakes nearly equal in size. Formosa Plastics has 32% (24% are held under its subsidiary Nanya Technology) and Micron owns about 32.7%. However, all of Inotera’s manufacturing technologies are from Micron. Avril Wu, research director of DRAMeXchange, noted that Nanya is midst of building its Fab-3A North in Taiwan and has scheduled the fab to begin producing on the 20nm manufacturing process by the second half of next year. In addition to swapping shares and buying new Micron shares, Nanya will also receive the option of licensing Micron’s two DRAM technology nodes, known as 1x and 1y. Nanya therefore will be free from technology licensing issues later on with its DRAM manufacturing.

Micron’s motives behind the acquisition is more complex and multi-faceted. From a long-term perspective, the changes that were made to pricing agreement between Micron and Inotera earlier this year would have severely squeezed the latter’s margins, resulting in an inevitable conflict of interests between the two companies.  “China is already in full swing to build a domestic semiconductor sector, with DRAM as the cornerstone,” said Wu. “Micron would be in more of a dilemma if its partnership with Inotera started to fall apart since the Taiwanese government are beginning to take more relaxed stance towards Chinese investments in the local semiconductor companies.” There is a possibility that the Chinese will be able to obtain Micron’s technologies and production capabilities by taking over Inotera. Even if Inotera only represents 30% of U.S. memory maker’s DRAM capacity, it is still too risky. By acquiring the whole company, Micron will not only eliminate this political and business uncertainty but will also have complete control over any collaboration with its new subsidiary foundry.