And the winner is (drum roll please)....
Micron Technology appears likely to win the Elpida Memory sweepstakes now that SK Hynix has reportedly dropped out of the bidding.
Micron (Boise, Idaho) reportedly bid around $2.5 billion in the final round of bidding, which closed Friday (May 4). Micron also promised to keep Elpida's main fab in Hiroshima and its employees, according to a Reuters report, which cited Japan's public broadcaster NHK. The NHK report apparently did not cite any sources.
With Hynix out, it would appear that only two bidders are left standing for Elpida: Micron and the team of Hony Capital, a Chinese investment firm, teamed with U.S. private equity firm TPG.
Looking back at an analyst roundup we posted last month, most of the analysts that we solicited input from predicted that Micron would likely win the bidding and that Micron had the most to gain from acquiring Elpida.
Mike Howard, a memory analyst at IHS iSuppli, said Micron probably had the most to gain because gaining control of Elpida's production capacity would likely double Micron's DRAM market share to between 20 and 25 percent, allowing it to challenge Hynix for the No. 2 position in DRAM. Howard said Micron would also gain access to Elpida 's mobile DRAM product portfolio, where it has lagged its competition, and added that Micron would probably idle some of Elpida's production capability, thereby benefitting all DRAM companies.
Jim Feldhan and Adrienne Downey of Semico Research wrote, "Micron-Elpida would have more leverage with its customers as well, so prices could stabilize. Finally, faced with even larger competitors than before, the Taiwanese DRAM companies will have more incentive to finally consolidate as well. Eventually the industry will end up with only a handful of players."
And so it would appear that the likely outcome of this extraordinary situation—a bankrupt Japanese firm selling itself to the highest bidder—is at least on its face a happy outcome for the DRAM industry as a whole. Perhaps this is part of the reason Hynix pulled out. Why spend billions when you may benefit almost as much from your competitor laying out that kind of cash?
In some ways, it would be more interesting if the long shot, the team of Hony and TPG, pulled the upset. Micron of course has been entrenched in DRAM for years and it would be interesting to entertain the possibility of a new player. But of course, the entry of new players in DRAM has always been to its detriment. Analysts and others believe that the DRAM industry would actually be better off with fewer players.
Still, a winning bid by Hony, which specializes in the buy-out of China state-owned enterprises and has $6.8 billion in assets under management, could accelerate the technology curve for chip makers in China. If some of Elpida's advanced process technology (the firm started sampling 25-nm DRAMs last year) made its way to Chinese foundries such as SMIC and Grace, it could help make them more competitive. But that's not necessarily in the best interests of the industry as a whole.
A call to action: Readers, what do you see as the upshot for DRAM as a whole if, as it appears, Micron emerges as the winner of the Elpida sweepstakes?