Tue, Jul 03, 2012 page13

• Powerchip to sell Rex stake to Micron

  THREE-WAY ALLIANCE: With Micron confirming it was acquiring Japan’s Elpida, it could create a multinational team that could help it take on South Korean makers

  • By Kevin Chen / Staff reporter
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  Powerchip Technology Corp (力晶科技) and its investment subsidiary yesterday said they would sell all of their shares in Rexchip Electronics Corp (瑞晶電子) to Micron Technology Inc of the US, as consolidation continues to sweep the global DRAM industry.

  Hsinchu-based memorychip maker Powerchip and Taipei-based Li Hsin Investment Corp (力信投資) said in separate stock exchange filings that they would sell a total of 691.13 million shares in Rexchip to Micron for NT$9.696 billion (US$324.2 million) at NT$14.03 per share.

  Rexchip is a PC memory chip manufacturing venture between Powerchip and Japan’s Elpida Memory Inc, the third-largest DRAM chipmaker in the world.

  The deal would be conditional on Micron’s purchase of the remaining shares of Rexchip from Elpida, a public relations officer at Powerchip said by telephone yesterday.

  The share sale, announced before the opening of the local stock market yesterday, lifted Powerchip’s stock yesterday. Shares of the memorychip maker jumped 5.45 percent to NT$0.58 per share on the over-the-counter market, outperforming the GRETAI Securities Market index’s 0.95 percent rise.

  Shares of Rexchip also surged 12.36 percent to NT$10 on the Emerging Stock Market, a preparatory board for Taiwan’s two main bourses.

  Micron confirmed in a statement later yesterday that it had agreed to acquire the Powerchip Group’s 24 percent stake in Rexchip.

  The US company also said in the statement it had reached an agreement with Elpida’s trustees to acquire Elpida for about ￥200 billion (US$2.5 billion). Under the agreement, Micron said it would acquire 100 percent of the equity of Elpida for ￥60 billion and ￥140 billion in future annual installment payments through 2019 would be paid from cash flow generated from Micron's payment for foundry services provided by Elpida, as a Micron subsidiary.

  "We are creating the industry-leading pure-play memory company," Micron chief executive officer Mark Durcan said in the statement.

  Yukio Sakamoto, Elpida president and chief executive officer as well as the company's co-trustee, said joining with Micron would result in a combined organization that can best serve customers with broader memory solutions, strength and scale.

  The Micron-Elpida deal is expected to close in the first half of next year, while Micron's purchase of Powerchip Group's Rexchip shares will occur upon the completion of the Elpida deal, according to the statement.

  Micron’s acquisition of Elpida would boost the US company’s market share to nearly 24 percent, allowing it to overtake Hynix Semiconductor Inc, with a market share of 23.9 percent, and make it the world’s second-largest DRAM chipmaker after Samsung Electronics Co of South Korea, DRAMexchange, a research division of Taipei-based TrendForce Corp (集邦科技), said in a report on Sunday.

  The report said Micron’s acquisition of Elpida was likely to produce a multinational team of memorychip makers integrating capacity. This Micron-led alliance would be able to combine the strengths of various manufacturers in Taiwan and Japan to compete with South Korean firms, it said.

  “Micron will concentrate its efforts on server DRAM and NAND flash products, with the majority of production taking place at the US maker’s Singapore fab,” the report said. “Elpida will focus on mobile DRAM production, already evident in the increase of mobile DRAM capacity to 70 percent at its Hiroshima fab.”

  While Rexchip may continue focusing solely on commodity DRAM production, Micron may consider Rexchip’s R2 fab, which is idle at the moment, for NAND flash production in anticipation of strong market demand, DRAMexchange said.

  As for Winbond Electronics Corp (華邦電子), another Taiwanese memorychip maker, Micron might consider increasing its server DRAM output ratio to more than 50 percent as the cloud-computing market expands, while Powerchip might gain authorization to use Micron’s 20 nanometer process technology for commodity DRAM production, according to DRAMexchange.

  With a total monthly capacity representing 35 percent of global DRAM capacity, “the Micron team will be on a level playing field with Samsung and Hynix, joining the [South] Korean makers as the third heavyweight in the DRAM industry,” the report said.

  This story has been updated since it was first published.
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