Micron closes in on Elpida deal worth over £1.5 billion

Boise, Idaho doesn't make international news headlines too often, but it did earlier today when semiconductor producer Micron Technology Inc – based in the northwestern American city – signed a definitive sponsor agreement worth over £1.5 billion (¥200 billion) to acquire and support bankrupt Japanese chipmaker Elpida.

Most of the money involved in the deal - around 70 per cent, or £1.1 billion - will be used to pay off Elpida's debts, in conjunction with corporate reorganisation proceedings being supervised by the Tokyo District Court.

Nevertheless, it is being indicated that only 30 per cent of the Tokyo-based firm's debts will actually be settled, with a press release from Micron indicating that it will complete annual instalment payments through 2019 but that "all pre-petition obligations will be fully discharged under the proceedings."

Mark Curcan, CEO of Micron, proposed that his company's move made it "the industry-leading pure-play memory company" and that it represented a positive solution for all parties involved, including the creditors.

"Today's transactions will help strengthen the cominbed companies' market position in the memory industry through increased research and development and manufacturing scale; improved access to core memory market segments; and additional wager capacity to balance among DRAM, NAND, and NOR memory solutions for the ultimate benefit of Micron and Elpida customers," he said.

Micron will invest over £800 million in Elpida's existing facilities, including a plant in Hiroshima, as it looks to double its global market share for dynamic random-access memory (DRAM) production. At present, Samsung occupies the top slot in the DRAM with a 41.4 per cent Q1 share, according to statistics from TrendForce.

The acquisition is of concern to some observers, as it further reduces competition in the DRAM market, with Samsung and Micron – along with Hynix – now set to essentially form a three-party oligopoly.

Micron's position is strengthened by its relationship with Apple, who were rumoured to be keen on the Elpida takeover.