Micron Technology Inc. (MU) said it’s in talks to buy Elpida Memory Inc., the Japanese chipmaker that filed for bankruptcy in February, adding capacity to make chips used in personal computers and smartphones.
Micron got the approval from the Tokyo District Court today to negotiate to acquire Elpida’s entire business, the Boise, Idaho-based company said in a statement today. Elpida picked Micron after holding a bidding, the Tokyo-based company said in a separate statement.
Acquiring Elpida would double Micron’s share of the global market for dynamic random-access memory, the most widely used chips in PCs, to about 24 percent, helping it compete against industry leader Samsung Electronics Co. (005930) Elpida, which has three factories, also supplies Apple Inc. (AAPL) with chips used in iPhones.
Private-equity firm TPG Capital also planned a bid, a person familiar with the matter said April 6. SK Hynix Inc. (000660), the only company that had publicly expressed interest in buying Elpida, decided not to participate in the second round of bidding, the Icheon, South Korea-based company said May 4.
Elpida, with 448 billion yen ($5.6 billion) of debt, sought protection from creditors after DRAM prices plummeted as they became a commodity, and as PCs gave way to mobile communication devices. Elpida was also hurt by a stronger yen, which erodes the value of its exports.
Dan Francisco, a spokesman at Micron, didn’t immediately return an e-mail seeking comment outside of regular office hours. Elpida declined make comments beyond those in its statement.
The price of the benchmark DDR3 2-gigabit DRAM declined to a record 71 cents in November, compared with $4.85 on Sept. 1, 2010, amid slowing personal-computer sales, according to DRAMeXchange, Asia’s biggest spot market for the chips. The price reached $1.05 today. Samsung maintained its top slot in the market in the first quarter with a 41.4 percent share, TrendForce Corp. said May 8. Hynix had 23.9 percent, Elpida’s was 12.4 percent, and Micron held 11.6 percent, the researcher said.
Taking over Elpida would also enable Boise, Idaho-based Micron to boost its mobile DRAM business, as the Japanese chipmaker held a 17 percent of share in the market in the fourth quarter, TrendForce said. Micron had 7.3 percent in mobile DRAM, lagging behind Samsung’s 54 percent and Hynix’s 21 percent.
Yukio Sakamoto, Elpida’s president, is heading the company’s restructuring efforts after getting court approval to serve as its trustee March 23. The company plans to submit its revival plan Aug. 21.
The chipmaker was created through the 1999 merger of the memory businesses of NEC Corp. (6701) and Hitachi Ltd. (6501) Toshiba Corp. (6502) announced its withdrawal from the DRAM business in 2001 to focus on making NAND flash memory chips.
While Elpida’s creditors may ask for at least $3 billion to $4 billion, bidders probably won’t offer more than $2 billion, Bank of America Merrill Lynch said in a March 30 report. Also, a buyer would have to spend $3 billion during the next 12-18 months to help restore Elpida’s competitiveness, making the deal risky, according to the report.
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