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Components | February 04, 2012

Semiconductor industry loses great talent

The DRAM industry received tragic news – Steve Appleton, CEO of Micron Semiconductors, passed away at 51 in a small plane crash in Boise, Idaho.
In light of Appleton’s death, Micron COO and President Mark Durcan will assume the responsibilities of CEO until the successor is appointed by the Board of Directors; Durcan originally planned to retire in August 2012. Established in 1978, Micron is the oldest of today’s remaining DRAM manufacturers. Appleton joined the company in 1983, working in various positions before replacing co-founder Joe Parkinson as CEO in 1994, for a total of 18 years in the position.

Micron makes a variety of semiconductor products, with DRAM and NAND flash products accounting for the largest portion of revenue. According to TrendForce research, for 2011, DRAM market share was 11.8% in 3Q, and NAND flash market share was 11.3% in 4Q, putting Micron in fourth place. As DRAM products are considered commodities, they are highly affected by economic changes.

During his tenure, Appleton underwent several challenges in the industry, but he was always able to turn the situation around and lead Micron through the economic downturns. He also oversaw two famous mergers and acquisitions, including the 1998 acquisition of its competitor, Texas Instruments, and the 2001 acquisition of Toshiba’s semiconductor DRAM production line.

Both acquisitions turned the industry’s severe oversupply around and secured Micron’s sustainable core competence of technology value as a corporation. His death is without a doubt a great loss of talent for the industry, and it will also pose challenges for Mircon’s management.

Micron-Elpida Alliance To Be Affected, Influencing Future DRAM Market Development

Since May 2011, the DRAM industry has begun undergoing another wave of industry shift. Affected by the economic changes and the weak shipment demand of the PC market, DRAM oversupply again caused significant losses for the majority of the DRAM makers.

Merger and acquisitions rumors abound, in particular with talks of Micron and Japanese maker Elpida’s alliance. Should this merger become a reality, the market is expected to once again alleviate the oversupply situation. A portion of the DRAM excess production capacity can be transferred to producing NAND Flash products.

However, Micron’s loss of its leader at this critical moment further increased the uncertainty of this potential collaboration. It is expected that Micron’s management must undergo internal management adjustments before the company can further negotiate with Elpida.

According to Nikkei’s earlier reports, Micron’s plan to invest US$ 500 million will most likely be further delayed. At the time, Mircon sought out Elpida for its superior Mobile DRAM technology to complement the company’s shortcomings in this area. Combined with Micron’s Flash memory products, and integrating it into MCP products to further expand its smartphone and tablet market shares.

As for commodity DRAM, they can also work with Elpida to jointly develop the technology and makeup for Micron’s 2-year gap in manufacturing process. Micron's related companies including Nanya and Inotera, both have the chance to benefit, topped with Taiwanese DRAM makers mass production capacity, this collaboration between the US, Japan and Taiwan would close in the commodity DRAM product manufacturing cost gap with the Korean makers; moreover, they can also gradually migrate to mobile DRAM production, which has a greater market demand, in order to obtain greater gross profit while being able to compete with major Korean makers such as Samsung and Hynix.

Due to Micron CEO and Chairman Steve Appleton’s sudden passing, TrendForce believes that not only will Micron and Elpida’s collaboration may be delayed, but it may also affect the development of the DRAM industry in Taiwan, US and Japan.

The industry consolidation may delay further with significant consequences. At the moment, the industry can only hope for Micron to quickly ascertain its management team and future direction, bringing the company back on track for the tasks ahead.

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