Intel reportedly seeking DRAM alliance in Japan

HSINCHU, Taiwan --- Intel Corp. is in discussions that could lead to the creation of a memory chip alliance aimed at increasing Intel's bargaining power in the DRAM market, according to a Taiwan company connected to the negotiations.

Intel is negotiating with Japanese vendors Elpida Memory Inc. and Mitsubishi Electric Corp. to provide it with DRAMs that will support high-end processors and chipsets to be developed by Intel, reported the Taipei-based Economic Daily News. Elpida is a DRAM venture between NEC Corp. and Hitachi Ltd.

Elpida and Mitsubishi would then outsource their DRAM production to Hsinchu-based Powerchip Semiconductor Corp., which produces DRAM for Mitsubishi, the report said, without identifying sources.

Eric Tan, a vice president at Powerchip, told EBN that Intel and the Japanese chipmakers "have conducted talks for several months on the alliance," but he declined to provide further details.

An Intel spokesman in Folsom, Calif. downplayed the discussions. "Basically, it's just speculation. We talk with memory vendors all the time. We're trying to coordinate capacity, so there's no news there. Anything else is speculation."

The arrangement comes as the DRAM industry is going through a major consolidation that has given a handful of suppliers a hammerlock on the market. Intel "certainly doesn't want to see the DRAM market eventually dominated by Samsung Electronics and Micron only," Tan said. "They would like to boost their bargaining power by having its own DRAM partners."

Samsung and Micron together hold about 50% share of the worldwide DRAM business, some analysts said.

Officials of Intel's Taipei office declined to comment on the report, while those at Elpida and Mitsubishi couldn't be reached for comment.

For the Santa Clara, Calif.-based powerhouse, the partnership would make sense, but it doesn't mean Intel necessarily needs to team up with Japanese companies, some analysts said. "If Intel's new products are attractive in the market, many DRAM companies would just love to support the platforms without Intel asking," said Conner Liu, research head at SG Securities in Taipei.

A few years ago, Intel invested in Micron, Boise, Idaho, in exchange for its support, but the arrangement later failed, Liu said.

Japanese chipmakers have increasingly farmed out their production to Taiwan to help cut costs as a poor economy at home and a weak market overseas make it hard to build new facilities and upgrade manufacturing equipment.

Earlier this week, reports out of Japan stated that Mitsubishi is in the initial stage of talks to sell its DRAM division to Elpida. Neither company would confirm or deny those reports.