Powerchip seeks control of flash memory maker

The company wants to place nominees in eight of 15 board seats at flash memory maker Macronix, in which it already holds a 5 percent stake

Powerchip Semiconductor, the largest DRAM maker in Taiwan, is seeking management control of flash memory maker Macronix International.

The DRAM maker, which is Macronix's largest shareholder with over a 5 percent stake in the company, Monday ran half-page advertisements in Taiwan's two largest daily financial newspapers, the Economic Daily News and Commercial Times, telling shareholders to vote for its nominees in board elections next month. Powerchip is seeking eight of the 15 board seats and one of four supervisory seats at Macronix. If its nominees win, Powerchip would be able to choose the CEO, president, and other members of the management team at Macronix.

Macronix has asked shareholders to reject Powerchip's nominees. In two open letters last week, the chairman of the company accused Powerchip of attempting to take over his company and said it has rejected meetings to discuss possible new board members. He also said control by Powerchip would have a negative impact on business. Powerchip has denied the allegations.

The reason Powerchip is vying for management control at Macronix may be to further diversify into flash memory along with fulfilling orders for a major game console maker, Nintendo. Powerchip and other DRAM makers have been moving into new markets ever since a major slump in DRAM prices nearly put some makers out of business earlier this decade.

Prices have been unkind to manufacturers this year as well. The most popular DRAM used in PCs, 512M DDR2 chips that run at 667MHz, have declined 72 percent since the beginning of the year to $1.75 per chip, according to DRAMeXchange Technology, a clearinghouse for the chips. The price is below manufacturing costs, causing most DRAM makers to lose money on the chips they sell at such a low price.

Macronix supplies Mask ROM chips for Nintendo's popular Wii game console, a hit product that has boosted component suppliers along with Nintendo. Flash memory is Macronix's other main product and makes up more than 40 percent of its output.