Siemens Calls Off Advanced IBM Chip Deal : Technology: The German electronics giant cites dwindling demand and increased competition for dropping out of the 64-megabit effort.
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A much-heralded alliance aimed at ending Japanese domination of the computer memory chip business began to fray Thursday when German electronics giant Siemens said it would not manufacture advanced computer memory chips that it has been developing with International Business Machines Corp.
Siemens and IBM agreed in January, 1991, to work together on the development of a highly advanced memory chip, the 64-megabit, dynamic random-access memory, or DRAM.
IBM said at the time that the venture could help the United States and Europe restore the international balance of power in memory chips, which are widely used in electronics products.
But Siemens said it now believes that forecasts of dwindling demand for memory chips and fierce competition would make it difficult to make money in the market.
The 64-megabit DRAMs, which Japanese companies are also developing, are expected to go into production beginning about 1995.
“We are not going to build a 64-megabit DRAM facility with IBM,” a Siemens representative told the Financial Times. “The intention is that we will not be a major player in the DRAM market after the 16-megabit (chip).”
IBM said it will seek another partner. “At present we continue to plan for 64-megabit manufacture in Germany. We are looking for new partners within the time frame of roughly one year,” IBM said.
Although IBM and Siemens have never put a price on their joint development agreement, the effort was believed to be worth hundreds of millions of dollars. Industry analysts have said that a 64-megabit DRAM factory would cost $1 billion or more.
The decision by Siemens does not mean it will pull out of the memory market immediately. It still manufactures 1-megabit and 4-megabit DRAMs.
In a separate agreement, Siemens and IBM continue to collaborate on production of 16-megabit DRAMs.
But Siemens’ decision means that it not likely to be a participant in the memory chip market after those products are replaced by the 64-megabit chips later this decade.
The decision also raises doubts about the ability of the struggling European semiconductor industry to remain in the memory business.
The worldwide market for DRAMs has been depressed for several years, particularly in Europe, where manufacturers have kept prices low to gain market share.
Large Japanese companies such as NEC, Toshiba and Hitachi--which knocked most U.S. firms out of the DRAM business in the mid-1980s--are now believed to be losing money in the market.
