Intel to Join Forces With Chip Maker : Micron Technology Deal Assures Parts for Firm
Intel Corp., one of Silicon Valley’s leading technology companies, is joining with one of the two remaining U.S. makers of computer memory chips as part of a long-term industry campaign to regain a part of that critical semiconductor market from Japanese and other overseas manufacturers, industry sources said Tuesday.
Under the joint venture, which is to be announced here this morning, Intel will pledge to purchase dynamic random access memory semiconductors (DRAMs) from Micron Technology of Boise, Ida. Intel will get an option to purchase Micron Technology stock if the company needs extra capital to expand its production. The deal assures Intel--the company that invented DRAMs in the late 1970s but gave up production in 1985--a steady source of the memory chip, which is in short supply.
Micron Technology and Texas Instruments are the only U.S. companies making the memory chips. The others, like Intel, abandoned the market in the face of what the Reagan Administration found in 1985 to be illegal below-cost dumping of DRAMs by Japanese competitors.
Good for Industry
Industry sources described the Intel-Micron Technology venture as one of the first signs of a new strategy of American high-technology electronics firms that have been buffeted by competition from Japan and up-and-coming companies in South Korea, Singapore and Taiwan.
“This is exactly the right thing from the perspective of the overall industry,” said Ralph J. Thomson of the American Electronics Assn., which has been pushing producers and users of semiconductors to combine forces to enhance the global competitiveness of U.S. companies.
Thomson called the deal “a direct response to the summit meeting” of leading producers and users held in Santa Clara, Calif., last January to encourage “increased U.S. semiconductor production capacity and cooperative arrangements” with chip users.
“This gets the U.S. memory production back with an expanded capacity. It decreases the degree of dependence on foreign suppliers; ameliorates nervousness about being held in a hostage situation by overseas competitors; expands the U.S. base of production by U.S. companies, and moves the United States toward increased user-producer interaction,” Thomson said.
This strategy evolved after the United States and Japan signed a semiconductor trade agreement in September, 1985, in which Japan pledged to stop dumping chips and to increase its purchases of U.S. semiconductors. The result, however, was an immediate increase in the price of memory chips, which upset users who feared they would lose sales. It also resulted in President Reagan last March imposing trade sanctions against Japan for the first time since World War II after the Administration determined that Tokyo was not keeping its part of the deal. Part of those sanctions are still in effect.
Micron Technology, a small chip maker with revenue of $101.5 million for the first six months of its current fiscal year, will gain the use of Intel’s worldwide marketing network for its DRAMs.
