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Source: www.asiaecon.org |

TAIWAN TO CONSOLIDATE CHIP-MARKET


  In order to compete against the two major Korean chip manufacturing giants, Samsung Electronics Co. and Hynix Semiconductor Inc., Taiwan has announced that it will create an alliance with Japan and US chip-making companies. The two South Korean giants dominate approximately half of the chip manufacturing sector. With falling prices from memory chips, Taiwan companies have suffered immensely. Many of the companies are in the business of making DRAM, dynamic random access memory, which are used to temporarily store data and are important features on personal computers and other gadgets.


In order to compete against the two major Korean chip manufacturing giants, Samsung Electronics Co. and Hynix Semiconductor Inc., Taiwan has announced that it will create an alliance with Japan and US chip-making companies. The two South Korean giants dominate approximately half of the chip manufacturing sector. With falling prices from memory chips, Taiwan companies have suffered immensely. Many of the companies are in the business of making DRAM, dynamic random access memory, which are used to temporarily store data and are important features on personal computers and other gadgets.

Taiwan’s Minister of Economic Affairs, Chii-Ming Yiin, announced on Thursday that a holding company, Taiwan Memory Co., will be established. The Taiwanese government is very likely to aid in this endeavor and fund an unspecified amount of capital into the holding company. Taiwan is looking to merge or coordinate the island’s six memory chip makers, Japan’s Elpida Memory Inc. and the United States’s Micron Technology Inc.. The details of the holding company, including a time line for the plan, are yet to be disclosed.

John Husan, a Taiwanese semiconductor-industry veteran, was appointed to set up Taiwan Memory co. He believes that the task at hand is difficult but, if successful, could prove to be beneficial for all participating companies. If the holding company is able to succeed, the chip-manufacturing company will shape the industry into Korea DRAM makers and non-Korea DRAM makers.

The establishment of the company indicates the impact of the economic crisis. In the time before the economic crisis?Pre-economic crisis, countries and companies were battling against each other to construct big technology industries. In Taiwan, government funding helped support a large number of competitors that led to a cyclical over-investment, oversupply and falling prices.

Last year, the global industry lost $7 billion on sales as DRAM prices fell. Taiwanese companies account for a quarter of global DRAM production reportedly loss $3 billion. Most recently, the last major European memory chip maker, Qimonda AG, filed for insolvency.

The losses have greatly impacted Taiwan’s economy,especially since Taiwan’s companies produce a large number of the world’s laptop personal computer, cellphones, flat-panel monitors and semiconductors.

The memory-chip manufacturing sector took off in the 1990s and in 2002 the Taiwan government incorporated the sector in its economy. Many companies received subsidies and tax cuts. Taiwan’s three biggest DRAM companies invested $20 billion in new capacity. But, the global downturn has damaged the companies, now with a combined market capitalization of less that $2 billion. Before the downturn, the government did not involve itself too deeply in regulation competition, which led to companies being unable to introduce ground breaking technology and force them to compete with commodized products. The South Korean government, however, engineered a merger a decade ago that resulted in Samsung and Hyinx. 

The reaction to the problem has Taiwan’s government intervening. The new company could potentially merge all six Taiwanese DRAM makers: Promos Technologies Inc., Nanya Technology Corp., Powerchip Semiconductor Corp., Winbond Electronics Corp., Rexchip Electronics Co. and Inotera Memories Inc. The merging of all six companies is believed to result in stronger pricing power and better competition to South Korea’s companies.

The market reacted positively to the news. Shares of Taiwanese DRAM makers ended up 6 percent in Taiwan trading. Japan’s Elpida’s shares also surged 5% but the Korean company Hyinx, the smaller of the two Korean companies, fell 3.7 percent upon the news.

For Japan and U.S. DRAM makers, Elpida and Micron, respectively, the new holding company would give them an opportunity to form a stronger industry alliance that could prove to be more efficient competition against the Koreans. However, it is still unknown whether or not the aforementioned companies will actually merge. It has been reported though that Elpida is seriously considering merging after careful review of the master plan. Micron already has strong ties with one of Taiwan’s DRAM companies and will most likely continue to work with the consolidated DRAM sector, continuing to offer patents to aid new research and development.

If the holding company does get established, the potentials are endless but with the current economic situation Taiwan might have missed the opportunity that Korean DRAM giants were afforded to. However, if all potential companies do indeed band together, Samsung’s and Hyinx’s global market share might decrease drastically.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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