Jim Feldhan and Adrienne Downey
Semico Research Inc.
The DRAM industry has had its ups and downs, to put it mildly. It 's clear that companies that diversify intelligently are stronger than those who don 't. Elpida has learned that the hard way. Switching some production to higher-margin mobile, server, and consumer DRAM, adding NAND production, and offering foundry services for non-memory products are all smart ways to diversify that have been successfully implemented in recent years.
Elpida 's most attractive assets are its wafer capacity (if bought on the cheap) and its mobile DRAM technology and customers. Acquiring Elpida would give another DRAM company more market share to compete against Samsung.
Semico believes that a Micron purchase of Elpida would be a smart move. Micron has a history of acquisitions and joint ventures in the DRAM industry. Micron also has a strong cash position so it is well-suited to successfully close the transaction. The company will gain a larger share of the mobile DRAM market, a small but fast-growing segment.
How would Micron purchasing Elpida affect the market? Samsung currently holds 26 percent of the total DRAM capacity. Inotera is second with 13 percent, then comes Elpida at 12 percent and Micron at 10 percent. If Rexchip 's output is included with Elpida 's, and half of Inotera 's is included with Micron 's, then a combined Micron-Elpida company would make up 38 percent of the total worldwide DRAM capacity, handily moving into the capacity lead 12 percentage points ahead of Samsung. 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.