U.S. Chip Consortium Appears Doomed : Technology: An announcement on U.S. Memories is expected soon. No new investors have come forward, and the outlook is bleak.
A first meeting of the founding members of U.S. Memories has been called amid growing signs that the proposed $1-billion semiconductor manufacturing cooperative may fold before getting off the ground.
Although a spokeswoman for the proposed venture declined to say where and when the meeting will be held, she said an announcement regarding the venture’s fate could be expected sometime next week.
In the past several months there has been growing speculation throughout the semiconductor industry that U.S. Memories would fail.
Since its public unveiling last June, the venture--designed to provide a domestic source of key computer memory chips and reduce U.S. reliance on Japanese imports--has not attracted a single new investor beyond its original seven members. Those members include Hewlett-Packard, International Business Machines, Digital Equipment and Intel. And U.S. computer makers, targeted as potential prime customers, have refused to agree to purchase the company’s future products.
Sanford L. Kane, the former IBM executive who has spearheaded the venture, said Thursday that there is nothing encouraging on the horizon. He acknowledged for the first time that he is growing increasingly frustrated and pessimistic about his lack of progress.
“I don’t know if this is going to work,” Kane said in an interview from his offices in New York. “A month ago I would have said, ‘Yes, we can do this.’ But now I am very frustrated at watching one company after another refuse to walk up to the bar and say they’re serious about this.”
Computer and semiconductor manufacturers have said they are not investing in the cooperative because they believe they can spend their money better by supporting other U.S. sources of memory chips. Other have noted that the key impetus for the venture, a desperate shortage of memory chips in 1988, has eased considerably in recent months to the point that a surplus is growing.
Kane said the real problem facing U.S. Memories has been his inability to get prospective customers to agree to buy the venture’s products. The first product is expected to be a memory chip capable of storing 4 million bits of data. Kane said the key component of the venture’s business plan called for its investors to commit to buy a minimum of 50% to 75% of the production run before manufacturing even begins.
“We weren’t just creating another semiconductor company,” Kane said. “We were going to be a company owned by its customers. And without that part of the equation, this is a rather dull idea.”
Still, Kane refused to say that the plan is dead. “I’ve put far too much into this to say that I’m pulling the plug because I’m frustrated,” he said. “But clearly I am frustrated.”
T. J. Rodgers, president of Cypress Semiconductor and a leading opponent of the venture, said Thursday that the possible demise of what he has already called “a dumb plan” would allow the industry to get on with the job of developing “real solutions” to the increasing competition from Japanese semiconductor makers.
