Korea Joongang Daily: China Plans to Venture into DRAM Manufacturing

According to Korea Joongang Daily, China's No.1 printed circuit board (PCB) maker, BOE Technology Group, plans to venture into dynamic random access memory (DRAM) manufacturing backed by government support as is often the case with many Chinese sectors, triggering fears that the global market could again plunge into cutthroat competition after years of teetering market dynamics before the recent rally.

BOE has risen to be a globally top-5 liquid crystal display (LCD) maker after acquiring Hynix's LCD business, HYDIS, in 2002 with help from Beijing.

The daily also reports that at least six local governments in China, including the Shanghai, Beijing, Hefei, and Wuhan governments, are competing for central governmental approval of their plans to build DRAM factories and develop integrated manufacturing capability on their own turf.

Industry executives fear China's entry into the global DRAM industry could end the dominance by the trio—SK Hynix Semiconductor Inc., Micron Technology Inc., and Samsung Electronics—of the global market by underselling, a typical tactic adopted by many Chinese industries to quickly grab market share soon after venturing into a sector.

The projected unbridled competition is expected to be compounded by SK Hynix's aggressive plan to invest 1.5 trillion won (US$1.36 billion) in new factories by 2021.

Industry executives point out evidence that SK Hynix's decision to halt expansion plans in 2013 had helped to realize the rally of the global market in the last three years.

In response to the reports concerning China's DRAM bid, Charles Kao, president of Nanya Technology Corp. and chairman of Inotera Memories Inc., Taiwan's No.1 DRAM manufacturing group by revenue, says he is unperturbed by China's plans for the nation may have ample capital but not the necessary specialists, and that nobody in the sector will trade technology for cash.

Kao is quite confident that his company will be China's most sought-after partner in its DRAM ambitions as long as his company fortifies its strength.

Industry executives point out that China is determined to develop homegrown IC industry mainly because IC chips are its biggest single import; so a homegrown IC sector would help to enhance cost competitiveness of its information technology exports.

They believe China would build its DRAM industry by acquiring Taiwan's second-tier memory-chip makers such as Macronix International Co., Ltd. and Winbond Electronics Corp., whose stocks are relatively less expensive.

Market consultant DRAMeXchange predicts China's memory-chip industry to take at least two years to set up and five to 10 years to catch up to major players.

(KL)