May 10, 2012
DRAM Maker Merger Could Create New Dynasty
American chipmaker Micron Technology announced today they are in talks to buy Elpida Memory, Inc, winning exclusive rights to acquire the company. Earlier this year, Elpida filed for Japan´s largest-ever manufacturing bankruptcy. Such a move could make Micron more of a competitive threat against other South Korean and Taiwanese chipmakers. The company could end up paying up to $3.75 billion for Elpida.
According to a statement, Micron wants to become Elpida´s financial supporter and take over their business as a part of their reorganization, which has been approved by Tokyo courts.
Elpida, the only dynamic random access memory chip (DRAM) maker in Japan, filed for bankruptcy protection in February. Other DRAM makers have also been feeling the pinch due to a loss in demand.
According to the Wall Street Journal, Micron has said, "Elpida has decided to move forward in negotiations with Micron as the potential sponsor.”
Confirming these reports, Elpida has also separately said they are in talks with the American company to help them out of their financial woes.
Such a combination of tech makers would create a new competitive playground in the struggling DRAM industry. According to IHS iSuppli, this merger could create a strong number two player behind Samsung, amassing 28% of the world´s DRAM manufacturing capabilities. Samsung currently makes 33% of the worlds DRAM. Current number two, South Korea´s SK Hyinx would subsequently be moved to third place.
"Overall, a Micron-Elpida merger would present Samsung with its most powerful rival yet," said Mike Howard, senior principal analyst at IHS iSuppli.
Eager to make a move in the competitive sphere of DRAM manufacturing, Micron has once before attempted to buy an Asian rival. In 2002, Micron put in a bid to acquire the aforementioned SK Hyinx for roughly $4 billion. This deal fell through, however, as SK Hyinx´s creditors blocked it for fear the company would leave the country.
This previous acquisition attempt is similar to the new one in another way: SK Hyinx was also near bankruptcy, filing in 2001 after it had gathered billions in debt to continue its business.
The DRAM game was once dominated by American companies. Now, Asian suppliers rule the roost, with Micron remaining as the last American hold out.
In recent years, however, Micron has tried to diversify their business, branching out by making chips for mobile devices and smartphones, a market which is currently booming
Should the acquisition go through, Micron will then have access to Elpida´s mobile DRAM technology, driving their mobile strategy further.
Idaho-based Micron has strong ties with PC makers, offering commodity and server DRAM as well as NAND flash products. According to a report on xbitlabs.com this merger could also spell good news for the struggling DRAM industry, as the two companies could begin to diversify and adjust the over-saturation that has troubled chipmakers.
Micron, however, is also experiencing some of their own financial trouble, as the chip maker announced its third consecutive quarterly loss this past March.