The deal, which will double Micron's DRAM chip production capacity, also obligates the company to support Elpida's operations and employees.
Micron Technology announced it would purchase
struggling Japanese dynamic RAM specialist Elpida Memory, which focuses on chips
for smartphones and tablets in addition to computers, for $750 million. The
transaction, labeled a sponsor agreement, will double Microns share of the
DRAM market. The agreement also calls for Micron to provide certain financing
support for Elpida capital expenditures and to maintain Elpida's operations and
Micron also announced a separate agreement
with Powerchip Technology Corp., a Taiwanese company, and some of its affiliates
to acquire Powerchip's 24 percent share of Rexchip Electronics Corp. for
approximately $334 million. Elpida, a supplier for Apple and other PC OEMs owns
about 65 percent of Rexchip. Together with the Rexchip shares acquired from
Powerchip, Micron will control approximately 89 percent of Rexchip's
outstanding shares. Both transactions are expected to close in the first half
of calendar 2013.
"Micron's sponsorship of Elpida will
enable stable payment of creditor claims and help to streamline approval of the
reorganization plan by the creditors and the Tokyo District Court. Joining with
Micron also delivers a clear advantage for Elpida's customers, suppliers and
employees," Yukio Sakamoto, co-trustee of Elpida, said in a prepared
statement. "The transaction is a strong testament to the value of Elpida's
technologies, products and people, and it will result in a combined
organization that can best serve customers with broader memory solutions,
strength and scale."
Elpida's assets include a 300mm DRAM
fabrication facility located in Hiroshima, Japan, as well as a Rexchip 300mm
DRAM fabrication facility located in Taiwan. The fabrication facility assets of
Elpida and Rexchip together can produce more than 200,000 300mm wafers per
month, according to a press release from Micron. "We've always had deep
requirements for additional capacity and this puts us in great shape to respond
to that," Micron president Mark Adams told the news agency Reuters.
"This is a big step in providing some stability to our industry."
"We are creating the industry-leading
pure-play memory company," Micron CEO Mark Durcan said in a company
statement. "Today's transactions will help strengthen the combined
companies' market position in the memory industry through increased research
and development and manufacturing scale; improved access to core memory market
segments; and additional wafer capacity to balance among DRAM, NAND and NOR
memory solutions for the ultimate benefit of Micron and Elpida customers."
According to a May report
from IHS iSuppli, Elpida unseated Micron from its third-place ranking in
the DRAM market for the first quarter of 2012. Elpida actually outperformed the
overall industry by increasing revenue by 1 percent from the fourth quarter of
2011 and grabbing 12.6 percent market share.
U.S.-based Micron dropped 3.4 percent and
landed in fourth place in the first quarter, with revenue of $759 million,
compared with Elpidas $780 million, according to IHS iSuppli. The total DRAM
market slid 4.4 percent from the fourth quarter of 2011 to the first quarter of
2012, posting overall first-quarter revenue of $6.2 billion, down from nearly
$6.5 billion in the previous quarter.
Nathan Eddy is Associate Editor, Midmarket, at eWEEK.com. Before joining eWEEK.com, Nate was a writer with ChannelWeb and he served as an editor at FierceMarkets. He is a graduate of the Medill School of Journalism at Northwestern University.