U.S.-based memory maker Micron is intending to buy ailing Japanese DRAM (dynamic random access memory) competitor Elpida for US$2.5 billion. A casualty from a slump in demand, and its inability to fend off competitors like Samsung, Elpida has filed for bankruptcy protection in Japan in late February this year, and Micron has been its financial sponsor since May.
Acquiring Elpida’s equity will cost Micron US$750 million; the latter will also pay US$1.75 billion in future annual installments through 2019.
Despite Elpida’s troubles, it commands a DRAM market share of 12.8%. After the purchase, Micron will see its own market share rise from 12.2% to 24.8% - moving it from fourth place to second place, just behind Samsung who has about 41%. Together with Hynix (another South Korean memory maker) who has 24%, the trio will account for nearly the whole of the global DRAM market. Micron had a failed bid to acquire Hynix way back in 2002.
The Elpida purchase will also allow Micron to take advantage of Elpida’s existing production facilities to boost capacity by about 50%. Furthermore, Micron stands to expand its product offerings, as Elpida also makes mobile DRAM for smartphones and tablets.