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 employees.
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.