Elpida Memory, one of the world's third largest dynamic random access memory (DRAM) maker, has announced a plan of action in response to historically high yen against the dollar and DRAM market deterioration.
Since the beginning of May 2010, when the foreign exchange (forex) rate was ¥95 to $1, the Japanese yen has steadily appreciated. In early September last year the yen was at ¥85 to $1, but in August this year it temporarily reached ¥75 to $1, a record level of currency strength. More recently the yen has been in the neighborhood of ¥77to $1. In the face of current expectations that the yen will remain strong for the immediate future, DRAM product prices have fallen by about one-third compared to a year earlier, resulting in an extremely harsh business environment for Elpida.
To address this rapidly deteriorating market situation, the company will make a determined effort to strengthen its management response:
- Elpida's mainstream DRAM chip density will be shifted from the current 2Gb to a 4Gb;
- Elpida will reduce production cost at the Hiroshima Plant by moving to more advanced manufacturing processes: the current 40nm mainstream manufacturing process used in Hiroshima will be shifted to 30nm and below process technologies as quickly as possible;
- Elpida will expand its US dollar-based purchases to help minimizing forex risks. Furthermore, the company is considering speeding up unifying global procurement strategies including buying materials and equipments and so on.
- Elpida will examine further optimization of the production allocation among Elpida group appropriate to product application. One step under consideration is a gradual transfer of part of production capacity at the Hiroshima Plant to the company's highly cost-competitive subsidiary Rexchip Electronics Corp. in Taiwan. A feasibility study covering this possible capacity transfer is now underway. In regard to employment, the study assumes that any affected workers at the Hiroshima Plant would be absorbed into or transferred inside Elpida group.
- Elpida plans to make more aggressive use of its intellectual property rights and seeks patent revenue increase.
- Expenses will be further reduced by narrowing down the number of product in development operations and by promoting rationalization and efficiencies in back-office departments. In regards to employment practices, mid-career recruiting will be restricted. Company's plan for hiring university graduates will not change. Lastly, the president and CEO of Elpida will not accept actual monthly payments for the present.