Another week, another semiconductor joint venture. This week we’ve had MeiYa Technology, the new DRAM joint venture between Micron and Nanya. Last week we had the NXP-STMicroelectronics wireless joint venture. Another half a dozen DRAM companies are talking about joint ventures. Why are JVs so popular?
Well one reason could be that modern semiconductor CEOs are so intimidated by the financial analysts that they prefer to share the risk of a new investment than engage in a go-it-alone venture, with all the consequences of having a failure on their hands which they can’t blame on someone else.
But there might be another reason. A joint venture can be set up to be very non-transparent. In an age when the financial analysts have learnt so much about the workings of the semiconductor business that it’s difficult for CEOs to hide anything, a joint venture can be an efficient smokescreen for hiding the scale of assets deployed, the costs, the debts, the profits and the responsibility.
Difficult businesses, where the analysts are urging CEOs to get out, can be tucked away in JVs e.g. the Numonyx JV of Intel and STMicroelectronics where they deposited their loss-making NOR flash businesses.
All in all JVs are a very useful mechanism for covering up areas which could prove to be embarrassing. As the big semiconductor companies come under increasingly intense scrutiny from the financial community, and as margins come under increasing pressure, it is likely we will see more of them.
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