LONDON – Elpida Memory Inc., the number three DRAM maker behind Samsung and Hynix, is considering buying shares in Taiwanese DRAM makers to bolster its position, according to a Bloomberg report.
An attempt to weld several small Taiwanese DRAM makers together into a single entity using government money fell apart earlier this year. Taiwan Innovation Memory Co., having been rejected as a suitable case for government investment as a DRAM company, is trying to reinvent itself as a NAND flash supplier.
This has left Powerchip Technology Corp., ProMOS Technologies Inc. and Winbond Electronics Corp. as being essentially too small to keep up in the capital intensive DRAM business and among possible targets for Elpida.
Elpida has outsourcing contracts with these companies and a joint venture with Powerchip called Rexchip
Elpida (Tokyo, Japan) is looking to buy stakes of 20 percent to 30 percent and deals may lead to takeovers, although no negotiations are under way, the report said. “It’s almost impossible for the Taiwanese to survive by themselves. Without doing something, it will be tough for us to survive, too. We don’t have the scale," the report quoted Elpida president Yukio Sakamoto as saying.
Other Taiwanese DRAM makers that Elpida would consider a tie up with include Nanya Technology Corp. and subsidiary Inotera Memories Inc.. Elpida could engage in cross-holdings or form a holding company, the report referenced Sakamoto saying. Elpida is planning to list on the Taiwan Stock Exchange early in 2011, which could help raise money for the deals.
Expanding Elpida in Japan is not an option because of the strength of the yen and the high cost of domestic production, the report said. “Continuing to make big investments in this country [Japan] would be suicide,” the report quoted Sakamoto as saying.
Elpida has demonstrated a strong desire to stay in the DRAM business and this underscore's that. Elpida is not looking to rescue anyone. They want to control the business. Taiwan's proximity to Japan helps too.
Elpida's persistence is impressive. They've launched into development of an R&D center in Taiwan and certainly have for some time made clear their interest in a working relationship with the Taiwanese DRAM companies, and they are reportedly looking at listing their shares in the Taiwan Stock Exchange.
Costs seems to have been a problem for Elpida, and as noted here by their president, scale is a huge issue. They have their eye on a solution to both these problems (and that's not easy to do in the segments where Elpida operates) and they look as though they are going to keep at it.