CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Memory maker on hunt for higher ground

Elpida, the fifth largest DRAM maker in the world, takes out its checkbook and enters talks to bolster its manufacturing capacity in the shaky memory market.

Elpida, the fifth largest dynamic random access memory maker in the world, is shopping for more manufacturing muscle to shore up its position in the shaky memory market.

The company, a joint venture between Hitachi and NEC, said on Thursday that it will enter talks to acquire Mitsubishi Electric's DRAM business by April 2003.

Also announced was a deal with Taiwan's PowerChip Semiconductor, under which Elpida will share chipmaking technology with PowerChip in exchange for manufacturing capacity, a common practice among DRAM makers. PowerChip will agree to manufacture DRAM chips in the future for Elpida.

The moves by Elpida are the latest in a long series of mergers, joint ventures and acquisitions sparked by a decline in the DRAM industry. The memory market has been rattled by the PC sales slowdown, which began in late 2000. Now that the memory market has started to show some signs of recovery, manufacturers are preparing for what they hope will be a rebound.

The latest round of wheeling and dealing will shore up Elpida's fifth-place position, analysts said, giving it additional manufacturing capacity on the cheap. The alternative, building new a factory or factories, can take billions of dollars and years to achieve.

"This is perhaps one of the last opportunities for (Elpida) to gain some extra mass and some extra traction in the market," said Andrew Norwood, an analyst with Gartner.

The recent moves will open the door for Elpida to take on its rivals. "We are delighted with the opportunities before us as a result of our recent discussions with Mitsubishi Electric and Powerchip," Kenji Tokuyama, Elpida's president said in a statement. "The added products and capacity will strengthen our position in the market."

But even with extra capacity gained from both Mitsubishi and PowerChip, Elpida is unlikely to best fourth-place DRAM maker Infineon, Norwood said.

On its own, Elpida has about 5 percent of the DRAM market, while Mitsubishi has just over 2 percent, Norwood said, giving the company a shot at 7 percent or more of the worldwide memory market. "But one and one does not equal two when it comes to a merger. There is always some crossover with clients. Customers will always want to have two, three or four suppliers to ensure supply," he said.

Elpida and Mitsubishi manufacture DRAM chips used primarily in workstations and servers, whereas other suppliers like Infineon sell to the broader PC market.

As a result, any merger between the two will have less effect on the wider DRAM market than the failed merger between No. 2 manufacturer Micron Technology and No. 3 Hynix Semiconductor would have had. "It's not going to affect the mainstream PC market--the market that drives the spot (DRAM) price that everyone's so worried about," Norwood said.

As of last year, Samsung had the largest market share, followed by Hynix, Micron, Infineon, Elpida, Toshiba, Mitsubishi and Nanya Technology. Micron has since acquired Toshiba, while Elpida and Mitsubishi will likely merge.