Semiconductor companies gang up on Korean firms

Samsung Electronics Co. and Hynix Semiconductor Inc., be on your guard. Semiconductor companies around the world are forming alliances, in many cases aiming at the two Korean memory chip leaders, industry analysts said. “Foreign memory chipmakers are joining forces not only in developing technologies, but also in production, with the shared goal of challenging domestic firms,” an industry official said yesterday. “Such a threat is posed not only in the current mainstream dynamic random access memory chips, or DRAM, but also is appearing in next-generation products, such as flash memory chips. Koreans companies must draw up countermeasures as soon as possible.” In the past four months, more than 10 strategic partnerships have been formulated among semiconductor chipmakers. AMD, a U.S. microprocessor company, teamed with UMC, a Taiwanese foundry. NEC of Japan joined with LSI logic of the United States. ST Microelectronics, the third-largest memory chipmaker, partnered with Motorola and Philips. Fujitsu of Japan and AMD of the United States in early April launched a joint venture with $2.5 billion in capital to consolidate their flash memory chip businesses. “To our knowledge, Fujitsu and AMD’s partnership was prompted by their losing business to Samsung Electronics in the flash memory chip market,” an official from Samsung said. Samsung is the world’s second-largest producer of flash memory chips, following Intel. Flash memory chips are a type of constantly-powered chip designed to retain data when power is turned off. They are widely used in digital cameras and mobile handsets. Major global players in the semiconductor industry have cocked an eye at the Korean DRAM market, joining hands with latecomers from Taiwan and China. Elpida, a memory chip joint venture between Hitachi and NEC of Japan, recently struck an agreement with Semiconductor Manufacturing International, a Chinese foundry company. The Chinese firm will produce DRAMs for Elpida for five years, and Elpida will transfer necessary technologies to Semiconductor Manufacturing. “Japanese DRAM companies are expanding their market shares and pressuring Korean firms through a strategy of handing over production to Chinese firms while leaving only core production facilities and research and development institutes in Japan,” an industry expert said. Infineon Technologies of Germany, which joined forces with Taiwan’s Nanya Technology in production early this year, is already encroaching on the markets of Korean companies. Infineon, the world’s fourth player last year, has overtaken Hynix to become the No. 2 memory chipmaker. Infineon and Nanya will jointly build 12-inch wafer plants, which start operation later in the year. Ulrich Schumacher, president and chief executive of Infineon, has claimed that the company will overtake Samsung in 2006, helped by stepped-up cooperation with Nanya. Korean companies are speeding up their defensive strategies. Hynix agreed April 24 with ST Microelectronics to jointly develop and produce NAND flash memory chips, a large-density chip that is expected to be useful for feature-intensive mobile devices and digital cameras. Hynix, which was recently sentenced to high countervailing tariffs from the United States and Europe on its DRAM products, is trying to focus on flash memory chips. Samsung is considering entrusting Dongbu Anam Semiconductors, a local foundry firm, with its production in order to concentrate on nonmemory chips. NEC and Toshiba late last year agreed to co-develop next-generation energy-efficient semiconductor chips, the so-called MRAM, by 2005. by Pyo Jae-yong