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Winbond hoped to sustain stable growth. 26.
Exhibit 11. Winbond: Quarterly Product Mix
(SinoPac Securities. 2010)
4. Enter TMC: The Government’s attempt at consolidation.
Taiwan's memory chip makers were heavily affected by the most recent DRAM slump and lost 5% of their market share over the previous six months up to February 2009. 27. In order to help the ailing national DRAM companies the Ministry of Economic Affairs (MOEA) announced the formation of TMC (Taiwan Memory Company) in March 2009 to spearhead efforts to consolidate the island's struggling DRAM chip sector into a single company while bringing in technology from Elpida or Micron with the hope that the new entity could continue to develop its own DRAM technology and compete with global giants such as Korea's Samsung and Hynix. 28. The government aimed to invite private investors to invest in the new
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company, with the state owning less than 50%. 29.
The proposal to form TMC as an independent entity was aimed at restructuring rather than bailing out the cash-strapped chipmakers. 28. The government‟s view at the time was that the DRAM crisis was beyond the solution of a traditional rescue plan and needed a complete re-building of the business model. It aimed to inject minimal capital for maximum return focusing on industry-wide restructuring for long-term success, instead of an individual company bail-out. 6.
The ministry of economic affairs named former United Microelectronics Corp.
executive John Hsuan to head the state-backed company. 30. A New York Times article quoted him stating that "The key is to secure and develop own technology in the future and then promote it to international level,". 29. Mr Hsuan‟s main tasks included: 1) coordinate set-up of the new TMC management team; 2) negotiate with Micron and Elpida for the best terms; 3) engage with the Government Development Fund and other potential investors; and 4) recruit talent in management, technology, design, and finance. The mandate is for TMC was to finalize Elpida or Micron‟s negotiations by June and complete the formation by September 2009 including consolidation and investments. 6.
In April 2009 both Micron Technology and Nanya Technology, along with their joint venture Inotera memories, opted out of discussions to be part of the new TMC led group. For Micron's part, the company wasn't comfortable with the risk of its
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technology IP potentially leaking out if multiple patent holders began working under TMC. Micron stressed that its IP portfolio for specialty DRAM was more advanced than Elpida's, who was one of TMC‟s participants. At the time Micron, Nanya, and Inotera said they would continue to develop and improve their own partnership in preparation for competition from the new memory company. 31.
After Micron‟s announcement, it seemed that Taiwan‟s DRAM industry, with the entrance of TMC, was looking to still end up divided into two camps. One led by Elpida and TMC and the other led by Micron.
In September of that year Taiwan Memory Company (TMC) announced a deal in which it agreed to partner with Promos in chip production and R&D. Promos soon after indicated that it would cancel its unpaid leave program in October. Promos employees had been taking several days of unpaid leave each month since November 2008. UMC, which had been investing in Promos since June 2007 and become the second largest shareholder with a 7.03% stake was to cooperate with TMC to integrate the Memory chip supply chain. 32.
By October 2009, apart from the Promos deal, TMC had made little headway since a consolidation plan was unveiled in March apart from saying it was seeking a
partnership with Elpida Memory. At that time DRAM prices had rebounded thanks in part to demand following the launch of Microsoft Corp‟s Windows 7. Global DRAM prices leaped 21 percent quarter-on-quarter in the third quarter of 2009, after a rise of 19 percent in the previous quarter. The second-quarter price rebound marked the first since the fourth quarter of 2006 .” Meanwhile Taiwan‟s major DRAM makers — Nanya Technology, Powerchip, Inotera Memories and ProMOS Technologies — had seen monthly revenues rise by 15 percent per month for the three months
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between July and September 2009. 7.
Some industry experts such as Liu Szu-liang, a DRAM analyst with Yuanta Investment Consulting started to be quoted by the media saying that “The government‟s efforts are destined to be a flop” as “The optimal timing for
consolidation and securing technological support from outside had passed.” As he saw it almost impossible now to bring DRAM representatives back to the negotiating table as rebounding demand ignited their new hope of making a comeback without government controls 7.
On November 11th 2009 TMC received a blow after the Legislative Yuan of the Republic of China concluded that the Taiwan Economic Bureau was not allowed to invest in TMC. Later on, the Taiwan Economic Bureau announced that the DRAM reformation plan had ceased. According to Digitimes, TMC and Elpida‟s
collaboration might also be cancelled as the Taiwanese government would not inject money into TMC and thus to Elpida.
SinoPac Semiconductor analyst, Sophie Chuang, opined at the time that the key issue to the unforthcoming government support was that other players in the industry (e.g.
Micron and NanyaTech) saw the action as unjust. Moreover, Elpida‟s unwillingness to give up essential technology was also deemed critical to the government‟s decision.
33.