U.S. chip maker Micron Technology Inc (MU.N) is in discussions with the government of Taiwan about taking a role in restructuring the island's memory chip manufacturers, the company said on Monday.
The proposal would involve Micron sharing up to 2,000 of its 17,000 patents and potentially creating a joint-development model that would place certain research and development activities in Taiwan, according to a Micron spokesman.
Such a deal would involve Micron taking a stake in a holding company formed by the government of Taiwan that would include some of the island's struggling dynamic random access memory (DRAM) chip makers, though Micron would not specify which companies.
Taiwan's economic minister previously told Reuters the government has up to T$70 billion ($2 billion) to bail out the sector, which has been hurt by falling prices and a supply glut, and could take major stakes in any joint ventures.
Taiwan's top three memory chip manufacturers, ProMOS (5387.TWO), Powerchip (5346.TWO) and Nanya Technology (2408.TW), have been working on restructuring plans with the government since late December.
Micron is interested in this effort because it creates a better environment for the DRAM industry and provides Micron with a cost-efficient way to grow its scale, said Micron spokesperson Dan Francisco.
Micron, based in Boise, Idaho, and Japan's Elpida (6665.T), have both been widely reported to be in discussions with Taiwan about a bailout of the sector.
On Saturday, Michael Sadler, executive vice president of Inotera Inc, a joint venture of Micron and Nanya, was quoted by a Taiwan newspaper as saying Micron would offer the most preferential conditions for a holding company.
Francisco would not say whether Micron's proposal involved any funding on its part, citing the ongoing nature of the negotiations.
He did not say when the proposal was submitted, but noted negotiations have been under way for weeks.
MONEY FROM TAIWAN GOVT
Analysts say the Taiwan government could initially set up a new holding company for memory chips, in which foreign companies could bring in advanced technologies in exchange for stakes. The new company would be better placed to compete against South Korean DRAM leaders Samsung (005930.KS) and Hynix (000660.KS), according to analysts.
If the Taiwan government is going to hand out money, Micron doesn't want to be cut off, says Auriga USA analyst Daniel Berenbaum.
If I'm Micron I would rather get money from the Taiwan government than see that money go to competitors, Berenbaum said.
Taiwan's manufacturers produce nearly a quarter of the DRAM chips used in PCs and other electronic gadgets. The market for DRAM chips has been racked by an industrywide oversupply, exacerbated by plummeting demand for PCs and electronic goods that use the chips amid the global economic slowdown.
The downturn has hurt all memory makers, including Micron, which has lost more than $2.7 billion during the past eight quarters. In February, Micron said it would cease manufacturing DRAM chips on older, 200mm equipment at its Boise, Idaho facility and eliminate as many as 2,000 jobs in the state by the end of its fiscal year.
But Micron has shown an interest in bargain-priced Taiwan assets even as it slogs through the downturn. In November, it struck a deal to acquire a 35 percent stake of Inotera, which owns advanced memory production facilities, for $400 million.
Micron's Francisco said a joint research and development center in Taiwan under its proposal would supplement, rather than replace, its current R&D efforts in the United States.
Bob Merritt an analyst with Convergent Semiconductors, a memory industry consulting and research firm, said the ultimate shape of Taiwan's DRAM restructuring, and whether a foreign firm plays a role, likely depends on the package of cash and intellectual property that a company like Micron or Elpida brings to the table.
This is a huge, very complicated game, said Merritt. And it has to do with countries that want to keep people employed.
Micron's stock fell 21 cents to $3.01 on Nasdaq on Monday.
(Reporting by Alexei Oreskovic; Additional reporting by Baker Li in Taipei; Editing by Tiffany Wu, Richard Chang)