FPG announces it is ending DRAM production

TAIPEI, Taiwan -- Formosa Plastics Group (FPG, 台塑集團) officially ended its dynamic random-access memory (DRAM) business and research contract with Micron Technology (美光科技), FPG said yesterday.

FPG, Taiwan's top plastics, fiber and electronic machinery company which holds shares in PC chip technology innovator and manufacturer, Inotera Memories, Inc. (華亞科技), said it had been working with its business and research partner Micron Technology for four years on DRAM products and technological innovation.

As the PC chip market has been sluggish during a time of strong competition from South Korean manufacturers, the DRAM business led to severe deficits for the company, according to FPG.

New Partnership

FPG said that it had signed two contracts with Micron. One is to officially end the research and manufacturing partnership on the production of DRAM chips with Micron. The other is to start an investment project with Micron concerning Inotera Memories, Inc., which will focus on the manufacturing of PCs and servers.

According to Inotera, the company's production facilities are designed to manufacture high-density and high-performance DRAM products using state-of-the-art technology.

Inotera said it will accommodate Nanya Technology Corp. (南亞科技) on the change in business strategy since the firm signed the relevant agreements with Micron.

In the future, the company will focus on restructuring various arrangements among the three parties, including joint ventures, wafer supply, finance and other related matters, Inotera officials said.

Inotera added that under the new supply agreements, Nanya Technology will only have the right to reserve a certain percentage of Inotera's wafer-start capacity per month from February till December, while Micron will substantially purchase all of Inotera's manufacturing output beginning in the early part of the year. Inotera also said that Micron's purchase price for Inotera's output is market-based, as opposed to the former margin-sharing arrangement.

Optimistic Investment

Nanya said it expects to ease the monthly deficits of nearly NT$1 billion through the new partnership. The firm said the new partnership appears likely to increase the prices of its products, thereby boosting profits.

According to Nanya, Micron currently holds a 40-percent share of Inotera, while Nanya holds 29 percent. The firm said that in the future it plans on increasing its stake in Inotera.

Nanya said it will change its business strategy to focus on consumer and low-power value-added DRAM product market segments. The company said it will cease its DRAM technology joint development program with Micron, but will maintain the right to obtain future process technology from Micron via transferring and licensing.

According to Inotera, the new investment project will amount to around NT$6 billion. The goal of the agreement is to help the company clear its current financial deficits. The company said since Micron manufactures certain products that can make high gross profits, the new partnership holds great economic potential.