SAMSUNG, MICRON PEACEMAKING MAY BE AT EXPENSE OF RIVALS

SAMSUNG, MICRON PEACEMAKING MAY BE AT EXPENSE OF RIVALS

Two semiconductor manufacturers have called a truce, at least temporarily, and signed a second-sourcing agreement that could bode ill for other players in the market, industry analysts say.

The world's largest chip maker, South Korea's Samsung Semiconductor Inc., and up-and-comer Micron Semiconductor Inc. of Boise, Idaho, have entered into a first-of-a-kind agreement for the South Korean giant.The move adds weight to Samsung's already imposing presence in North America and comes in the wake of a history of feuding between the two companies, including a dumping complaint brought by Micron against Samsung just last year.

Now that Samsung is no longer dumping or violating the intellectual property rights of Micron, there is reason to do business through second sourcing of each other's products," said Dan Klesken, analyst with Robertson & Stephens & Co. in San Francisco.

"I think it's admirable that they have buried the hatchet; the long and short of it is people who have disagreed in the past, and have sued each other in the past, can find reasons to do business in the future," he said.

The new deal calls for Samsung to be Micron's first alternative source for the triple-port dynamic random access memory chip, commonly known as a DRAM. In return, Micron will be one of the first major suppliers of Samsung's 16- megabit synchronous DRAM.

The triple-port DRAM is designed for use in advanced network applications and high performance graphic systems. But Samsung's fully synchronous DRAM - an industry first - has applications in high-end personal computers, engineering workstations and other high performance systems.

"This alliance between Micron and Samsung will provide Micron with a strong second-source for their parts and may lead to second sourcing in other parts as well," said Ron Bohn, analyst with Dataquest Inc. in San Jose, Calif.

Samsung and Micron executives acknowledged it made sense to leverage research, development and manufacturing efforts to maximize market penetration and springboard to the next generation of high-speed, wide-area networking and advanced graphic systems.

Last year, Micron filed a dumping complaint against Samsung and fellow South Korean manufacturers Goldstar and Hyundai. This spring, the International Trade Commission upheld the U.S. chip makers complaint, resulting in increased tariffs for all three companies.

Micron is a one-time partner of Samsung. During the mid-1980s, Samsung acquired semiconductor technology through a licensing agreement with Micron. This enabled Samsung to stay hot on the heels of Japanese competitors and Micron to receive badly needed cash.

In the last decade, however, South Koreans have become the world's No. 3 chip makers, meeting 16 percent of global demand. From the beginning, their efforts have focused on exports and have come to dominate the country's electronics exports as a whole.

Samsung is South Korea's biggest player, with 70 percent of the country's output of DRAMs. Last year, Samsung's chip production grew 35 percent to give it a 13.6 percent global market share, the world's largest.

For its part, parent Micron Technology is one of only four U.S. companies manufacturing DRAM memory chips. The others are Texas Instruments, Motorola and International Business Machines Corp., which makes chips primarily for its own consumption.