Elpida Acquisition by Micron: Opinion of IHS iSuppli …

With Elpida Acquisition, Micron Becomes ≠2 DRAM Supplier
 
This is an IHS iSuppli News Flash from information and analytics provider IHS covering Micron Technology Inc.’s announced acquisition of Elpida Memory Inc.
 
With its planned purchase of Elpida Memory Inc. of Japan, U.S.-based Micron Technology Inc. will become the world’s second largest supplier of DRAM, according to new calculations based on first-quarter rankings from the IHS iSuppli Memory & Storage service.
 
Micron had been ranked the ≠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 Co. Ltd., ≠2 Hynix Semiconductor Inc., and ≠3 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 ≠2 position.

           WW DRAM Market Share Ranking in 1Q12

(Source: IHS iSuppli Research, July 2012)

           
WW DRAM Market Share Ranking in 1Q12
                     With Elpida/Micron Combined

(Source: IHS iSuppli Research, July 2012)

"The purchase of Elpida represents a huge boost for Micron’s status in the DRAM industry," said Mike Howard, senior principal analyst for DRAM & memory research at IHS. "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."
 
Micron’s acquisition announcement follows news of the bankruptcy of Elpida. 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.
 
Global DRAM industry revenue this year is forecast to reach $30.5 billion, up 3.3 percent 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 with DRAM revenue exceeding $30 billion each year for the next five years and reaching $39 billion in 2016.

                  
Global DRAM Revenues Forecasts
                                 
(in $ billion)

 (Source: IHS iSuppli Research, July 2012)
 
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.