Teeth make smiles, and smiles make sales - Unidentified Harrods person in Alan Sugar's The Apprentice
MEMORY MAKER Micron is set to buy Elpida for $2.5bn.
Since Elpida filed for bankruptcy, Micron has been widely considered the favourite to buy the beleaguered Japanese DRAM manufacturer. Now Nikkei reports that Micron will fork out $2.5bn for Elpida in a bid to compete with market share leader Samsung.
Micron revealed it was in talks with Elpida over a possible purchase in May, with rival DRAM maker SK Hynix having walked away from the bidding. The US firm has made it clear that it wants to be a bigger player in the DRAM industry and buying Elpida will be the quickest way to gain market share.
DRAM manufacturers have been talking about consolidation in the industry for some time, which is code for circling the wagons to have more control of market prices. While Elpida is clearly in the midst of financial difficulties, Micron's financial results have been nothing to write home about lately, with four quarters of losses.
Should the deal go through, Micron will end up with close to a quarter of the market, putting it in a good position to go toe-to-toe with Samsung and raising the possibility of rising DRAM prices. Micron will also have to service Elpida's debt, with a number of bond issues needing to be rolled over in the coming quarters.
With Micron picking up Elpida, the DRAM industry will be largely controlled by Samsung, SK Hynix and Micron. µ
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