Plan to Make Memory Chips in U.S. Fails : ‘DRAM’ Project Drew Praise but No Money
A bold effort to start a U.S. company that would try to dent Japan’s manufacturing dominance of computer memory devices has failed because American chip users were “not willing to put their money where their mouth is,” a venture capitalist said Tuesday.
“I’ve given up,” said Pierre Lamond, a general partner at Sequoia Capital and co-founder of National Semiconductor Corp. “I’ve been working on it since May. We gave ourselves a timetable and a limit, and we could not get any sizable industrial partner to sign on the dotted line.
“We had lot of promises, a lot of interest, but it was all talk, no action. Enough is enough.”
Lamond’s plan for a novel partnership to fund a memory chip start-up, using cash from investors and lease guarantees from U.S. chip users, was an attempt to wrest from Japan some of the $5.7-billion worldwide market for DRAMs--dynamic random access memory chips.
Those chips, in short supply for about a year, are critical components in desktop computers, printers and dozens of other electronic goods.
Some American computer companies have been forced to curtail production or raise prices because of the DRAM shortage and have complained that Japanese chip users get preferential treatment from Japanese chip makers.
“Although users of DRAMs complain about the treatment they’re getting from the Japanese, they’re not willing to put their money where their mouth is,” said Lamond. “They’re unwilling to put funds into this sort of a project. I guess they’re satisfied with the Japanese as suppliers.”
Proposal Dubbed Megaram
Lamond approached four computer makers affected by the DRAM shortage--Apple Computer of Cupertino, Calif., Sun Microsystems of Mountain View, Calif., Compaq Computer Corp. of Houston and Digital Equipment of Maynard, Mass.
“If I could not convince four major forward-looking companies, I don’t think I could convince other smaller companies,” Lamond said.
Lamond wanted to start the first U.S. DRAM venture in years, and he dubbed the proposed company Megaram. The plant would have employed about 1,000 workers, he said, and would have tried to reach $100 million in sales by its third year.
Most U.S. chip makers dropped out of the memory chip business largely because Japanese companies in the late 1970s and early 1980s sold chips below the market price to grab market share.
Only two U.S. companies, Texas Instruments Inc. in Dallas and Micron Technology Inc. in Boise, Ida., continue to make and sell DRAMs in the United States.
“The Japanese have 90% of the worldwide market for one-megabit DRAMs,” Lamond said, referring to the tiny chips that can hold 1 million bits of information. “They’re now assembling the next generation, four-megabit chips, and are expected to go into production in 1990, and they’ll probably grab 95% of that market.
Lamond sought $15 million in venture capital for Megaram’s initial working capital. He wanted chip users to provide lease guarantees for $125 million in chip-making plant and equipment during Megaram’s first phase and $300 million over five years.
