© homiel / dreamstime.com Components | January 03, 2012
Elpida loan due in April
Elpida’s loan due in April. Financial difficulties cause merger speculation.
Heading into the end of 2011, Elpida’s financial difficulties were revealed. Rumors abounded, not only of Elpida seeking a bailout from the Japanese government, but also of Toshiba stepping up to take over. If this rumor is true, Elpida will be the first maker to fall in the harsh DRAM winter. Currently, Elpida’s cash is down to JPY$110 billion, approximately US$1.429 billion, but the company’s total debt amounts to around US$6.26 billion, 60% of Elpida’s total assets. JPY$37.4 billion (approximately US$486 million) of Elpida’s total debt comes from the Japanese government’s recapitalization program and must be repaid by the end of April 2012. In the face of this pressing deadline, Elpida has no choice but to look elsewhere for funds, which has fueled industry speculation of a merger or acquisition. Integration necessary for DRAM industry to become oligopolistic and return to profitability Amidst numerous conjectures about Elpida’s possible integration, the Japanese government plays an important role. In addition to possibly extending repayment of Elpida’s loan, the government is actively involved in integration prospects. Besides potential government intervention, there is also a chance that Elpida’s longtime strategic partners Kingston and Powertech Technology (PTI) will offer assistance. Since 2H11 there has been frequent news of Kingston purchasing Elpida chips at discounted prices, hoping to help Elpida make it through the DRAM price downturn by decreasing the company’s losses somewhat. Market rumors also hinted that Nanya was willing to cooperate with Elpida. This rumor was immediately and firmly denied by both parties, and upon analysis it appears that there is little truth to the supposition. From Nanya’s perspective, their current debt ratio is a high 96.8%. Although the company has received continuous financial support from industry giant Formosa Plastics, at this point in time it is highly unlikely Nanya would leave partner Micron to cooperate with Elpida. Furthermore, in terms of cost considerations neither Elpida nor Nanya is in a position to endure the technology integration period that would be necessary after merging. Lastly, as Nanya and Elpida have filed patent infringement lawsuits against each other, there is little possibility of a strategic alliance between the two. As Elpida’s options are limited when it comes to integration partners, the Japanese government is eager to help negotiate a partnership between Toshiba and Elpida, in hopes of developing an operational strategy that will further reduce the proportion of commodity DRAM wafer starts. Furthermore, the government also hopes for integration of DRAM and NAND product lines, in order to target the smartphone and tablet PC markets as major Korean makers have done. Furthermore, there is also the possibility of U.S.-Japan cooperation, with the goal of going up against Korean makers. Such an alliance would not only enable makers to solidify DRAM and NAND product lines and break into the mobile DRAM market, but Elpida and Micron’s combined wafer start capacity would be 328K starts per month, surpassing that of number two Korean maker Hynix. From an economic perspective, teaming up would help keep costs down. According to TrendForce, currently the market has entered the traditional down season. Although, DRAM total wafer start volume has already decreased by over 20% since the beginning of 2011, a portion of DRAM capacity must be cut indefinitely if the DRAM industry is to achieve balanced supply and demand. This is the only method for the industry to achieve sustained growth and become an oligopolistic market. Currently, other than Korean maker Samsung who possesses nearly 50% market share, DRAM makers are all in the red. Taiwanese manufacturers are suffering the most, with enormous net loss figures. Nanya’s debt ratio is nearing 100%, while Powerchip’s is around 80%, with clear need of an extension on imminently due loans. In terms of Micron, debt ratio is lower than 30% as the company’s NAND flash remains profitable. Thus, it is unlikely they will be part of a merger. Micron’s subsidiary company Inotera is relatively stable in comparison to other Taiwanese makers, with the ability to solicit capital on their own – Micron subsidiary, Dutch Numonyx is part of private fundraising plans set by Inotera in December 2011. Taking the above factors into account, the most likely company that would be part of a merger is Elpida, and the DRAM industry is sure to see major changes in 2012. DRAM market to gradually head towards oligopolistic status, price slashing history unlikely to recur According to TrendForce, the current DRAM industry is still a competitive market. As profitability is achieved in the DRAM industry by using capacity and technology migration to keep single chip cost down, as soon as market demand growth slows, oversupply is difficult to reverse. From the market perspective, impacted by the rise of mobile products, the time for high PC yearly shipment volume has long gone. The only way to increase profitability is to cut more DRAM capacity, and increase the proportion of mobile DRAM shipments. Before the market becomes an oligopoly, speculation of mergers and acquisitions will be endless, and the longer the industry remains in the red, fewer makers will be able to participate in such actions as they slowly lose grounds for negotiation. However, with successful integration and an oligopolistic market, DRAM profitability will still be possible, and the surviving manufacturers will be able to live on as the industry fulfills its long-term goal of healthy operation.
