Taiwanese media: Mainland China still needs help from us for DRAM technology development

Source: Content from United Daily News , Thanks.

Mainland China is actively developing the memory industry, but it is still difficult to break through the technical defenses of the three major DRAM manufacturers. Under policy and time pressure, the importance of Taiwanese manufacturers playing a key role is highlighted. Industry insiders believe that Taiwanese manufacturers will inevitably become the first target of cooperation for mainland China in the future.

The memory industry in mainland China is currently divided into three major forces: Tsinghua Unigroup, Hefei Ruili and Fujian Jinhua. However, after Micron launched a judicial investigation and kept a close eye on the three major manufacturers' theft of patents and trade secrets, Tsinghua Unigroup has recently stated that it will move towards independent research and development in the future.

The Hefei Ruili team, led by former Inotera vice president David Liu, is still in full swing and has announced that it will enter the 19nm DRAM production next year; Fujian Jinhua has cooperated with UMC and commissioned UMC to develop DRAM-related process technologies to produce niche DRAM. The team is led by Chen Zhengkun, former general manager of Rexchip and Micron Taiwan and current senior vice president of UMC, who also serves as general manager of Fujian Jinhua.

It is understood that UMC established a small trial production line in Southern Taiwan Science Park for Fujian Jinhua, which was temporarily suspended due to Micron's judicial investigation, but resumed operation soon after. It will initially introduce 32 nanometers, and the ultimate goal is to move into processes below 25 nanometers.

However, industry insiders revealed that as Micron vigorously conducted judicial investigations in the United States, Taiwan, and mainland China, mainland DRAM industry players have encountered a considerable bottleneck and have found it difficult to make a breakthrough. For example, GigaDevice's recent acquisition of Beijing ISSI has failed. Even if there is a breakthrough in the future, they will probably face a flood of infringement lawsuits from major manufacturers such as Micron and Samsung.

Memory industry players analyzed that China encountered many technical obstacles in DRAM, which made Taiwanese manufacturers, including Nanya Technology and Winbond Electronics, the main targets for Chinese manufacturers to compete for production capacity. The reason is that Lenovo, Huawei, OPPO, VIVO, and even Haier, TCL and other major computer, mobile phone and home appliance manufacturers have their products sold all over the world. Most of them will respect intellectual property rights and will not rashly import memory from Chinese manufacturers that are suspected of infringement.

Industry insiders estimate that as Samsung, SK Hynix and Micron are unwilling to switch technology, it will be difficult for mainland DRAM manufacturers to break through the technological defense line for at least five years. However, mainland China is devoting all its national strength to the development of memory, and the development of DRAM is imperative. Under the dual pressure of time and technology, Taiwanese manufacturers have become a channel for obtaining technology licenses, and their future strategic position deserves attention.

The memory industry is a typical capital-intensive and technology-intensive industry. Let's start with capital. Just the land and factory buildings, excluding equipment, may cost NT$15 billion to NT$20 billion. Research firm Bernstein estimates that if you want to gain a place in either the DRAM or NAND Flash market, you need at least 15% of the market share. Based on the production capacity in the fourth quarter of 2014, the monthly output must reach 200,000 pieces (capital expenditure is about US$20 billion, about NT$626 billion).

In the process of chasing market share, if the production capacity increases to 200,000 pieces per month, the market will be oversupplied. For new entrants with higher initial production costs, the price will fall below the cost. Even if the new entrants invest more than US$20 billion in capital expenditures in the first 16 to 24 months, they will still lag behind the industry leaders by more than one generation in ten years. Bernstein estimates that new entrants who invest in the DRAM industry will have to bear a loss of US$40 billion (about NT$1.3 trillion) in the first ten years, and those who invest in the NAND industry must be prepared to face a loss of US$35 billion (about NT$1.1 trillion) in the first ten years.

Bernstein estimates that new entrants into the DRAM industry will face losses of more than $40 billion in the first ten years.

Even if you pay a lot of money, there is no guarantee of success in this industry. Taiwan is a bloody example.

From the 1990s to 2010, Taiwan invested more than US$50 billion (about NT$1.6 trillion) in the development of the memory industry in order to gain a certain market share. However, the two trillion Samsungs in 2006 were no match for the strong support of Korean manufacturers for the entire industry. After the 2008 financial tsunami, when manufacturers were hesitating whether to invest, Samsung doubled its capital expenditure to 18 trillion won (about NT$557.8 billion) in 2010 and devoted itself to the development of DRAM, which wiped out the industry at the time.

In the ten years from 2001 to 2010, the DRAM market had a profit of 8 billion US dollars. If Samsung's profit of 17 billion US dollars is excluded, the entire DRAM market lost 9 billion US dollars. Excluding Samsung and SK Hynix, the two Korean factories, the entire industry lost nearly 13 billion US dollars. Only Samsung and Hynix made profits in the entire industry. During this period, Qimonda went bankrupt, Powerchip and ProMOS suffered serious losses and faced restructuring, and Nanya Technology also turned to niche chips and lost its market share. Among the Taiwanese factories, the only large-scale one left was Inotera, in which Micron has a stake.

Since then, Taiwan's process technology has always lagged behind DRAM leaders such as Samsung by one generation, and costs have remained high. Eventually, ProMOS and Powerchip also withdrew from the DRAM market, with the former transitioning to IC design and the latter entering the foundry market.

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