© 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.
500 jobs lost as Molex decides to close facility Connectors and interconnect components manufacturer, Molex, has announced that it will shut down production and close its Shannon, Ireland, a decision that will affect about 500 employees.
NTU Singapore and GF to explore next-gen memory technology Nanyang Technological University, Singapore (NTU Singapore) and GlobalFoundries will jointly be exploring the next-generation of embedded memory for smart systems.
EU Commission clears Infineon's acquisition of Cypress The European Commission has, under the EU Merger Regulation, approved the acquisition of US-based Cypress Semiconductor by German semiconductor company Infineon Technologies.
Sponsored content by Sourceability NA LLCComponent Aggregators vs E-Commerce Marketplaces What is the difference between electronic component aggregators and a marketplace?
67% of a buyer’s journey is now done digitally. Learn how marketplaces emerged as full-cycle procurement platforms and challenged the traditional component aggregators.
GLOBALFOUNDRIES buys Smartcom’s PDK team GLOBALFOUNDRIES has acquired the process design kit (PDK) engineering team from Smartcom Bulgaria AD to enhance GF’s scale and capabilities.
New head of Zeiss Research Microscopy Solutions Effective 1 October 2019, Dr. Michael Albiez became Head of the Research Microscopy Solutions strategic business unit (RMS SBU) at Zeiss and, with this appointment, a member of the management team for the Zeiss Industrial Quality & Research (IQR) segment. He has also been appointed Managing Director of Carl Zeiss Microscopy GmbH.
ams is not backing down – launches new offer for Osram The Austrian sensor manufacturer says that it intends to launch a new all-cash takeover offer for Osram Licht for EUR 41.00 per share.
Sivers IMA and NXP collaborate on 5G NXP Semiconductors and Sivers IMA Holding AB announces a collaboration to deliver a state-of-the-art solution for 5G-NR (New Radio), such as gigabit Fixed Wireless Access applications.
LEMO opens new facility in the Netherlands To support the unprecedented growth of its Benelux business, LEMO has invested in a new, purpose-built, hi-tech and eco-friendly facility near Amsterdam.
Wafer capacity by feature size shows rapid growth at <10nm Leading-edge processes (<28nm) took over as the largest portion in terms of monthly installed capacity available in 2015. By the end of 2019, <28nm capacity is forecast to represent about 49 percent of the IC industry’s total capacity.
Elatec USA appoints Paul Massey as CEO Elatec USA Inc., developer and manufacturer of RFID products, has named Paul K. Massey as Chief Executive Officer. In this newly created position, Massey will report to the Elatec Board of Directors and Managing Director Stefan Haertel.
Data Respons reports on record high quarterly results Data Respons presented figures for Q3 showing both solid revenue growth and a good margin increase. The company reports 35 percent growth in operating income and 68 percent growth in the operating profit, reaching an EBITA margin of 12.1 percent in the third quarter.
EC imposes interim measures on Broadcom The European Commission has ordered Broadcom to stop applying certain provisions contained in agreements with six of its main customers. This will "prevent serious and irreparable harm to competition likely to be caused by Broadcom's conduct, which prima facie (at first sight) infringes EU competition rules".
Specialisation kept Universal Robots agile through the years Universal Robots, the Danish robotics company that many analysts credit with both creating and taking over the collaborative robot space.
2Q/2019: Memory business is approaching bottom “Combined DRAM and NAND revenue was USD 25.4 billion in 2Q/2019, down 5% from Q1 and down 39% year-over-year as sluggish demand and elevated inventory levels continued to plague the memory markets”, says Simone Bertolazzi, Memory Technology & Market Analyst at Yole Développement.
Tridonic supplies new Beijing airport with light-on-demand Tridonic supplies the new mega airport Beijing Daxing International Airport with drivers, intelligent lighting control and light-on-demand with daylight tracking.
Infineon-radar technology in Google Pixel 4 Smartphone Whether for artificial intelligence, augmented reality or the Internet of Things – 5 billion people worldwide 1 will be using smart devices to sense their environment next year.
NVIDIA leads way but competition is intensifying Diversity is the name of the game when it comes to the edge Artificial Intelligence (AI) chipset industry. In 2019, the AI industry is witnessing the continual migration of AI workloads, particularly AI inference, to edge devices, including on-premise servers, gateways, and end-devices and sensors.
Nidec continues Polish investment Nidec Motors & Actuators continues to expand in Poland and decided to invest a further PLN 165.2 million (EUR 3.8 million) in Kraków's special economic zone in Niepołomic.
Phoenix Contact builds R&D centre in Skolkovo German electronics company Phoenix Contact is building a regional development and competence centre in Moscow's high-tech cluster Skolkovo.
Elektrobit opens software lab in Berlin Kickstarts the new office by signing a collaboration agreement with Daimler subsidiary MBition.
Smiths Detection scanners keep laptops and liquids in the bag Recent implementation of Smiths Detection’s checkpoint scanners at Melbourne Airport pave way for reduction of passenger journey time by 50 percent.
Murata develops Millimeter-Wave RF Module for Terragraph Murata Manufacturing is working to develop an RF module solution for Terragraph, a gigabit wireless technology developed by Facebook. The module solution aims at meeting the growing demand for reliable, high-speed internet access in urban and suburban environments.
Ynvisible Interactive enters manufacturing agreement with Invisense Ynvisible Interactive has entered into a partnership with Invisense AB, a developer of passive humidity sensors. The agreement between the companies establishes Ynvisible as the preferred manufacturing partner for Invisense’s growing range of humidity sensor products.Load more news