News Article
Elpida Announces Bankruptcy
Japan's remaining DRAM manufacturer has filed for bankruptcy
Elpida Memory, Japan's last manufacturer of dynamic random access memory, or DRAM computer chips has announced that it has filed for bankruptcy in the Tokyo courts effective immediately. The company stated that it had been expecting a reasonable offer for the company but that the proposed deal had fallen through leaving no other options for the beleaguered company.
The impact of the announcement will be globally and very well could be a turning point for the Japanese semiconductor manufacturing industry. There had been rumours of a company buy out for a while with USA based Micron tipped as a possible suitor. Doubts were raised about how Micron would precede after the untimely death of Stee Appleton in a light airplane crash.
DRAM manufacturing is a notorious difficult market with price wars and huge losses the norm. Elpida had racked up too much debt in this instance and with no partner or saviour on the horizon there was little option for company directors.
The company's announcement was as follows.
Our company was established in December 1999 as a sole company in Japan that specializes in DRAM (our initial trade name was NEC Hitachi Memory, Inc.), has started development operations for DRAM products since April 2000, and changed our trade name to the present one in May 2000.
Thereafter, we expanded our business by establishing foreign companies as local distribution offices, by commencement of sales business inside and outside Japan, by succession of businesses of other domestic or foreign companies to our company, by collaboration with other domestic or foreign companies, and by commencement of manufacturing of products at our subsidiary in Hiroshima (currently, our Hiroshima Plant). Since March 2003, we have been a sole company in Japan being engaged in DRAM business. After the listing of our shares (currently, common shares) on the 1 st section of the Tokyo Stock Exchange in November 2004, we explored our business through such as the plant and equipment investments into Hiroshima Plant, etc., the establishment in 2005 of a joint venture company, Tera Probe, Inc., a company specialized in wafer probe testing, the establishment of Akita Elpida Memory, Inc., a wholly owned subsidiary to take on the back-end process for DRAM, the establishment of Rexchip Electronics Corporation, a joint venture company for front-end process, and the subsequent acquisition thereof as a subsidiary.
However, as a result of the reinforcement of production capacity by investments into plants and equipment implemented proactively in the DRAM industry in 2006 through 2007 in expectation of the growth of demand due to an increase of the volume of shipment of personal computers as well as an increase of the capacity of DRAM per unit, the supply significantly exceeded the demand. At the beginning of 2007, the price of DRAM started falling sharply and, combined by a significant decrease of demand for the products due to the global economic downturn begun in the fall 2008, such price further declined. In the fiscal year ended March 2009, we were forced to experience a significant deterioration in business results compared with the previous year.
In such situation, being evaluated in June 2009 as one of the companies having world's highest technology in development and design of DRAM, we received an approval on the business restructuring plan under the Act on Special Measures Concerning Revitalization of Industry and Innovation of Industrial Activity from the Ministry of Economy, Trade and Industry in order to maintain such superiority in technology and to increase the productivity. Despite such business restructuring plan that targeted on keeping the superiority in technology, improvement of productivity and further expansion of market share by implementing the most advanced research and development of premier DRAM, and by investments into advanced plant and equipment which enable high productivity, the circumstances around our company turned from bad to worse due to the factors such as the record-breaking strong yen against the US dollar, and the steep fall of the price of DRAM products by fiercer competition in the DRAM industry.
Within such continuing harsh management environment, an additional negative factor, which is a stagnation of demand for DRAM due to the great flood in Thailand in 2011, has arisen. Based on the background mentioned above, we have concluded that, if we continue the business by ourselves, we will face cash shortage soon. Moreover, we assumed that, if we left this situation and then cash shortage would become reality, the corporate value of our company must significantly fall, there must be no way to be supported by any sponsorship, and the people concerned such as the creditors must suffer more inconvenience. Therefore, we are obliged to decide that we will aim for the restructuring of our business under the proceedings of the Corporate Reorganization Act and filed the petition as of today.
