Wed, Feb 15, 2012 - Page 11 News List

Elpida’s future ‘uncertain’

TOUGH:Japan’s largest maker of DRAM chips says it has difficulty getting funding to repay its debts because of plunging chip prices, five quarters of losses and Samsung

Bloomberg

Elpida Memory Inc, the Japanese chipmaker facing an April deadline to repay debts, said it sees “uncertainty” over remaining in business because it still doesn’t have the necessary financing.

Elpida has not been able to reach a deal with the Japanese Ministry of Trade, the Development Bank of Japan and its main lenders, the Tokyo-based company said in a statement yesterday.

Elpida’s ability to repay ¥92 billion (US$1.2 billion) in bonds and loans is made more difficult by plunging chip prices and five straight quarters of losses.

The comments reverse a Feb. 2 announcement from the Apple Inc supplier that it expected to secure financing by March 31. Japan’s largest maker of DRAM computer chips needs government backing to stay in business as South Korea’s Samsung Electronics Co profitably diversified while chip prices collapsed, analysts said.

“The government already helped them in the past, so it’s important for them to exit when the company is still alive,” said Yoshihiro Nakatani, a senior fund manager at Asahi Life Asset Management Co in Tokyo. “I think the support will continue.”

Elpida’s shares rose 0.8 percent to ¥374 in Tokyo yesterday, before the announcement. The company lost 62 percent of its market value last year, extending a 37 percent slump in 2010.

“Elpida has not made as much progress as initially envisioned in discussions with the relevant parties,” the company said yesterday. “Therefore, material uncertainty about its assumed going concern is found.”

Elpida’s slump indicates the difficulty Japanese companies have in competing with Samsung, which had 7.34 trillion won (US$6.5 billion) in operating profit from selling chips last year. Chip prices had become as cheap as a “rice ball,” Elpida chief executive officer Yukio Sakamoto said last year.

Samsung boosted its profits by producing specialty chips for smartphones, tablet computers and servers.

Elpida is also discussing advance payments and capital investments with customers, it said last month. The chipmaker’s net loss for the three months ended on Dec. 31 was ¥42.1 billion as demand for personal computers slumped and the yen strengthened, it said on Feb. 2.

“The negotiations must have been rough sailing,” Mitsuo Shimizu, a Tokyo-based analyst at Cosmo Securities Co, said by telephone.

The company got ¥140 billion in financial aid and loans from the government and banks in 2009 after falling chip prices caused it to post a record loss.

“Elpida’s future is totally dependent on the government’s decisions,” said Young Park, a Hong Kong-based analyst at Woori Investment & Securities Co.

The company cannot survive on its own and the Japanese government might be willing to extend support to keep DRAM production within the country, he said. Japanese media have reported that Elpida might tie up with Micron Technology Inc of the US and Taiwan’s Nanya Technology Corp (南亞科技).

Elpida, Hynix Semiconductor Inc and other makers of DRAM chips lost a combined US$14 billion in the past three years, according to Bloomberg calculations. That comes after the US$37 billion that Taipei-based market researcher DRAMeXchange Technology Inc (集邦科技) estimates they spent building factories in a bet on continued growth in the industry.

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