TI, Toyota venture in wings?

Electronic News, August 12, 1996 by Crista Hardie

Tokyo--Reports of a planned DRAM joint venture involving Texas Instruments and a Toyota Motor affiliate may be premature, but not outside the realm of possibilities, sources indicated last week.

According to Nihon Keizai Shimbun, a Japanese newspaper, Toyoda Automatic Loom Works is cutting a deal with TI to build a $1.5 billion memory fab in Japan. The plant would also make semiconductors for use in automobiles, the article said. Subsequent rumors had the companies making 256-megabit DRAMs, highly advanced memory chips for which there is no current computer application.

A source close to TI said the reports are merely speculative: "It's possible, but at this point it's either just an 'if' or in very high-level discussions."

Meanwhile, a TI representative would neither confirm nor deny whether the company is planning such a venture. "Our policy is to discuss joint ventures only when we're ready to announce them, but we are in discussions with a number of potential partners at any given time," the spokeswoman said.

Previous reports from Japanese news organizations have been questionable, if not downright inaccurate, according to one industry source.

Nevertheless, the idea of a car or industrial equipment maker venturing into the world of electronics is not new. Other "heavy industry" manufacturers-- including Hyundai, Samsung, Hitachi, the LG Group and Fujitsu--have made enormously successful transitions into the semiconductor business, especially in memories.

Besides, the Toyota Group has already entered the telecommunications and software businesses, so entering the chip-making business seems to follow, logically speaking. Why a semiconductor venture would be assigned to the Loom Works division is another question. Toyoda Automatic Loom Works makes forklifts and textile machinery, and assembles cars for Toyota. It is said to have a small semiconductor operation in place.

One analyst could draw only a tenuous connection between looms and electronics with computer punch cards, an early method of feeding instructions into automated equipment.

As for the Dallas-based chip maker, "All TI is after is a company with deep pockets," said Jim Handy, memory analyst for Dataquest. "Usually what TI gets into are deals where someone else will put up the capital and TI will put up the know-how." TI then buys back the output for a negotiated price and markets it with its own brand name.

TI has other successful joint ventures along those lines with Kobe Steel of Japan and Acer, a personal computer maker based in Taiwan.

If the thought of anyone considering an entry into the memory business under current conditions is still puzzling, consider this:

"That's how the South Korean companies were able to get such a huge jump on the market, by making investments when the market was down," said Jim McGregor, memory analyst for In-Stat. "A lot of Taiwanese companies are taking the same approach right now."