Reports: US to challenge Elpida subsidies

October 6, 2009 – The US is ready to press the World Trade Organization to investigate alleged government subsidies of memory chip maker Elpida Memory, a move that would have significant implications in both Japan and Taiwan, according to multiple reports.

In a letter to Mike Crapo (R-Idaho) — home state of rival memory chipmaker Micron — US Trade Representative Ron Kirk reportedly floated the idea of exploring the issue through WTO sessions and a regional semiconductor industry gathering. Elpida last month raised ¥30B through a share issuance to the Development Bank of Japan under a government industrial revitalization program, as part of a ¥160B (US $1.8B) effort to rebuild the DRAM maker with public and private funds.

Elpida also is the chosen technology partner of Taiwan Memory Co., the proposed restructuring of Taiwan’s DRAM industry. (Elpida shares sunk to a two-month low after the reports of the US subsidy inquiry.)

TMC isn’t commenting on the news, but Digitimes notes that TMC is in line for government Taiwan government funding, part of which would likely be used to purchase a 10% stake in technology partner Elpida; pressure from the US could upset those fundraising plans. But Micron, currently the fourth-biggest global DRAM supplier (behind Samsung, Hynix, and Elpida, could also benefit from such government action due to ties with Taiwan partners Nanya and Inotera, as an alternative to TMC, Digitimes notes.

Even if the US — which itself subsidizes many sectors, from farmers to airlines — doesn’t follow through with the threat, "markets have been reminded of the many uncertainties around the chip sector," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, quoted by Reuters.


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