Micron today announced that it is acquiring Japanese DRAM firm Elpida Memory in a deal valued at $2.5 billion. The move, said Micron CEO Mark Durcan during an investor conference call, will "create the world's leading pure-play memory company."
Under the terms of the deal, Micron will pay $750 million in cash at closing. The remaining $1.75 billion will be paid in annual installments through 2019. The companies expect the transaction to close in the first half of 2013, pending approvals.
Acquiring Elpida and settling its debts -- plummeting DRAM prices and increased competition forced it into bankruptcy earlier this year -- expands the Boise, Idaho-based computer memory maker's technology portfolio and market presence. The deal also gives Micron some added muscle to compete against fast-growing Asian chipmakers, particularly Korean technology giant Samsung.
"The memory business is perhaps the most competitive and rapidly evolving in the world," said Durcan. "It requires significant, ongoing technology, product development and market development investments." By acquiring Elpida, Micron is paying big to stay in the game.
Elpida's manufacturing assets include a fab in Hiroshima, Japan that produces 300 millimeter (mm) DRAM chips and an assembly and test facility in Akita, Japan. Micron hopes to exploit the "cost synergies as well as scale advantage" of the union, says Durcan.
With Elpida's manufacturing capabilities and intellectual property in hand, Micron stands to better adjust to shifting market dynamics that increasingly favor mobile devices. Micron has the enterprise IT segment of the market covered as a provider of DRAM chips for servers. Elpida is a supplier of mobile memory whose customers include tablet market leader Apple.
Specifically, the Micron-Elpida deal will enable "additional wafer capacity to balance among DRAM, NAND and NOR memory solutions," according to a statement.
On a related note, Micron announced that it is acquiring Powerchip Technology's 24 percent stake in Rexchip, a Taiwanese DRAM manufacturer in a deal valued at approximately $334 million. Rexchip operates a 300mm DRAM factory in Taiwan.
Together with Elpida's 65 percent interest in Rexchip, Micron will control 89 percent of the company's outstanding shares. Micron's purchase of Rexchip shares from Powerchip will coincide with the close of the Elpida deal.
Elpida and Rexchip produce more than 200,000 300mm wafers per month, according to the companies. Snapping them up gives Micron's manufacturing capacity a big boost, an estimated 50 percent increase over current levels.