2 More Firms Balk at Joining U.S. Chip Consortium
Two more U.S. electronics manufacturers said Wednesday that they will not join U.S. Memories, the fledging consortium designed to spur the domestic semiconductor industry against Japanese competition. The news raised new concerns that the novel venture may not get off the ground by its self-imposed deadline in six weeks.
The latest rejections came from Sun Microsystems, a fast-growing Silicon Valley computer maker, and Unisys, the nation’s third-largest electronics manufacturer. Earlier, computer makers Apple Computer and Tandy Corp. and chip makers Texas Instruments, Motorola, Micron Technologies and Cypress Semiconductor said they would not participate in the consortium.
U.S. Memories’ founders--seven of the largest domestic electronics companies--said in June that they hoped to raise $500 million and attract additional corporate partners by year-end to create a company that would manufacture state-of-the-art computer memory chips.
However, since its unveiling in mid-June, U.S. Memories has run into a series of obstacles, many from within the very group--the American semiconductor industry--that the consortium’s founders say they want to nurture and protect from the increasingly competitive Japanese.
The venture has yet to enroll more than its initial seven founders and has raised just $200 million, about 40% of its goal.
“At the end of the year, U.S. Memories goes away unless it raises the $500 million it needs,” a spokeswoman for the consortium said Wednesday. “It’s a go, no-go deadline.” The spokeswoman said about 18 companies, including American Telephone & Telegraph and AST Research, are still considering whether to join.
The initial business plan for U.S. Memories called for the company to make so-called DRAMS, or dynamic random-access memory chips, using a highly advanced design licensed from International Business Machines, a principal backer of the venture.
These chips, smaller than a fingernail, are some of the most important pieces in any electronic device. American industry now depends most heavily on Japanese manufacturers to produce and export them.
Sun Microsystems said it declined to join the venture because it has long-term relationships with several chip suppliers that should cover its needs. Unisys, which has posted staggering losses and laid off thousands of workers in the past several months, simply said the timing was wrong for it to join.
However, analysts said, several factors may be keeping U.S. Memories from attracting additional backers. One factor, they said, has been the outspoken opposition to the venture from some chip manufacturers, particularly T. J. Rodgers of Cypress Semiconductor in San Jose. Another has been moves by IBM to license to those outspoken opponents the very technology it wants to pass along to U.S. Memories.
Both factors, the analysts said, underscore the extreme difficulties U.S. companies face when they try to form industrywide ventures. Sematech, an earlier attempt to spur the industry with a consortium approach to developing advanced chip manufacturing techniques, has also run into obstacles and is behind schedule.
Opponents to U.S. Memories have claimed that the venture would compete with their core business operations and would do so with the blessing of the federal government, because the consortium will need exemptions from certain antitrust regulations before it can start.
At the same time, IBM has agreed to license its technology for an advanced new four-megabit memory chip to Micron Technology Inc., and it is negotiating a similar deal with Cypress. Analysts view the deals as potentially undercutting the mission of U.S. Memories because it will give potential members access to the technology without their having to participate in the consortium.
For example, Ulrich Weil, a high-technology analyst in Washington, noted that Sun Microsystems buys large quantities of DRAMs from Cypress and would have a supply of the four-megabit chips if Cypress secures a license from IBM.
“That takes care of the problem, and they didn’t have to join,” Weil explained. “IBM is helping those companies on the fence not to join, and to some degree, that’s undercutting U.S. Memories.”
An IBM spokesman said the licensing agreements are consistent with its strong support of the consortium and are another way of helping to build a strong domestic source of memory chips.
