SAN JOSE, Calif. -- After its proposed deal in Taiwan has apparently fallen apart--or been scrapped--Japanese DRAM maker Elpida Memory Inc. has formulated a new plan to raise money.
Elpida plans to raise $200 million by selling new shares and convertible bonds to memory module maker Kingston Technology Inc. The move would give Kingston a 4.79 percent stake in Elpida. The funding would be used to upgrade Elpida's 300-mm fab in Hiroshima to 40-nm technology.
Originally, Elpida was banking on new funds from a government-backed Taiwan memory venture, dubbed Taiwan Memory Corp. (TMC). At one time, the Taiwan venture hoped to consolidate several of the island's struggling DRAM makers. Elpida was the technology provider.
The Taiwan government was supposed to provide 20 billion yen for Elpida. But TMC--and the proposed funding--appears to be dead in the water, prompting Elpida to a find a new partner in Kingston. (One faction of the Taiwan government is still pushing for the formation of TMC, but the effort is losing steam and nearly dead.)
Hoping to weather the DRAM downturn, Japan's Elpida last year issued new shares in an effort to raise up to 78.5 billion yen ($844 million).
Now, enter Kingston. Under the new plan, Elpida will raise 11.7 billion yen ($125 million) by selling Kingston 6.47 million new shares and another $75 million in an issue of bonds.
The funding would be used for ''purchase of manufacturing equipment for the purpose of aiming for the conversion of the 65-nm manufacturing process, which is an existing semiconductor manufacturing process, into the company's most advanced manufacturing process (40-nm manufacturing process),'' according to Elpida (Tokyo).
Elpida is shipping 65-nm DRAMs, but skipped the 50-nm generation and decided to move to 40-nm. Elpida recently set up an R&D center at its Rexchip subsidiary in Taiwan to develop 40-nm 4F2 process technology.
Elpida's Hiroshima fab at the end of 2009 completed the pilot run of the 40-nm 6F2 process, where Elpida plans for half of its 130,000 300-mm wafers per month to be converted and further conversion dependent on market conditions.
Meanwhile, Fountain Valley, Calif.-based Kingston Technology, the independent world leader in memory modules, recently said announced that its global revenues in 2009 reached $4.1 billion, a $100 million increase over 2008.
Kingston's increase was attributed to a rise in average selling price, healthier demand from corporate end customers and consumers, and the company's entry into the solid-state drive (SSD) market. The rise in revenue marks a change from the previous year when an oversupply in chips and a weakened global economy led to a downturn in the memory industry.
Elpida as well as Hynix, Samsung and other DRAM makers are seeing a major rebound. Rival Micron Technology Inc. posted strong results this week.
''Our latest checks continue to show that DRAM demand is running better than normal seasonality with sources indicating supply tightness both DDR3 and DDR2, which we view as a plus considering that we're at the end of March and not in late July,'' said Dunham Winoto, an analyst with Avian Securities LLC, in a report.
''While sustained higher memory pricing will most likely eventually lead to more capacity investments, we feel that we have not yet reached the point where we have to worry that suppliers are beginning to act irrationally as in the past,'' he said.
Plus, there is no capacity problems to speak of. ''Note that the industry, as a whole, has not added a brand new fab over at least the past couple of years, and is unlikely to do so during the next 6-12 months,'' he said.
''With no new DRAM fabs being built in calendar 2010, and perhaps even through 1H '11, it means to us that bit supply will be limited at 45-50 percent based on Moore's Law,'' added Hans Mosesmann, an analyst with Raymond James, in a report. ''With lithography equipment lead-times at about 12 months, the current shortage of DRAM is not about to abate anytime soon, in our view, as bit demand (right at the start of the Win7 enterprise upgrade cycle) is likely going to be (greater than) 60 percent in 2010 and (greater than) 50 percent in 2011.''
In a separate deal, Spansion Inc. recently acknowledged that Japan's Elpida acquired a portion of its research and development assets, but declined to provide further details, including the value of the deal. As part of the deal, Elpida may have acquired Spansion's MirrorBit NAND technology, according to an analyst.