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Talk of the Day -- Will Taiwan benefit from Micron takeover of Elpida?

2012/05/07 20:08:44

As expected, U.S.-based Micron Technology has won the right to negotiate exclusively to buy Elpida Memory Inc. after offering more than 200 billion yen (about US$2.49 billion) for the bankrupt Japanese chipmaker, according to local media reports.

Major Taiwanese memory chip makers and market analysts hailed the development as they believe Micron's acquisition of Elpida will help form a Taiwan-U.S.-Japan alliance to battle South Korean dominance of the global memory chip market, the reports said.

According to data compiled by U.S. technology research firm IHS iSuppli, Elpida was the world's third largest DRAM chip maker, with a 13.1 percent market share in 2011.

Micron controlled an 11.6 percent market share in 2011. After taking over Elpida, Micron will expand its share to 24.7 percent and will replace South Korea's SK Hynix as the world's second largest DRAM maker. Hynix held a 23 percent global market share last year.

As Micron maintains close partnership with Taiwan's largest DRAM maker Nanya Technology Corp., a Micron-Elpida-Nanya alliance could control more than 30 percent of the global DRAM market. In comparison, the world's No.1 DRAM supplier Samsung Electronics of South Korea held a 45 percent market share in 2011.

SK Hynix dropped out of the race for takeover of Elpida last week, according to foreign wire service reports.

The following are excerpts from a special report in the Monday edition of the United Evening News on the latest developments in the DRAM industry:

Industry sources said Micron sent senior executives to Taiwan before it joined an international bidding for Elpida earlier this year.

Micron executives presented the initiative of forming a U.S.-Japan-Taiwan alliance to battle Korean dominance of the global DRAM market, the sources said.

Once acquiring Elpida, Micron will also get access to Elpida's Taiwan subsidiary Rexchip Electronics Corp. in which Taiwan's Powerchip Technology also has a stake.

Rexchip is known for its advanced production facilities and relatively low debt ratio.

Foreign media reports have quoted Micron executives as having said they will maintain work terms for employees at Rexchip and Elpida's Japanese factories after it takes over Elpida.

Micron has long maintained close 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.

Once it acquires Elpida, Micron will expand its Taiwan partnership to include Rexchip, Powerchip and Powertech Technology.

Pai Pei-lin, spokesman for Nanya Technology -- the memory chip manufacturing arm of Formosa Plastics Group -- would not comment on the possible impact of Micron's acquisition of Elpida on the grounds that no official documents on the deal have been released.

At the moment, Pai said, Nanya Technology's business operations remain unchanged. In the long run, he said, Nanya will definitely benefit if Micron offers more technological support and research manpower.

Moreover, Pai said he believes that the conclusion of Elpida settlement deal will have a positive effect on the DRAM market.

Nevertheless, some industry analysts said Taiwan's DRAM makers must strive to enhance their research and development capability as well as increase added-value of their products if they want to survive ever more ferocious competition in the world market.

Elpida has been searching for an investor to sponsor its restructuring after filing for bankruptcy protection in February with 448 billion yen (US$5.6 billion) in liabilities, hit by a strong yen and a slide in prices of DRAM computer chips.

In the final round of bidding that closed last Friday, Micron also offered to keep Elpida's two main factories in Japan open and to guarantee jobs for the company's current employees for the time being, according to foreign wire service reports. (May 7, 2012).

(By Sofia Wu)