With its planned purchase of Elpida Memory as well as Rexchip Semiconductor, Micron Technology will become the world’s second largest supplier of dynamic random access memory (DRAM), according to new calculations based on first-quarter rankings from the IHS iSuppli.

Micron had been ranked the No. 4 global DRAM supplier in the first quarter, with $759 million in revenue and a 12.2% share of the market. The company placed behind top-ranked Samsung Electronics, Hynix Semiconductor and Elpida. But with the purchase of Elpida, Micron’s revenue and market share in the first quarter would jump to $1.5 billion and 24.8%. This would allow Micron to edge out Hynix for the No. 2 position.

“The purchase of Elpida represents a huge boost for Micron’s status in the DRAM industry. Micron will see its market share and DRAM manufacturing base nearly double as a result. Furthermore, Micron is gaining access to some excellent mobile DRAM technology, which should greatly improve its product portfolio. The $2.5 billion sale price is reasonable and shouldn’t impact Micron’s cash position adversely. It will likely take at least six months for the deal to close, but IHS expects a very quick transition and integration once it does,” said Mike Howard, senior principal analyst for DRAM & memory research at IHS.

Global DRAM industry revenue this year is forecast to reach $30.5 billion, up 3.3% from $29.6 billion in 2011. Although seemingly small, the revenue expansion for 2012 is a welcome development given the market’s stunning 25% contraction last year. The overall picture will continue to brighten during the next few years, as shown in the figure below, with DRAM revenue exceeding $30 billion each year for the next five years and reaching $39 billion in 2016.

The consolidation of the DRAM market set off by Elpida’s bankruptcy and the subsequent purchase by Micron is bringing new stability to DRAM pricing, helping lead renewed growth to the market, IHS iSuppli reported previously.

Before Elpida’s bankruptcy, the DRAM industry in 2011 had been bedeviled by excess DRAM manufacturing capacity, which drove down prices and caused revenue to decline. Compounding the difficulties last year was the October flood in Thailand, which depressed PC shipments, a traditional DRAM stronghold. The perceived scarcity of hard disk drives pummeled PC sales and thereby DRAM demand; and the paucity of hard drives meant PC manufacturers were paying more for storage, leaving even fewer dollars to spend on DRAM and other components.

Tags: Micron, Elpida, Samsung, Hynix, SK Hynix, Rexchip, Nanya, Winbond, Business