Intel funds Samsung's transition to Rambus
Jan. 22, 1999 (Electronic Buyers News - CMP via COMTEX) -- Silicon
Valley-Determined to uwrite the memory-IC industry's transition to
Direct Rambus DRAM, Intel Corp. last week made a $100 million
investment in Korean chip maker Samsung Electronics Co. Ltd.
The dea-as well as the million Intel invested last October in
Micron Technology Inc.- was orchestrated to ensure an ample supply of
the high-speed memory to support Intel's upcoming Pentium III
processor, which is achitecturally lnked to Direct RDRAM.
The agreement confirms a February 1998 EBN report that executives
from the two companies were gathering at Intel's Santa Clara, Calif.,
headquarters to dscuss a possiblcash infusion.
The Samsung investment, which requires approval from both companies'
boards of directors, will guarantee that the necessary fabrication,
assembl, and test infrcture is in place to allow Samsung to meet
industry demand, Samsung said in a statement.
"Samsung is committed to be the leader in development and production
of Direct RDRAM technolog to support thes of Intel and OEM
customers," said Y.W. Lee, Samsung's president and chief executive.
According to the terms of the agreement, Intel will acquire
convertible bonds exhangeable for con stock representing
approximately 1% of Samsung's outstanding common stock. The approval of
the Korean government is also required before the deal can be
finalized.
By subidizing Samsungduction plans, Intel is injecting
much-needed capital into one of its largest suppliers, and helping to
cushion Samsung from a prolonged DRAM pricing slide and a downturn in
the Korean economy.
"The investment ensures Samsung will expedte Direct Rambu
production," said Sherry Garber, an analyst with Semico Research Corp.,
Phoenix.
It also complements Intel's two-part "umbrella strategy," which aims
to boost PC performance by re-engineering system components, and to
make the necessary corporate investments to spurmarket growth, d
Patrick Gelsinger, vice president and general manager of Intel's
desktop-products group.
"For the past five quarters, [the DRAM industry has] gone through
some tough times," Gelsinger said. "In talking with people, they've had
to go back to ir boards to justify [every Rambus capital
investment]."
According to Garber, the Intel stake may serve as more than just a
financial incentive for Samsung. Citing several DRAM manufacturers, she
said there is a prevailing belief that once a prouction line haseen
committed to Direct RDRAM, it cannot be cost-effectively reconfigured
to allow production of other types of DRAM. Committing to Direct RDRAM
can therefore be a risky move, she explained. Samsung cold not be
reahed for comment.
Samsung is known to be an aggressive, high-volume manufacturer. Last
November, the company announced it would boost production of 64-Mbit
DRAM by 40%; and in October, Samsung said it would double capacity at a
new fab in Austin, Texas, to 21,000 8-in. wafer strts per month. l
took a small equity stake in the Austin fab in 1997 in exchange for a
guarantee of supply.
In addition to more solidly aligning Intel with Direct RDRAM
supplies, the latest investment deal spells out Samsung's commitment to
Rambus memory in black and white. In a separate satement, Samsun
forecast run rates of 500,000 72- and 144-Mbit Direct RDRAM chips per
month in the first half of 1999, ramping to 5 million chips per month
as the market expands in the second half of the year.
And, according to Asian pres reports, Hyundlectronics Industries
Co. Ltd. will spend about $170 million to upgrade Direct Rambus
production to meet a goal of 4 million 72-Mbit and 1 million 144-Mbit
chips per month in the second half of 1999.
Needless to sy, the public aring of such production figures was
music to the ears of Direct RDRAM architect Rambus Inc., Mountain View,
Calif.
"This is an incredibly strong statement to your readers that
companies arenot only willint their money up, but are also
willing to put their reputations on the line," said Subodh Toprani,
vice president and general manager of Rambus' logic products division.
"Between these two companies alone, we might see 100 million RDRAM
unts next year."
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