SkyWater chosen for volume US manufacturing of temperature sensing chip Foundry partner, SkyWater Technology, has been chosen by investment firm, Asymmetric Return Capital (ARC) and Linear ASICs, a fabless analog and mixed-signal semiconductor company, to volume manufacture a microchip with temperature sensing capabilities used in a low-cost, smartphone-enabled wireless patch that assists in the remote detection of COVID-19.
Samsung expands with new NAND flash facility Samsung Electronics plans to expand its NAND flash production capacity in Pyeongtaek, Korea, in order to improve its ability to meet demands from emerging technologies.
ASML ships first-generation multibeam inspection system ‘eScan1000’ ASML Holding NV says that it has completed system integration and testing of its first-generation HMI multibeam inspection (MBI) system for 5 nm nodes and beyond.
Cognex takes measures to counter deteriorating market conditions Machine vision technology provider, Cognex Corporation, says it is taking significant steps to reducing expenses due to deteriorating market conditions and to position the company for growth when conditions improve.
Verkotan selects PWC technology from Rohde & Schwarz Test and measurement specialist Rohde & Schwarz has recently introduced the R&S PWC200, the first plane wave converter (PWC) on the market. Verkotan is the first independent test house to choose this technology to test 5G NR FR1 base stations over-the-air (OTA).
Kurt Sievers takes the helm at NXP At its annual general meeting of shareholders, the appointment of Kurt Sievers as the company’s next CEO was overwhelmingly approved.
Excelitas’ Qioptiq subsidiary expands with new plant Excelitas Technologies, a company delivering photonic solutions, sats that its Qioptiq subsidiary held a ground-breaking ceremony last week to mark the beginning of construction for a new factory in Göttingen, Germany.
Farnell adds Sorensen power supplies to its roster Distributor Farnell announces that it has added Sorensen, the premier DC programmable power supply brand from Ametek, to its range of power supplies.
Infineon raises EUR 1 billion following successful share placement Infineon informs that the company placed 55 million new shares, following an accelerated bookbuilding process with institutional investors, under the exclusion of subscription rights. The shares were placed at a price of EUR19.30 per share, meaning that the company managed to raise EUR 1.06 billion.
Skeleton Technologies strengthens management with new COO Skeleton Technologies has appointed Ants Vill, former Vice President of Product, as Chief Operating Officer.
SiPearl chooses Germany for its first international operational subsidiary SiPearl, a designer of the microprocessor for the European exascale supercomputer, is opening its first international subsidiary in Duisburg, in the Ruhr region, Germany, in order to build closer connections with its German partners and future clients.
DELO reports increased revenues despite current pandemic DELO closed the financial year that ended on March 31 with a turnover of EUR 163 million. This is an increase of almost 5% compared to the previous year (EUR 156 million).
China falls far short of its "Made-in-China 2025" goal IC production in China represented 15.7% of its $125 billion IC market in 2019, up only slightly from 15.1% five years earlier in 2014. IC Insights forecasts that this share will increase by 5.0 percentage points to 20.7% in 2024 (one percentage point per year on average).
COVID-19 highlights the gravity of the secondary market for SME Cha Jin-Seok, Chief Financial Officer of SK Hynix, said it best in the company’s Q1 earnings call, “Because of a never experienced pandemic, even basic business activities such as maintaining normal operations and predicting future demand have become challenging tasks.”
GlobalFoundries to implement ITAR at US manufacturing facility GlobalFoundries plans to implement export control security measures at its most advanced manufacturing facility, Fab 8, in Malta, New York.
Rebound Electronics expands in Asia The independent supplier of electronic components says it is investing to increase its market coverage in Asia with the opening of several new offices and setting up a customer service & telesales centre.
Samsung expands foundry capacity with new production line Samsung Electronics says that it plans to boost its foundry capacity at the company's new production line in Pyeongtaek, Korea, to meet growing global demand for extreme ultraviolet (EUV) solutions.
Super Dry Totech expands Long Term Storage Solutions offering The most recent development for Super Dry Totech, is the acquisition of a new building to expand on capacity & to minimise risk by assuring continuity should a disrupting incident occur in one of the facilities.Load more news
- COVID-19 highlights the gravity of the secondary market for SME
- China falls far short of its "Made-in-China 2025" goal
- Raspberry Pi audio HAT board with MERUS class D multilevel amplifier
- ASML ships first-generation multibeam inspection system ‘eScan1000’
- Gémosz is still looking to grow – but the pandemic brought new perspectives