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Micron veers away from Taiwan DRAM venture

Posted: 09 Apr 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Micron capex? Taiwan DRAM venture? memory market?

Micron Technology Inc. has cut its capital spending amid ongoing losses and a lowered forecast, and disclosed it has no plans to join the new DRAM venture in Taiwanfor now.

The company's net loss narrowed slightly in its latest fiscal quarter and sales fell sharply on a plunge in average selling prices, which sank 30 percent from the preceding quarter.

Micron's results missed Wall Street's expectations. "The miss was largely due to steeper than expected price declines early in the quarter, which negatively impacted the gross margin," said Daniel Amir, an analyst at Lazard Capital Markets, in a report.

In addition, Micron's "management cut its capex projection again," he said. "Management reduced its FY09 capex guidance to $650-to-$700 million from $650-to-$750 million previously."

For the May quarter, the analyst cut his forecast for Micron. He now expects sales of $1.075 billion and an EPS of minus $0.30, verses sales of $1.312 billion and an EPS of minus $0.26. In the latest fiscal quarter, Micron posted sales of $993 million and an EPS of minus $0.97.

Despite the lowered forecast, Micron's "outlook (is) growing more positive as memory starts bouncing off the bottom," the analyst said.

Still in discussion
During a conference call, Micron downplayed the recent events in Taiwan. In a possible move to gain control of Taiwan's DRAM industry, Japan's Elpida Memory Inc. this week was selected as a strategic technology partner of Taiwan Memory Co. (TMC). As reported, the Taiwan government is bailing out the island's loss-ridden DRAM sector.

As part of the proposed plan, Taiwan will consolidate many of its DRAM makers and form a new company, dubbed Taiwan Memory Co. Taiwan's DRAM makers include Nanya, Inotera, Powerchip, Rexchip, ProMOS and Winbond.

The Taiwan government will own less than 50 percent of TMC. The entity was planning to form a partnership with either Elpida or Micron.

Elpida was given the nod this week, creating some confusion in the market. Within TMC, Elpida may help to consolidate several DRAM makers in Taiwan, including Powerchip, Rexchip and possibly ProMOS.

So, is Micron and its partner on the outside looking in? TMC claims that it is also talking to Micron and its Taiwan DRAM partner, Nanya Technology Corp. Micron and Nanya have a joint DRAM venture in Taiwan. As reported, Micron recently acquired Qimonda AG's share in a joint DRAM venture with Nanya in Taiwan, dubbed Inotera Memories Inc.

"I would just say that we're still in discussions with the Taiwan government," said Steve Appleton, Micron chairman and CEO, in a conference call with analysts, which was transcribed by the Seeking Alpha Website. "And, you know, we just haven't seen any compelling reason yet in terms of benefits for Micron to participate there."

Nanya DRAM ramp
For now, the Micron/Nanya duo have not joined TMC and will operate business as usual, said Ken Hurley, president and CEO of Nanya Technology's U.S. subsidiary.

Hurley confirmed earlier reports that Nanya's parent company, the Formosa Plastics Group, has set plans to inject NT$10 billion ($302 million) in its DRAM unit. The funds will be used as part of its major DRAM conversion effort.

At present, Nanya is shipping 70nm DRAMs, based on the trench technology from its former partner, Qimonda. But Nanya is looking to convert its capacity over to 68- and 50nm stacked-capacitor DRAM technology from its new partner, Micron.

To make the entire conversion process possible, Nanya and Micron will require a grand total of NT$20 to NT$25 billion ($603.9 to $754.9 million) in capital spending. It's unclear if or when the companies will garner those funds.

Still, Nanya's parent company, Formosa Plastics, is still backing the company despite huge losses in the DRAM unit. "They are still supporting us," Hurley said.

- Mark LaPedus
EE Times

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