Tuesday, April 10, 2012
In February 2012, Elpida Memory Inc filed for bankruptcy protection in Tokyo court. Since then, bidders for the memory semiconductor firm have included Micron, Hynix, and Toshiba, and now private equity firms TPG Capital and Hony Capital. This mix creates the potential for a bidding war, says CJ Muse of Barclay Capital. Muse shares the likely and unlikely scenarios for Elpida’s assets, and how these will affect DRAM semiconductors overall.
According to Reuters, the two private equity firms will take part in a second round of bidding for Elpida, due to close on April 27. Yukio Sakamoto, Elpida president & CEO and Nobuaki Kobayashi, attorney-at-law as the Trustees for the bankruptcy case. While a winning bid could be selected as early as May, the entire process will likely take longer, which means a resolution might not come until August. Meanwhile, expect DRAM pricing to grind higher from today's $1.00 but hold near $1.10+ suggesting only a modest recovery.
Likely scenarios:
Micron (MU) buys Elpida. An asset sale to Micron or another chipmaker for pennies on the dollar is the best scenario for the memory sector, and Micron buying Elpida would make the most strategic sense, Barclays asserts. The purchase would add mobile DRAM to Micron's DRAM portfolio, giving Micron another reach into the tablet and mobile phone chip market. While Micron currently accounts for just 5% of the mobile DRAM market, adding Elpida (~17% market share in 2011) would tie Micron with Hynix for #2 in this market at 22% share (see the table). Micron could also leverage Elpida’s Hiroshima fab to produce NOR Flash chips.
Hynix and Toshiba jointly buy Elpida. Toshiba reportedly approached Hynix about a joint bid after its prior stand-alone offer was said to be below Micron's bid (various reports from Reuters and Digitimes suggest a bid between $1.5B and $1.8B). Hynix could bring its mobile DRAM share to 39%, competitive with sector king Samsung. Toshiba might want Elpida's DRAM intellectual property (IP) to ensure success of its magnetoresistive random access memory (MRAM) technology. Given Hynix is Toshiba's ODM partner, a joint bid makes sense, Barclays asserts, noting that the main question will be the extent of government backing provided.
Table. Mobile DRAM market share. SOURCE: IDC and Barclays Research.
|
Mobile DRAM |
2009 |
2010 |
2011 |
|
Elpida |
10% |
17% |
17% |
|
Hynix |
27% |
27% |
22% |
|
Micron |
2% |
4% |
5% |
|
Nanya |
0% |
0% |
0% |
|
Powerchip |
0% |
0% |
0% |
|
ProMOS |
0% |
0% |
0% |
|
Samsung |
61% |
52% |
56% |
|
Winbond |
0% |
0% |
0% |
By: DocMemory
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