Elpida Files for Bankruptcy As It Fails to Get Government Protection

What was once a major power on the memory market is now in the direst of straits

By on February 28th, 2012 21:01 GMT
Elpida tried to negotiate with the Japanese government, hoping to be granted protection to repay the $5.6 billion debt, but it had to file for bankruptcy instead.

Elpida is Japan's only maker of dynamic random access memory (DRAM) and used to be one of the most powerful memory players in the world.

Now, though, after misfortunes and poor marketing performance, it is in a very difficult financial situation.

With a debt of $5.6 billion (4.16 billion Euro), it tried to get protection from the Japanese government.

When that failed, it took the next logical measure: it filed for the beginning of corporate reorganization proceedings.

“Since Elpida is Japan's only DRAM manufacturer many industry watchers and participants expected Japan's government to keep the company afloat out of national pride. This seems not to be the case,” reads an e-mailed statement from Objective Analysis semiconductor market research firm.

In other words, it has filed for bankruptcy, much like Kodak did after it backed out of the camera market it used to dominate.

“Elpida, while strong technically, has suffered because of the 2011 DRAM price collapse and Japan's strong yen. An export driven economy has to keep its currency undervalued to remain competitive in the world economy. The success of the Japanese economy raised the value of the yen. Elpida has good technology, but is simply unable to compete in an oversupplied world market using prices that are yen-based,” the statement reads.

“Elpida will stay in business as various options are decided. The purpose of the bankruptcy is to shield the company from actions its creditors could legally take to seize assets. The intent is to continue to operate. This means that there will be no change to the current oversupply until a decision has been made.”

If Elpida ends up selling any or all of its assets, Micron will probably be the buyer, since Hynix and Samsung have their own production to worry about and aren't in very safe waters either. We may even hear of business mergers in Taiwan down the line, where the majority of memory firms are stationed.

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