Financial News
DRAM merger would change industry
A POSSIBLE merger between Micron Technology and Elpida Memories has the potential to redraw the competitive landscape of the dynamic random access memory (DRAM) space, yielding a new No. 2 player that could challenge Samsung Electronics leadership. A union would catapult the consolidated entity to 2nd place in the global DRAM market, with a combined capacity of 374,000 wafer starts per month. The newly merged company would have a 28 % share of DRAM manufacturing capacity, placing it just behind leader Samsung Electronics currently with a 33% share. On their own, Elpida and Micron usually place in the No. 3 and No. 4 spots, respectively. The reconfigured DRAM terrain also would mean that Hynix Semiconductor falls to third place. Media and industry speculation currently poses the possibility of Micron taking over Elpida, or of Elpida coming to some sort of arrangement with its rival. But before such a Trans-Pacific marriage can proceed between the leading U.S. memory player and the chief Japanese DRAM producer, both Micron and Elpida would have to face down a number of potent challenges, Howard pointed out. The first and largest, is Elpida’s debt. At the end of the
third quarter last year, Elpida owed $4 billion in outstanding obligations. And although the DRAM industry is familiar with large amounts of debt because fabs can be extremely expensive to build and often require debt to finance, Micron is decidedly debt averse. A second daunting challenge is the strong yen, the currency in which approximately 60 percent of Elpida’s wafers in Japan is denominated. A third possible challenge could be Micron’s ongoing partnership with Nanya Technology. There could be covenants in the agreement between Micron and Nanya that could sour any chance of a possible deal between Micron and Elpida. And in an unexpected development, the Feb. 3 death of Micron CEO Steve Appleton in an experimental airplane crash could complicate matters and delay consolidation, especially since Appleton was a known advocate for consolidation and was likely a driver behind any possible deal. For Elpida, a key advantage would be greater access to
the premium customer segments that Micron serves. In the third quarter, Elpida DRAM commanded an average selling price of $0.70 per gigabyte, compared to an enviable, near- double rate for Micron at $1.34 per gigabyte. Micron, clearly, is serving a different customer group that Elpida simply would love to get its hands on, IHS believes. But while Elpida would gain access to Micron’s specialty customers in a merger, Micron also would be able to reach Elpida’s mobile DRAM buyers. Elpida shipped 18.4 percent of mobile bits in the third quarter, compared to only 5.3 percent for Micron. And with mobile DRAM now accounting for about 15 percent of the total DRAM market, such leverage for Micron would constitute an unqualified boost and help expand its overall revenue.
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www.euroasiasemiconductor.com Issue I 2012
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