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Talk of the Day -- Taiwan closely monitoring Elpida bidding

2012/04/25 22:55:14

Taiwan is closely watching an international race for bankrupt Japanese chip maker Elpida Memory Inc. as a second round of bidding for the world's No. 3 maker of dynamic random access memory (DRAM) chips is set for April 27, a local business paper reported Wednesday.

According to the report, the Ministry of Economic Affairs completed an analysis of possible impacts on Taiwan of various bidding results three weeks ago.

Ministry officials were quoted as saying that Taiwan's information and communication technology (ICT) industry could be hurt potentially if SK Hynix of South Korea emerges as the final winning bidder.

At the moment, the report said, the ministry would most like to see U.S.-based Micron Technology take over the bankrupt Japanese DRAM company. The company maintains close ties with some local technology firms.

The following are excerpts from a special report in Wednesday's edition of Commercial Times on Elpida bidding and its possible impact on the local IT sector:

Japanese semiconductor giant Toshiba Corp. has reportedly dropped out of bidding for Elpida, according to foreign wire service reports, citing sources close to the negotiations.

As a result, the bidding would be a race among a handful of companies from the United States, South Korea and China, the reports said.

Micron reportedly offered the highest price in the first round of bidding for Elpida and many market mavens expect it to eventually win the bid.

A Micron victory could help contain further expansion of South Korean makers in the DRAM market, industry analysts said.

Elpida, which trails South Korea's Samsung Electronics and SK Hynix in DRAMs with a market share around the 12 percent, filed for bankrupt protection in late February with US$5.6 billion in debt, marking the largest bankruptcy of a Japanese corporation.

Following Elpida's withdrawal, the companies still planning to take part in April 27 bidding will be Micron, SK Hynix and private equity firms U.S.-based TPG Capital LP and Chinese-owned Hony Capital.

According to a study by Taiwan's Economics Ministry, if SK Hynix acquires Elpida, the global DRAM trade map could undergo a dramatic reshuffle, with South Korean electronics giants controlling dominating shares. As DRAM is a key component in the ICT industry, South Korean dominance could potentially hinder the sector's overall growth in the long run, the ministry report said.

Elpida controls more than 60 percent of stakes in Rexchip Electronics Corp.. a Taiwan-based joint venture in which Taiwan's Powerchip Corp. and U.S.-based Kingston Technology Co. also hold stakes. If SK Hynix acquires Elpida, it will control Rexchip's production capacity.

If the TPG-Hony joint venture acquires Elpida, it will have hard time obtaining Elpida's Taiwan subsidiary Rexchip because Taiwan's law still bars Chinese companies from acquiring controlling stakes in any local DRAM companies.

As Micro had long been discussing a tie-up with Elpida, ministry officials said, the U.S. company may stand a good chance of winning Friday's bidding for Elpida.

Should that be the case, the officials said, the ministry will help Rexchip forge technological cooperation with Micron.

Micron has maintained closed partnership with Taiwan's largest DRAM maker Nanya Technology Co. and the two companies also jointly control Inotera Memories Inc., a Taiwan-based DRAM maker. (April 25, 2012).

(By Sofia Wu)