Steve Appleton in retrospect

Peter Clarke, EE Times -- EDN, February 6, 2012

Throughout his career he sought to grow Micron's scale by picking up businesses here and wafer fabs there, as others lost their appetite for the hard graft. It can be seen that Appleton was a conservative who used US strategic considerations to his company's advantage but who, with his untimely death, has left Micron holding the bag on DRAM and half in and half out of NAND flash memory via a joint venture with Intel.

Appleton was already at Micron in the 1980s, but not yet in a senior position, when anti-dumping suits against Japanese DRAM manufacturers -- led by Micron -- and SIA petitions to the US government started to have their effect. In September 1986, a semiconductor trade agreement was signed that addressed concerns over dumping of chips at below cost in the US market and access to the Japanese market for US companies. The Japanese specifically undertook to increase foreign companies' market share to 20% within five years.

It may well have been these maneuvers that colored Appleton's approach during the next major DRAM crisis.

But in June 1998, soon after Appleton had risen to the position of chairman and CEO at Micron, he was looking to build Micron's position. The company agreed to take over the DRAM business of Texas Instruments Inc, increasing market share but at a time when Micron was making losses due to collapsing selling prices for DRAMs.

Micron versus Korea

In the late 1990s, as in the 1980s, accusations of DRAM dumping were being made, but this time against South Korean chip companies. Korean DRAM maker Hyundai, which became Hynix, faced bankruptcy and Appleton was vociferous in his condemnation of moves to support Hynix and other South Korean companies.

In February 1998 Appleton accused the Korean government of already violating the conditions of the bailout package to the country provided by the International Monetary Fund. He told a House Banking Committee hearing: "We should not send tax dollars to Korea to brace up insolvent companies, on the one hand, while turning a blind eye to their export surge strategies that are harming US companies, on the other." Appleton added: "If these were companies operating in the United States, they would have two choices -- bankruptcy or undertake a massive belt tightening by cutting capital spending and bringing output back into line with current demand."

In December 2001, after another difficult year for DRAM, Micron agreed to acquire the commodity DRAM business of Toshiba, including the company's Dominion Semiconductor LLC manufacturing facility in Manassas, Va. At the same time Hynix and Micron announced the companies had agreed to hold preliminary discussions to explore a possible strategic alliance or "other transaction." 

In February 2002 the deal was proving difficult to make with leaks from Hynix to the Korean press that the company's debtors wanted $4.8 billion while Appleton who had started with an offer of around $2 billion had only been prepared to go to $3.8 billion. At the time Hynix owed about $6.5 billion in debt.

Despite what may have been attempts to force his hand Appleton signed a non-binding agreement to buy Hynix memory operations for $3.2 billion in stock and a $200-million cash investment for 15% of Hynix non-memory activities. Almost immediately, at the beginning of May 2002 the deal fell through.

As we now know the deal, which could have been a defining moment in Appleton's career, never happened and in the end Hynix' debt was converted into equity by the banks, a legacy which in part hangs over the company to this day.

Meanwhile, the rocky DRAM road continued to take its toll and in 2003 the company announced the intention to lay off roughly 1,800 workers, or 10% of its workforce, in a bid to return to profitability in the unforgiving world of commodity PC memory.

Intel, which to help it sell PC processors needed DRAMs for in package cache memory, was the savior of Micron. Intel invested $450 million in Micron in September 2003 to help it expand 300-mm wafer production and DDR2 production.

In July 2004, Appleton's love of adrenalin-fueled activities caught up with him when his stunt plane crashed in the desert east of Boise. Appleton was injured in that incident but managed to get away with an injured back, cuts and bruises. One other passenger, Micron employee Michael Duffy, was reported to have injuries of a "similar severity" at the time.

Rambus and flash

By 2004 Appleton was racing to get into flash memory production as quickly as possible. In an interview with EE Times conducted in London, Appleton said: "We absolutely have to get into the flash market. There's competition in all markets but the ASP [average selling price] in flash means there's still more profit to be made in flash than in DRAM. We have a 2-Gbit flash memory in 90-nm that is as good as anything anybody else has today. We're not too late with the technology."

And Intel was part of the solution to that conundrum with the formation of a joint venture with Intel in January 2006, IM Flash Technologies (IMFT), to take over some of Micron's facilities and produce NAND flash.

 But in 2007 and 2008 DRAM oversupply and price erosion were again hurting Micron's financial results and losses and lay-offs became regular and dispiriting fare. The company had to spin-off a successful CMOS imaging business, which went independent as Aptina Imaging Corp.

Throughout the decade and in parallel with the intense competition of the DRAM business was the long-running saga of Rambus, a memory interface and intellectual property licensor that originally found success with Intel. The saga, too complex to detail here, continues to run and as recently as November  2011 Micron and Hynix were found not to have colluded to fix the price of memory chips and shut the Rambus RDRAM technology out of the market.

One of Appleton's final major business moves was the acquisition of Numonyx Holdings NV in 2010 in a stock transaction for $1.27 billion. Numonyx was the somewhat difficult and unwanted joint-venture that had wrapped up the NOR flash memory business and phase-change memory research interests of Intel and STMicroelectronics. It was a move that was typical of many Appleton had made before; seeking to gain economies of scale with mature and well understood product lines.

Appleton came across neither as a visionary nor as a CEO who drove R&D hard to get Micron into new business areas. Some have been critical of Appleton as Micron laid off U.S. workers and then participated in the opening of a fab in Singapore and with many quarters of red ink it was easy for others to be critical. But Appleton played a difficult set of cards and kept Micron manufacturing chips over many years, while many other chip companies had moved into fab-lite mode.

Appleton was also the CEO who told employees in October 2001 that he would forego his salary for as long as Micron continued to lose money. Appleton also declined bonus awards earned for fiscal 2008 and 2007 due to the company's poor financial performance. That's not something that many other CEOs have ever been prepared to do.

Appleton's passing will change Micron and the US chip making landscape dramatically at a time when the ideas he championed -- manufacturing and fair competition -- are coming back to prominence.

This story was originally posted by EE Times.

Also see:

Appleton's death could delay DRAM consolidation

Micron appoints Durcan CEO