And Then There Were Four

While the working parts on semiconductors have continuously shrunk over the last two decades, the demand for semiconductors has simultaneously grown. Through extensive consolidation, the number of industry players has shrunk to four major memory chip manufacturers; Micron Technology is the only remaining US company. Jeff Moss discusses how Micron withstood the consolidation and outlines legal’s role in maintaining the company’s dominance.

Modern Counsel: Micron has been around for almost four decades and survived the whittling of the semiconductor market. What allowed it to come out on top of the pile in the United States?

Jeff Moss: Our former CEO, Steve Appleton, knew that the industry had to consolidate. And he had the vision that Micron would be the driving force in that effort. When I joined Micron in 1995, there were 30 to 40 memory chip suppliers worldwide. This included Motorola, IBM, and many foreign companies. Intel, AT&T, and others had already exited the industry due to its high volatility. It was very fragmented, with everyone competing for market share. Beginning in the late 1990s and during subsequent industry “down” periods, Micron was willing to take risks on various timely opportunities. It began acquiring major manufacturing facilities, or “fabs,” from companies that either wanted to get out of the memory industry or were struggling financially. It was much less expensive to acquire those production capabilities than to create them from scratch.

MC: Your first major transaction was to acquire assets from Texas Instruments in 1998. As the first, did it present any unique challenges?

JM: Our entire legal department worked nearly full-time on the transaction for months. Even for our very experienced outside counsel, I believe it remains one of the most challenging transactions they have ever worked on due to: the number of countries in which the assets were located; the number of parties involved; and a couple of foreign, joint ventures that were part of the transaction. We had simultaneous negotiations not only with Texas Instruments, but also with Canon, HP, Kobe Steel, and the Economic Development Board of Singapore—all extraordinarily sophisticated parties. That meant coordinating multiple complex negotiations around the world. We had 30 to 40 in-house and outside attorneys from multiple firms working almost around-the-clock for weeks at a time. Keep in mind, too, that Micron didn’t have a separate M&A team then but did nearly all of the due diligence in-house. All of the Micron attorneys had our “normal” responsibilities (which for me was sales and much of our procurement work) in addition to whatever was required for the deal. Now we have a dedicated group of attorneys and business counterparts who focus exclusively on M&A, joint ventures, and investment matters.

MC: What were some of the more challenging deals?

JM: Besides being challenging because it is very rare for a Japanese company to go through formal bankruptcy and to be acquired by a US company, our most recent major acquisition in 2013, Elpida, also marked a major transition for the legal department. Until then we were primarily a US-based group supporting worldwide functions. But now we have many attorneys located around the world, so we can address issues in real time wherever they occur. We don’t have the luxury of taking a few days to analyze and respond anymore.

MC: How has Micron’s legal department played a significant part in the ongoing consolidation initiative overall?

JM: We don’t just come in during the final stages to document what’s been agreed to. We’re included from transaction inception, and that enables us to influence not just the legal structure, but also the business strategy of these transactions. Valuing our input has always been part of the culture here. Even when I was in a much more junior position, I was part of many negotiating and strategy sessions with the CEO and other senior leaders.

MC: Does Micron have plans for any more M&A?

JM: There should be many opportunities for future M&A that enables us to provide more specialized, value-added products that use our memory chips. In addition to computers and servers, our memory products are now in all kinds of applications, including mobile devices, cars, TVs, and other household appliances, medical devices, and industrial applications. And much of the information from these devices and other sources needs to be stored in gigantic data centers that also use our memory products. These applications demand more customized memory solutions.

MC: Is the semiconductor market still consolidating, or do you see an end in sight?

JM: Though opportunities for further large-scale consolidation may be limited, as memory manufacturing companies look to develop and bring specialized solutions for their customers in-house, there will still be plenty of opportunity for challenging transactions that further consolidate and enhance the industry, including M&A, complex joint ventures, and other strategic alliances. Many of the incredible new uses of our products are literally changing the world. I think we’re only seeing the tip of the iceberg when it comes to the true potential of Micron and the industry.