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Elpida poise for come back, appoint new president
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Monday, November 4, 2002
Elpida Memory Inc. has hired a reputed turnaround specialist, Yukio Sakamoto, as its new president, raising expectations that he will put Japan's largest DRAM maker on solid footing. That is, if Elpida's corporate parents empower him to do so.
"The range of my discretion was the biggest issue" when discussing his appointment, Sakamoto said. "I can decide investment up to 10 billion yen [about $81 million] at my discretion," he said.
Elpida was formed in 1999 when Hitachi Ltd. and NEC Corp. combined their DRAM operations, and those two companies are equal owners of the venture. Mitsubishi Electric Corp. agreed to transfer its DRAM operation to Elpida in early October.
Analysts have said that Elpida's joint ownership has slowed decision-making and strained the organization. Sakamoto recognizes as much. "The organization has not functioned smoothly and efficiently like an organic body," he said. "With such an organization, it is difficult to survive in the semiconductor industry, in which agile management is essential. I am going to mange the company with quick decision-making."
Though the discretionary investments Sakamoto will control are relatively small for a DRAM company, he will also have authority in matters of personnel. He is one of five members of the company's board, with two members coming from NEC and two from Hitachi.
"Elpida can not stay as it is; it needs drastic measures," said Shigeo Matsumoto, executive vice president of NEC. "That's why we invited a president with big achievements from outside. Empowerment is essential."
Sakamoto, 55, started his career at Texas Instruments Japan and rose to become an executive vice president. He joined the semiconductor division of Kobe Steel in 1993 and negotiated the sale of its DRAM operations to Micron Technology Inc. He then became president of Nippon Foundry, an affiliate of United Microelectronics Corp., and concurrently served as a consultant for UMC Japan.
Though Elpida does not disclose its revenue, Hitachi said it anticipates a loss for the DRAM company of about $211 million for the fiscal year ending next March. "Japanese semiconductor companies cannot afford several ten billion yen [several million dollars] in losses every year. If Elpida does not show a conspicuous improvement in about one year, that would be my failure," Sakamoto said. His presidency is based on a three-year contract.
Sakamoto's targets are clear: first, capacity expansion; second, turning a profit; third, taking Elpida public.
Elpida has a capacity of 3,000 300-mm wafers a month at its fabrication facility in Hiroshima, Japan. "I am going to expand the capacity to 10,000 wafers a month as soon as possible," Sakamoto said. That will require and investment of $400 million to $600 million, well above Sakamoto's range of discretionary spending. "My resources will decide whether I can raise money or not," Sakamoto said. "I believe investment should be done in a recession."
Elpida is now negotiating with three potential investors, including foreign companies. Rumors have mentioned Intel Corp. as a possible investor, but Sakamoto did not confirm Intel's interest, nor did he identify Intel as one of companies now negotiating with Elpida.
Sakamoto said he intends for Elpida to turn a profit by the fourth quarter of next year. To break even, the company must generate monthly sales of at least $80 million at current exchange rates, according to Sakamoto's estimates. The company's sales to date have been far below this level, he said without elaborating, then promised to open Elpida's revenue for all to see as soon as possible.
For immediate capacity, Sakamoto said he plans to depend on outside foundries such as Powerchip Semiconductor Corp. for as much as 50 percent of Elpida's total capacity.
Through rebuilding, Sakamoto intends to make Elpida one of the world's top three DRAM manufacturers with a market share of at least 15 percent to 20 percent. At present, the company ranks fifth with less than a 10 percent share.
By: DocMemory
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