Elpida’s Potential Withdrawal from the Memory Industry May Have Dramatic Consequences

Elpida's Insolvency Can Drastically Harm DRAM Industry, PC Supply Chain

by Anton Shilov
02/15/2012 | 07:36 PM

In case Elpida unable to repay its huge debt this April and become insolvent, its restructure and potential withdrawal from the market of dynamic random access memory (DRAM) will have severe impact not only on the computer memory in particular, but on the PC market as a whole.


Recently Elpida’s financial status and their uncertain future has been a focus of the market. This April, Elpida must repay the nearly ¥40 billion government loan as well as ¥80 billion in short-term bank loans. Besides negotiating with the Japanese government and other creditors, Elpida is searching for any financial source that would help the company survive, according to TrendForce research firm. As for long-term solutions, talks of alliance with Micron or Toshiba are still in discussion. In the meantime, Elpida is looking to other manufacturers for short-term funds. Currently, a few makers have agreed to provide varying amounts of financial assistance to help Elpida through this life or death situation.

Looking at Elpida’s process technology, the manufacturer’s situation is different from Qimonda’s, the maker that announced bankruptcy in early 2009. Qimonda was struggling technologically as well as financially – the maker had hit a bottleneck with trench technology which left them far behind their competitors. Losses increased, and in the end Qimonda had no choice but to file for bankruptcy. Elpida, on the other hand, has already entered 30nm mass production for commodity DRAM, and will begin test production on the 25nm process in Q2 2012, which means that the firm is perfectly ready to compete against major makers like Samsung or Micron. As for mobile DRAM, the maker is already on the 30nm class. Elpida’s product quality has long since been acknowledged by global manufacturers, and their technology is nearing that of first-tier Korean makers.

Elpida’s commodity and mobile DRAM market share in Q4 2011 accounted for 12% and 17% of the global market, respectively. If the Japanese government does not step in to offer assistance and Elpida backs out from the DRAM industry due to financial difficulties, the negative impact on the PC and DRAM markets will be severe. DRAM market share will be even more unbalanced, dominated by makers with leading technology, Samsung, Hynix and Micron. The DRAM market will be one step closer to an oligopolistic state, thereby leaving PC OEMs with less buying power.