Commentary: China DRAM industry set to rise

China's DRAM industry is set to take a big step forward as its state-backed technology conglomerate Tsinghua Unigroup has successfully raided a senior executive from Taiwan's DRAM industry.

Charles Kau, chairman of Inotera Memories and president of Nanya Technology, is expected to join Tsinghua Unigroup soon after leaving his current positions.

Kau will serve as executive VP of Tsinghua Unigroup's global operations, steering the development of China's home-grown DRAM and NAND flash technology and production capacity, as well as the build-up of a competitive talent pool for China's DRAM sector.

While confirming Kao's resignation, Nanya said Kao's new position will be facilitating the future cooperation among cross-strait DRAM industries and Micron Technology. The company is also looking forward to cooperating with Kau to enhance market presence in the Greater China region.

With immense financial strength and government support, Tsinghua Unigroup has recently offered to buy a stake in Micro for US$230 million, an attempt which has been turned down by the US-based DRAM chipmaker.

However, Tsinghua Unigroup's hiring of Kau, chairman of Micron's Taiwan-based subsidiary Inotera Memories, seems to place Kau in a perfect position to renegotiate with Micron for technology cooperation or a eventually tie-up between the two companies.

Given that the DRAM and NAND flash industries have been heading for a downturn recently and the prospects are likely to remain sluggish in 2016, the declining memory chip prices and rising production costs could force Micron to reach some sort of ally agreement with Tsinghua Unigroup.

Some indicate that Micron and Tsinghua Unigroup will build up a 12-inch joint venture fab, with the US-based chipmaker providing DRAM and NAND flash production technologies, while Tsinghua is responsible for building up memory production capacity.

In short, such a 12-inch joint venture fab will serve as a China version of Inotera Memories established by Kau.

Thus, Kau is actually to be in charge of integrating DRAM and NAND flash production capacity in the US, China and Taiwan, enabling Micron to take on Samsung Electronics and SK Hynix, while also helping China to establish its DRAM industry.