Elpida eyes alliance with local company to lift market share

Elpida Memory Inc, Japan's No. 1 computer memory chipmaker, may seek an alliance with Nanya Technology Corp (南亞科技) or ProMOS Technologies Inc (茂德科技) to challenge Samsung Electronics Co for global market share.

"If a Taiwanese chipmaker such as ProMOS or Nanya were to join us," combined production may exceed Samsung's, Elpida CEO Yukio Sakamoto said in an interview in Tokyo on Tuesday.

"It would make us that much stronger," he said, adding that no negotiations had begun.

A second alliance with a Taiwanese company would enable Elpida to expand production without having to invest billions of dollars to build its own production lines as chip prices trade at record lows. The Tokyo-based chipmaker forged a partnership with Hsinchu-based Powerchip Semiconductor Corp (力晶半導體) last year.

"Allying with a Taiwanese maker would be a natural move for the company," said Takeo Miyamoto, an analyst at CLSA Asia-Pacific Markets, who has a "buy" rating on Elpida.

ProMOS is a better candidate because it uses the same manufacturing technology as Elpida, he said.

Nanya spokesman Pai Pei-lin (白培霖) said the company was "very honored" by Sakamoto's comments.

ProMOS spokesman Ben Tseng (曾邦助) said an alliance with Elpida would "make sense."

James Chung, a Samsung spokesman in Seoul, declined to comment.

Eric Tang (譚仲民), a spokesman at Powerchip, said the Taiwanese chipmaker and Elpida would jointly make decisions on the Japanese chipmaker's strategy and expansion in Taiwan.

"It is good timing" for further consolidation in the computer memory chip industry, Tang said. "We have a mutual consent."

Shares of Elpida rose 3.6 percent to ?3,460 on the Tokyo Stock Exchange today, their first gain in 10 days. ProMOS rose 2.3 percent and Nanya declined 3.8 percent in Taipei trading.

Rexchip Electronics Co (瑞晶), the venture between Elpida and Powerchip, last month said it would double production capacity next year as it prepares for an initial public offering the following year.

A glut of computer chips known as dynamic random access memory (DRAM) drove down prices, leading to lower earnings at South Korea's Samsung Electronics and Hynix Semiconductor Inc in the latest quarter, while Elpida posted its smallest profit in six quarters. Powerchip, Nanya, Qimonda AG and Micron Technology Inc posted losses in the latest period.

"With prices falling this low, the industry is ripe for reorganization," Miyamoto said.

The Dramexchange Index, which tracks the most widely used types of computer memory, has tumbled 41 percent this year.

Some DRAM makers will choose to quit the business when chip prices fall below US$1, leaving only the top three, Sakamoto said. Prices of 512-megabit chips are already trading at less than US$1 each, according to Taipei-based DRAMeXchange.com (集邦科技), Asia's largest spot market for chips.