October 26, 1998, Issue: 813
Section: Sourcing
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Intel takes stake in Micron -- Makes $500M Equity Investment In Struggling DRAM Maker
Amber Howle
Santa Clara, Calif. -- In order to boost development of the Direct Rambus memory systems it supports, Intel Corp. is making a $500 million equity investment in memory manufacturer Micron Technology Inc.
The deal, however, is not likely to put a damper on Micron's plans for the competing SLDRAM memory technology.
Boise, Idaho-based Micron is one of the few members of the SLDRAM (formerly known as SyncLink) consortium currently shipping samples of 64-Mbyte SLDRAM. Micron, along with many other SLDRAM supporters, also supports Direct RDRAM and Double Data Rate (DDR) SDRAM technologies.
"The deal makes no change in our plans for developing other alternatives or architectures," said Jeff Mailloux, DRAM marketing manager at Micron.
Although SLDRAM is unlikely to generate a lot of volume next year, "we think it is a good technology and an area we want to keep pursuing," Mailloux said.
Representatives from Santa Clara-based Intel said the company's acquisition of stock rights, exchangeable for 6 percent of Micron's common stock, is part of its strategy to accelerate the adoption of Direct RDRAM.
Micron is one of the world's largest DRAM manufacturers, and it meets Intel's strategic requirements to provide industry leadership, said an Intel spokesman.
Rambus Inc., Mountain View, Calif., in close conjunction with Intel, developed the concept of Direct RDRAM. Major memory suppliers have rallied around the technology, which requires a whole new memory architecture with core logic support.
Memory suppliers, however, have not put all their eggs in one basket. Some already are shipping DDR samples, which are scalable to the current generation of SDRAM. Others still officially are supporting SLDRAM, which, like Direct Rambus, requires a new architecture.
To date, Micron and Siemens Components Inc., Hong Kong, have been the most vocal supporters of SLDRAM.
Although Micron claims the deal with Intel will not affect its plans for SLDRAM, analysts were skeptical, saying it could put SLDRAM on Micron's back burner.
"[Micron] is obviously going to put a lot more emphasis on Direct Rambus, and [SLDRAM] will wind up the odd man out," said Steve Cullen, DRAM analyst at Cahners In-Stat Group, Scottsdale, Ariz.
The memory industry's manufacturing capabilities are not likely to keep up with the demand for Direct RDRAM next year, said Sherry Garber, senior vice president of Semico Research Corp., Phoenix. "Intel realizes that they'll have a hard time getting the amount of Direct RDRAM they believe they'll need," she said. With the acquisition of Dallas-based Texas Instruments Inc.'s memory business, Micron has the opportunity to expand manufacturing significantly in the next year, she said.
Because of a softening market over the last three years, the DRAM industry is not very enthusiastic about making investments into new memory architectures such as Direct Rambus and SLDRAM, Garber said.
Although Intel does not have a controlling interest in the deal, "$500 million is a nice incentive to get Micron to make an investment in Direct RDRAM," Garber said.
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Who Gets What: Highlights of deal
- Investment gives Micron much-needed capital.
- Intel acquires rights to 6 percent of Micron's outstanding shares; ensuring ample domestic memory chip supply.
- Micron plans to develop alternative memory technologies.
Copyright ® 1998 CMP Media Inc.
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