When the going gets tough, the tough sharpen their focus and reaffirm their commitment to their core businesses. At least that's what the tough do in the DRAM business, as evidenced by moves by memory makers Micron Technology Inc. and Hynix Semiconductor Inc.

The two companies this month have made efforts to shore-up their core businesses, with Micron exiting the SRAM and Ternary Content Addressable Memory (TCAM) markets so it can focus on DRAM, and Hynix announcing it will invest in a fab that is essential to its continued competitiveness in the DRAM business.

In a development first detected by Betsy Van Hees, senior analyst, memory, for iSuppli Corp., Micron this month decided to drop its SRAM and TCAM product lines (see March 14 story). Micron has ceased all internal product development efforts and wafer starts for these product families, but will continue to support its existing customers using inventory and work in progress. With its withdrawal from SRAM, Micron will focus its efforts on DRAM, flash memory and specialty DRAMs like Reduced Latency DRAM (RLDRAM) and CellularRAM.

Meanwhile, Hynix announced a major new investment in its fab in Eugene, Oregon. The company will spend $100 million to upgrade the fab to an advanced 0.13-micron process, which the company refers to as its Prime Chip Technology.

Micron and Hynix's actions come in response to lost market share and continued financial troubles. Both companies in 2002 lost market share in the DRAM market to Samsung Electronics and Infineon Technologies AG.

Micron's market share fell to 18 percent in 2002, down from 20 percent in 2001. Furthermore, Micron's market share decreased to 17.5 percent in the second half of 2002, down from 18.5 percent in the first half of 2002. The company's balance sheet has been in the red since 2001. Rather than diversifying its product lines, Micron's response to its DRAM travails was to refocus on its main business. iSuppli believes this was a smart decision for Micron, given that the company has much work to do in order to remain a competitive DRAM supplier. This work includes reducing costs and improving its latest products.

Hynix has problems of its own. The company this month said it had laid off 20 percent of its executive team.

Upgrading the Eugene fab is essential to Hynix's continued competitiveness because the state-of-the-art facility produces high-end 256Mbit SDRAM and DDR.

Furthermore, upgrading the Eugene fab will help Hynix manage its future risk. Both the U.S. government and the European Union are conducting investigations into charges that the South Korean government has paid illegal subsidies to Hynix. Therefore, in the worst-case scenario - if actions taken based on the investigations impact Hynix unfavorably - it could become difficult for Hynix to sell DRAMs to the United States and European Union (see March 21, story).

However, any kind of antitrust penalties levied against Hynix would apply only to chips the company produces in its South Korean fabs, and not to DRAMs made at its Eugene facility. The high-end DRAMs Hynix makes at its Eugene fab are suited for sale in the high-end focused U.S. market.

Because of this, the company's strategic decision to upgrade its Eugene fab sends a meaningful signal to the market: Hynix is in the DRAM business for the long haul.

Like Micron, Hynix is reviewing all options to survive in the DRAM business, including selling its system IC business unit to generate cash for its memory operations.

Are there any risks associated with Micron's and Hynix's moves? Falling DRAM prices are putting pressure on both companies' financial situations.

Furthermore, Hynix's Eugene fab is not as efficient and its cost structure is much higher than those it operates in South Korea. Micron used to be the cost leader because it reduced mask layers and shrunk its die size in a cost-effective manner. However, Micron lost its cost leadership position to Samsung.

The market is anticipating that Micron's and Hynix's planned migrations to 0.11-micron and 0.13-micron process technology will be critical in regaining their market share and profitability.

While iSuppli cannot predict whether Micron's and Hynix's moves will help them to become more competitive and profitable in the future, the companies' decision to place their bets on their core business appears to be the correct decision at this time.