Micron expected to win Elpida assets in DRAM maker’s bankruptcy negotiations

May 7, 2012 — Elpida informally chose Micron to sponsor its restructuring, report severals sources.

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Barclays Capital cites the Japan Times ("Elpida selects US chip maker Micron to sponsor its rehabilitation plan” 5/6/2012) as a source for the agreement news, which has been reported by Reuters, NHK, and The New York Times, among other outlets. Micron reportedly will pay a higher price than expected (JPY200B or US$2.5B) for the assets, investing another JPY100B (US$1.25B) to upgrade fabs in Hiroshima and Akita, Japan. Micron’s original offer for the Elpida assets was said to be US$1.5 billion. The new figure is still well below the cost of constructing an equivalent amount of capacity, Barclays notes.

The final plan will be filed with the Tokyo District Court by the end of August.

Barclays estimates this deal leaves three main DRAM players: Samsung with ~45% share, Micron/Elpida with ~24%, and Hynix with ~23%. Reuters notes that this is nearly double Micron’s previous DRAM share, catapulting it past Hynix. In February 2011, IHS iSuppli put DRAM market shares at Samsung 42%, Hynix 22%, and Elpida and Micron tied at 13% a piece. The consolidation will help keep DRAM pricing “more rational,” Barclays predicts.

In addition to the 2 Japanese fabs mentioned above, Micron would gain 65% ownership of the Rexchip Taiwan fab and a more dominant role in mobile DRAM. As of now, there is no clarity on Micron’s plans for the 3 fabs, though Barclays assumes some conversion to NAND/NOR from DRAM lines.

A FAQ PDF about the bankruptcy is available on Elpida’s website at http://www.elpida.com/pdfs/pr/2012-03-28e.pdf.

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