Elpida selling shares, seeks funds for expansion

June 29, 2006 – Elpida Memory Inc. says it will issue 30 million new shares to raise roughly 141 billion yen (US $1.22 billion) to help finance planned expansion at its 300mm DRAM facility in Hiroshima Prefecture.

The chipmaker aims to boost capacity at the site by 20% to 67,000 wafers/month in the current fiscal year, and then increase to 85,000 wafers/month next year, and ultimately reach 100,000 wafers/month in fiscal 2008. Elpida, which expects to spend a total of roughly 306 billion yen (about $2.63 billion) on the total capacity increase, also will shift production at Hiroshima to 70nm process technologies.

Investors remain mixed on the news, with some acknowledging the need to address demand for memory used in consumer electronic devices. Other analysts, however, warn that the move dilutes the value of shares held by existing investors. The move will increase Elpida’s outstanding share total by roughly a third, during a period when the Tokyo markets have sagged recently.

“I’d be really angry if I were a shareholder” because of the share dilution, said Edwin Merner, president of Atlantis Investment Research, quoted by Reuters.

Other investors reportedly question the timing of the increase before the upcoming fiscal quarterly results are released. Elpida’s shares slumped nearly 10% on heavy volume following the news, reflecting analysts’ concerns.


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