Elpida may buy part of Powerchip DRAM plant

TOKYO, JAPAN: Japanese PC memory maker Elpida Memory Inc is considering buying part of a factory from Powerchip and plans to boost chip procurement from its Taiwanese partner, a source familiar with the matter said.

Sluggish PC sales have left the dynamic random access memory (DRAM) chip market in a state of oversupply and depressed prices, prompting Elpida to cut output late last year and seek alliances to bolster its competitiveness.

Elpida, the world's No.3 maker of DRAM chips, has agreed to double its procurement from Powerchip to the equivalent of 80,000 silicon wafers per month, the source said on condition of anonymity because the deal has not been made public.

Elpida will also obtain an additional 30,000 units made at Taiwanese subsidiary Rexchip Electronics that is currently allocated to Powerchip, the source said.

Elpida, which trails South Korea's Samsung Electronics and Hynix Semiconductor in the DRAM market, is at the same time considering buying part of a factory run by Powerchip, the source said.

Powerchip said it would hold a media briefing at 0700 GMT on an unspecified strategic announcement and its fourth-quarter results. Its chairman will attend. It declined to give further details or say whether an Elpida representative would attend.

Elpida and Powerchip are long-term partners and operate the Rexchip joint venture in Taiwan, while the Japanese company outsources some production to Taiwanese firms ProMOS Technologies and Winbond Electronics Corp.

Some kind of merger between Elpida and Powerchip has long been the subject of speculation as smaller DRAM makers look for the scale to deal with the power of the big Korean firms.

Taiwan had previously planned to set up a new firm to incorporate the country's chipmakers. The new firm was to have formed a capital tie with Elpida and share technology, but the deal fell apart after the Taiwanese government scrapped a plan to inject funds into the firm.

Powerchip, which makes DRAM chips mainly for PCs, posted a net profit in the third quarter of T$1.94 billion ($67 million). Its shares rose by the daily maximum of 6.8 percent on Friday, the last day of share trading before a week-long Lunar New Year holiday.

News of a deal between Elpida and Powerchip was reported by the Nikkei business daily earlier on Monday. Japan's Yomiuri newspaper separately said that Taiwan's government would not oppose any bid for a local chip maker by Elpida. Elpida had told Bloomberg News in an interview in October that it was looking at taking stakes in Taiwanese chip makers.

Elpida said in a statement on Monday that it has not made any announcements regarding a reported acquisition of Powerchip's DRAM business.

Shares of Elpida were down 3.8 percent in Tokyo, underperforming a 1.2 percent drop in the benchmark Nikkei average .N225.

Elpida plans to list on Taiwan's stock exchange this year, seeking to raise around $120 million.