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Elpida Poised to Drop on Survival ‘Uncertainty’: Tokyo Mover

Elpida Memory Inc. (6665), the Japanese chipmaker facing an April deadline to repay debts, was poised to plunge in Tokyo trading after saying it still doesn’t have the necessary financing to stay in business.

Japan’s largest maker of dynamic random access memory chips was offered at 294 yen as of 9:32 a.m., 21 percent below yesterday’s closing price on the Tokyo Stock Exchange. The shares were untraded because orders to sell outnumbered buyers.

Elpida said yesterday there is “uncertainty” about its future as it hasn’t reached a deal with the trade ministry, the Development Bank of Japan and its main lenders, reversing a Feb. 2 statement that it expects to secure financing. The Tokyo-based company’s ability to repay 92 billion yen ($1.2 billion) in bonds and loans is made more difficult by plunging chip prices and five straight quarters of losses.

“The chip industry is in trouble,” said Edwin Merner, president of Tokyo-based Atlantis Investment Research, which manages $300 million. “Most commodity type chip companies are losing money and the business continues to be capital intensive.”

The Apple Inc. (AAPL) supplier needs government backing to stay in business as South Korea’s Samsung Electronics Co. (005930) profitably diversified while chip prices collapsed, analysts said.

“Elpida has not made as much progress as initially envisioned in discussions with the relevant parties,” the company said yesterday. “Therefore, material uncertainty about its assumed going concern is found.”

Samsung Rising

Elpida’s slump contrasts with Samsung, which had 7.34 trillion won ($6.6 billion) in operating profit from selling chips last year.

Samsung boosted its profits by producing specialty chips for products with rising demand, including smartphones, tablet computers and servers.

Elpida is also discussing advance payments and capital investments with customers, it said last month.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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