NEC-Hitachi DRAM venture hints at accepting Rambus tax

NEC-Hitachi DRAM venture hints at accepting Rambus tax
By Anthony Cataldo, EE Times
September 13, 2000 (11:11 a.m. EST)
URL: http://www.eetimes.com/story/OEG20000913S0008

TOKYO — Early indications suggest that the new DRAM joint venture of Hitachi Ltd. and NEC Corp. prefers to make peace, not war, with Rambus Inc. The company, which will open its doors for business on Jan. 1, will independently decide how to come to terms with Rambus' DRAM interface licensing demands, which have unleashed a firestorm of lawsuits in recent months.

NEC's decision to license Rambus' broad DRAM interface portfolio, announced this week, may be a prelude to the decision of the still-unnamed NEC-Hitachi joint-venture DRAM company. Under the agreement, NEC has licensed Rambus' SDRAM, double-data-rate and Rambus DRAM interfaces for both logic and memory devices. However, except for next-generation 1,066-MHz Direct RDRAM Rambus technology, the licensing agreement will not be transferred to the spin-off. That means the licensing decision will be left to the management team of the new company.

NEC and Hitachi, which will each own 50 p ercent of the new company, have stood on opposite ends of the pole over Rambus. NEC's dealings with Rambus stretch back to the early '90s when it made the first Rambus-based DRAMs for use in the Nintendo 64 game console. It was also one of the first suppliers to push 288-Mbit RDRAMs for high-end systems. NEC's most recent decision to license Rambus' patents for SDRAM and DDR interfaces shows that the company isn't averse to the licensing model that has generated resistance from many other DRAM makers. Toshiba Corp. and Oki Electric Industry Co. Ltd. have also struck similar licensing agreements with Rambus in recent months.

Hitachi and Rambus, however, have often been at odds. Hitachi initially declined to pony up royalties for Rambus' SDRAM and DDR interfaces, which prompted Rambus earlier this year to sue Hitachi for patent infringement, and later seek to bar the import of Hitachi-made DRAMs and SDRAM controllers to the United States by filing a complaint with the U.S. International Trade Commission ( ITC). Hitachi eventually capitulated and agreed to license and pay royalties to Rambus for SDRAM, RDRAM and DDR interfaces, until the joint-venture company takes control of Hitachi's DRAM operations.

Despite the mixed opinions among Hitachi and NEC management over Rambus, early signs indicate that the joint-venture DRAM company will take a conciliatory position with Rambus. The joint-venture, which will be headed by Kenji Tokuyama, NEC's former memory division boss, is trying to cast itself as an independent entity eager to get off the ground without a hitch as it aims to nab a 20 percent share of the DRAM market.

Asked about the new company's stance on Rambus' royalty and licensing campaign, an NEC spokesman said, "My understanding is that they will probably sign something by the end of the year." The new company "doesn't want a legal confrontation," he added. "It just wants to get the business established and up and running as smoothly as possible."

The parent companies may also wish to avoid a repeat of Hitachi's bout with Rambus. Even though the new DRAM company will be an independent operation on paper, it has no fabrication facilities of its own and will rely on NEC and Hitachi for manufacturing capabilities. Any action by Rambus that would try to stop the import of SDRAM or DDR SDRAM into the United States in the absence of an agreement could pose a threat to the parent companies' manufacturing operations. Rambus pursued that route against Hitachi and one of its biggest customers, Sega Enterprises, which uses Hitachi's SDRAM controllers in its Dreamcast game console, earlier this year when it appealed to the ITC. Rambus recently lodged a similar complaint with the ITC against Hyundai.

If the joint-venture DRAM company decides to pay the Rambus tax, it will steer clear of the separate legal battles that now pit Rambus against DRAM makers Micron, Hyundai and Infineon. After resisting Rambus' attempts to collect royalties on SDRAM and double-data-rate SDRAMs, these chip makers separately fil ed lawsuits that accuse Rambus of antitrust violations and question the validity of its patent portfolio. Rambus has also been on the warpath, filing lawsuits accusing these DRAM makers of patent violation.

Licensing issues involving other DRAM makers are still pending. Mitsubishi, ranked seventh in sales among DRAM makers by Semico Research, has yet to reach agreement with Rambus. "We're continuing our negotiations with them," a Mitsubishi spokesman said.

Discouraging royalties

Rambus' strategy appears aimed at pushing DRAM makers to manufacture more RDRAMs while discouraging them from making SDRAMs with the DDR interface, a competing technology for which Rambus claims to own key patents that also apply to RDRAM. According to a recent statement released by NEC and Rambus, "the royalty rates for DDR SDRAM and the controllers, which interface with DDR SDRAM, are greater than the RDRAM-compatible rates." The same language was used to describe Rambus' settlement and patent agreement with Hitachi last June.

The NEC spokesman declined to disclose specific terms of NEC's agreement with Rambus, though he said NEC was able to negotiate relatively favorable licensing and royalty fees.

"We've always been friendly and have had a close relationship with Rambus," the spokesman said. "This covers not only DDR and Rambus but the next-generation Rambus technology as part of a big package."