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Elpida bailout denied, firm files bankruptcy

Posted: 29 Feb 2012 ?? ?Print Version ?Bookmark and Share

Keywords:DRAM? storage market? supply chain?

DRAM manufacturer Elpida Memory Inc. has failed to win a second government bailout and is now filing for bankruptcy. The embattled chip maker has been facing fluctuating market prices, supply shortages due to the flooding in Thailand and a stronger yen.

Elpida was formed in 1999, through the merger of NEC's and Hitachi Ltd's memory businesses and is the only Japanese DRAM maker. This month, the company posted its fifth straight quarterly loss.

Reports reveal that Elpida has liabilities worth around had liabilities of $5.5 billion (?448 billion), according to a filing with Japan's finance ministry. The company will be delisted from the Tokyo Stock Exchange on March 28.

Japan's government bailed out the company in 2009, and its decision to let it go bankrupt without further support is surprising, said Yoshihiro Nakatani, a Tokyo-based fund manager at Asahi Life Asset Management Co. in a report by Bloomberg.

"The impact from the worsening DRAM market and the stronger yen was big on Elpida," Nakatani said. "The government should have known that this business itself has a risk when they decided to support the company in 2009," according to the samereport.

Elpida hasn't been able to reach a deal with the trade ministry, the Development Bank of Japan and its main lenders over financing for 92 billion yen in bonds and loans due by April.

Handel Jones, CEO of International Business Strategies Inc., said last month at fab tool vendor trade group SEMI's International Strategy Symposium that one or two DRAM vendors would go bankrupt this year.

"It has now happened to Elpida, which was destroyed by what we are terming as 'predator strategies' by the market share leaders," Jones said. "Probably one other company will go bankrupt this year. The competition is becoming more brutal."

Dissecting the Micron-Elpida merger
Should the merger between these two companies still push through? IHS believes that the merged company could be a possible contender for Samsung. Read the whole article here.

Elpida's bankruptcy would be the nation's biggest since Japan Airlines Corp. sought protection in January 2010 with $28.81 billion (?2.32 trillion) in liabilities, according to data from Tokyo Shoko Research. Elpida employed 5,898 people as of March 31.

As the faltering global economy and floods in Thailand curb PC production, some DRAM manufacturers may not have enough money to mimic Samsung's diversification, analysts said.

Samsung boosted its profits by producing specialty chips for smartphones, tablet computers and servers. Elpida and other makers of DRAM chips lost a combined $14 billion in the past three years.

DRAM is the most common chip in computers. Samsung controlled 45 percent of the market by value in the third quarter, according to IHS Inc.'s iSuppli. Hynix held a 22 percent share and Elpida 12 percent.

Now that the company has filed for bankruptcy, what will happen to the reports that Elpida is in merger talks with Micron?

- Nicolas Mokhoff
??EE Times





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