Memory Chipmaker Micron To Acquire Inotera for $3.2 Billion
Leading memory chipmaker Micron Technology Inc. is going all in on Inotera Memories, snapping up the remaining shares of the company it doesn’t already own. The sale price: about $3.2 billion.
Micron already owned 33 percent of Inotera, which it acquired from Qimonda in 2008. Inotera, which provides DRAM foundary services based on 30nm process technology, produces about 120,000 wafer starts every month for Micron.
"The acquisition is the culmination of a highly successful seven-year partnership with Inotera,” said Micron CEO Mark Durcan, in a statement. “It enables Micron to realize the full financial and operational benefit of Inotera's operations.”
DRAM Oversupply Woes
All told, Inotera produces about 35 percent of Micron’s DRAM production. In July, Inotera said it is on track to convert about 80 percent of its total wafer-start capacity to 20nm process technology by the middle of 2016. That could help Micron compete in an already competitive market.
Micron may be moving to stop some bleeding in its stock. The company’s value has been declining since the beginning of 2015, thanks to slowing PC sales before the July release of Microsoft's Windows 10 operating system, currency exchange rates that are impacting its non-U.S. business and overall slowing market DRAM growth.
Even with the acquisition, Micron may see conditions worsen before they improve. DRAM oversupply will stretch into 2016, resulting in a 13.6 percent decline in global memory spending in 2016, according to market research firm Gartner Inc. And with PC sales continuing to weaken, next year could be a stormy one for the company.
"Since the previous quarter's forecast, continued weakness in the euro and yen have created major weaknesses in the overall equipment market picture," said Bob Johnson, research vice president at Gartner, in a statement in July. "With over half of all equipment being produced by either Japanese or European suppliers, the weakness in their currencies has been the primary factor in our reducing our overall outlook for 2015. Longer term, we expect modest growth throughout the semiconductor cycle, with just a pause in the equipment market growth expected in 2016, as DRAM goes through a typical cyclical downturn."
Jockeying for Position
The PC factor is massive. Although 71 million PC units shipped in the third quarter of 2015, that number marked a year-over-year decline of almost 11 percent -- even worse than 9.2 percent decline analysts had predicted, market research firm IDC noted in October.
We turned to Charles King, principal analyst at Pund-IT, for his thoughts on the topic. He told us “the story has a few twists and turns."
For example, he noted that in July Tsinghua Group, which is widely believed to be China’s largest government-controlled chip manufacturer, made a $23 billion takeover bid for Micron. That was just after HP sold control of its China units to Tsinghua for $2.3 billion.
Micron not only didn’t sell, but is now buying the remaining two-thirds of Inotera that it doesn’t already own and Tsinghua is buying stakes in ChipMOS Technologies, Powertech Technology, and Siliconware Precision Industry Co.
There is plenty of uncertainty in the DRAM arena but one thing appears certain, there is an oversupply and a jockeying for position. Meanwhile, rumors still abound that Tsinghua is aiming to buy Micron.