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Infineon and Mosel Vitelic Split Up. ProMOS to Stay With Mosel

by Anton Shilov
12/13/2002 | 06:39 PM

This week Infineon Technologies has made their official statement about breaking off all business relations with its joint venture, ProMOS Technologies, due to unresolved disagreements with its Taiwan partner, Mosel Vitelic. According to Infineon, the company will stop buying DRAM memory chips from ProMOS starting from the 1st of January, 2003. Moreover, Infineon will not transfer its manufacturing technologies to ProMOS beyond 0.11 micron, and even wants to withdraw about 30 engineers from the joint venture memory maker and also the license on the current fabrication process, although ProMOS representatives claim that they will still have rights to utilise it.

Mosel Vitelic reportedly used its shares in the joint venture as collateral for bonds they receive in 2003. This breached the shareholder agreement between the partners and after advising the Hsinchu-based company, Infineon terminated the shareholder’s agreement in early October this year (see this news-story). <%BANNER[article]%>

There are also a number of things in the split up that were not widely unveiled, though influenced the final break off.

Next April ProMOS needs to pay debts of $157.2 million, having about $171 million in cash in October. Since the company has been reporting losses for five or six consecutive quarters, there are not a lot of chances that after the year end the joint venture will be able to pay the credits back. In this case it becomes logical for Infineon to either sell its shares of ProMOS, as the company will become insolvent in a number of months, or to get the full manufacturing capacities of ProMOS, help the company to pay its debts and influence the prices on the memory chips afterwards.
Eventually, Infineon indicated their desire to utilise all manufacturing capacities of ProMOS in late October. At that time Mosel Vitelic declined to comment on this, however, it seems that they refused to allow Infineon to buy all memory made by ProMOS.
Given uncertain financial positions of ProMOS as well as Mosel Vitelic, and Infineon’s market expansion plans, the European company decided to quit ProMOS joint venture, where it has 30% stake.

Infineon presently buys 40% of all chips made by ProMOS, what accounts for 10% to 15% of total Infineon’s shipments. As a result of this divorce, Mosel Vitalic will receive 90% of all DRAM devices manufactured by the former joint venture (should I now start to call ProMOS as Mosel Vitelic’s subsidiary?).

Infineon will continue to seek partners in Asia using technology-for-capacity policy. Recently they announced relationship with Nanya.

ProMOS is currently negotiating with Elpida in regards technology collaboration in future.