With the spotlight on consolidation talks between Micron Technology Inc. and Hynix Semiconductor, Infineon looked like a nonplayer. Unsuccessful in its attempt to take over Toshiba Corp.'s relatively small DRAM operations. Stung when it explored an alliance with Hynix during a lull in the Micron talks. Overall performance: about a D-.

Then Infineon started shopping around in Taiwan.

First, it increased its stake in Promos Technology, a 300-mm joint venture with Mosel Vitelic Inc.

Then it struck a bargain with Winbond Electronics, trading technology for capacity.

Next came the sweetest deal: a 300-mm wafer joint venture with Nanya Technology, an up-and-coming DRAM maker with access to the deep pockets of its parent company, Formosa Plastics, and ambitious plans to be a major player.

Few details of the last deal were released. But the going rate for building next-generation plants is about $3 billion. Infineon will probably take on less than half that cost, continuing its relatively capital-light approach to staying in the DRAM business.

At a time when it was pinched by low cash flows-especially compared with Micron's war chest-and dismal pricing in DRAM, not to mention the losses at Infineon's other units, Infineon's DRAM operation managed to execute a beautiful strategy. The German chip maker brought to the Taiwanese memory guys what they lack (homegrown technology) and what any DRAM maker covets (a little cash).

Together, the Taiwanese account for about 15 percent of global output in DRAM chips. They are good at cost control but less good at developing their own technology. After more than a decade of producing chips, companies like Winbond were still reliant on outside sources for R&D. Winbond suffered a blow when technology partner Toshiba pulled out of commodity DRAM. Then Infineon stepped in. Easy pickings.

With Nanya, the scenario was also a nice, precise fit. Infineon already had one well in Taiwan with the Promos 300-mm fab. Nanya had the money and desire, and it was a licensee of technology from an Infineon-IBM R&D partnership in DRAM.

Now that the Micron-Hynix deal has ruptured (for now), Infineon ends up being best in class. Nice style, great execution. A+.

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