Elpida files for bankruptcy protection after bailout fails

MANHASSET, NY -- Elpida Memory Inc. has filed for the Japan’s biggest bankruptcy in two years after semiconductor prices plunged and it failed to win a second government bailout, according to a Bloomberg news report.

The report states that Elpida had liabilities of 448 billion yen ($5.5 billion), according to a filing with Japan’s finance ministry today. The maker of dynamic random access memory, or DRAM, chips will be delisted from the Tokyo Stock Exchange on March 28.

The only Japanese DRAM maker'ss troubles may have exacerbated by DRAM prices falling 85 percent and a stronger yen.

Japan’s government bailed out the company in 2009, and its decision to let it go bankrupt without further support is surprising, said Yoshihiro Nakatani, a Tokyo-based fund manager at Asahi Life Asset Management Co. in the Bloomberg report.

“The impact from the worsening DRAM market and the stronger yen was big on Elpida,” Nakatani said. “The government should have known that this business itself has a risk when they decided to support the company in 2009,” according to the Bloomberg report.

Elpida hadn’t been able to reach a deal with the trade ministry, the Development Bank of Japan and its main lenders over financing for 92 billion yen in bonds and loans due by April, the Tokyo-based company said Feb. 14.

Handel Jones, CEO of International Business Strategies Inc., said last month at fab tool vendor trade group SEMI's International Strategy Symposium that one or two DRAM vendors would go bankrupt this year.
"It has now happened to Elpida, which was destroyed by what we are terming as 'predator strategies' by the market share leaders," Jones told EE Times Monday. "Probably one other company will go bankrupt this year. The competition is becoming more brutal."

Elpida’s bankruptcy would be the nation’s biggest since Japan Airlines Corp. (9205) sought protection in January 2010 with 2.32 trillion yen in liabilities, according to data from Tokyo Shoko Research. Elpida employed 5,898 people as of March 31, according to data compiled by Bloomberg.

As the faltering global economy and floods in Thailand curb PC production, some DRAM manufacturers may not have enough money to mimic Samsung’s diversification, analysts said.

Samsung boosted its profits by producing specialty chips for smartphones, tablet computers and servers. Elpida  and other makers of DRAM chips lost a combined $14 billion in the past three years, according to Bloomberg calculations.

DRAM is the most common chip in computers. Samsung controlled 45 percent of the market by value in the third quarter, according to Englewood, Colo.-based IHS Inc.’s iSuppli. Hynix held a 22 percent share and Elpida 12 percent.

Elpida was formed through the 1999 merger of NEC’s and Hitachi Ltd.’s memory businesses. Earlier this month, the company reported its fifth straight quarterly loss.