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Date: 15-07-15

China goes for big in semiconductor

It is reported in the media, China's Tsinghua Unigroup is planning a acquisition bid to buy Micron for US$23 billion. This offer clearly shows China's super-fast growth plans in chip industry. China imports huge amount of chips but sells back to the world by using them in the electronics systems it exports. Many US made chips enter China and enter back into US by embedding themselves in products like smart phones to PCs to many such products. Not only for business reason, but due to strategic reason, China is focusing on building local chip manufacturing capability. China has lot of fabless design companies. China SMIC makes 28nm chips and is planning to make 16nm/14nm by 2020.

SMIC, Huawei, Imec, and Qualcomm have invested to form a new company called SMIC Advanced Technology Research & Development (Shanghai) Corporation to build 14nm chips in China. Majority is owned by SMIC, while Huawei, Imec, and Qualcomm will be minority shareholders. Imec to provide know-how in advanced semiconductor processing technology.

While this is about logic chip manufacturing. China is looking for acquisition in memory segment. China based Uphill Investment recently acquired a small sized US based SRAM vendor ISSI and could win over Cypress Semiconductor's higher bid for ISSI. But the Micron case is little different. To give you some more analysis on semiconductor memory industry:

DRAM and NAND flash memory industry is now commoditised in its own way, not like some other commodities! However advanced is the technology what matters here is the manufacturing efficiency what Samsung, Toshiba and Hynix have shown. China is equally good in achieving manufacturing efficiency.

Semiconductor memory industry is now more dependent on semiconductor equipment makers, where US has edge over other regions in the world. The deal between U.S.-based Applied Materials and Japan-based Tokyo Electron was not cleared.

There is significant research going on in developing nonvolatile memory chips which can replace SRAM as well as DRAM. Once that happens the technologies used by leading semiconductor companies such as Micron, Samsung and Hynix and Toshiba will be far less worth. The new memory technologies require a some what different semiconductor manufacturing equipment.

But for Micron to survive in the highly competitive semiconductor market surely there are better ways rather than getting acquired by a Chinese company.
First of all, Micron is a near hundred percent semiconductor memory focused company. Memory chips is everything for Micron.

When it comes to cost of manufacturing of memory chips, Micron has all the advantages what Samsung, Toshiba and Hynix has. Micron can invest in a manufacturing location where there's going to be a significant growth in electronics consumption including some growth for PC market and mobile phone market, and in the regions where these other Asian leaders failed to invest.

Micron has also done significant innovation in 3D memory cube. Micron is also strong in image sensor market. Even if it decides to sell off the business to Chinese investor, it can bargain for far higher price than what the offer been reported in the media.

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