/// With Elpida Buy, Micron Leaps Into Second Place in World Memory Market

July 3, 2012  |  All Things Digital

After buying the bankrupt Japanese memory-chip maker Elpida for about $2.5 billion, Idaho-based Micron Technology will jump into second place (behind Samsung) on the world market for memory chips, according to a market estimate by IHS iSuppli. Micron was the fourth-ranked producer and Elpida third. Combined, they would leap ahead of South Korea’s Hynix into the No. 2 slot by revenue, and would have accounted for $1.54 billion in sales in the first quarter of 2012. Samsung reported DRAM sales north of $2.5 billion in the quarter. It’s another step in the long-term consolidation of what has turned out to be the most difficult of all the segments of the chip business. DRAM — the memory chips that go inside PCs and servers — are essentially commodities, and thus subject to violent boom-and-bust cycles as demand spurs a round of building new factories. When all the manufacturers build new ones and upgrade the ones they already have, they finish just in time for demand to slack off. And that usually hurts, because when demand does crash, and it always does, they’re left with two bad choices: One, let some of the new factory lines sit idle, for accounting purposes; or two, make as many chips as they can and compete with the other companies on price. Almost always, all DRAM companies choose option two, and flood the market with cheap chips. The result is great news for consumers who can benefit by upgrading the computers they already own with relatively cheap chips; it’s also a boon for PC makers, who can add a lot of memory to the machines they sell without upping the price. But it’s bad for the companies trying to make a profit on DRAM. It turns out that 2011 was one of those flood years, and in fact it was one of the worst in recent memory . It was so bad for DRAM companies that global sales of DRAM chips shrunk by 25 percent, from nearly $40 billion in 2010 to less than $30 billion in 2011. This year, sales are expected to inch upward to about $30.5 billion, leading into another boom cycle next year, when demand is high, supplies are tighter and prices rise. And then it will go bust again. Micron’s acquisition basically leaves the industry with three large players. The next two, after Samsung, Micron and Hynix, are Nanya and Winbond, both significantly smaller. The deal also represents the end of a long-term goal for Micron

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With Elpida Buy, Micron Leaps Into Second Place in World Memory Market

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