Bloomberg News

Elpida Shares Advance on Plan to Shift Production to Taiwan

September 14, 2011

(Updates with comment from analyst in fourth paragraph.)

Sept. 15 (Bloomberg) -- Elpida Memory Inc. advanced to a two-week high in Tokyo trading after the world’s third-largest memory chipmaker said it may shift some domestic production to Taiwan to deal with a strong yen and an industry slump.

Elpida gained 5.8 percent to 568 yen as of the 11 a.m. trading break on the Tokyo Stock Exchange, the highest intraday level since Aug. 30. The benchmark Topix index added 1.3 percent.

The maker of memory used in personal computers is studying the feasibility of transferring some production at its Hiroshima plant to a more cost-efficient factory operated by subsidiary Rexchip Electronics Corp. in Taiwan, according to a statement by the Tokyo-based company today. Elpida is among chipmakers facing weakening demand for dynamic random access memory chips, or DRAM, as sales of personal computers slow.

“It’s hard for them to keep making DRAM products at the moment because of costs,” Seo Won Seok, a Seoul-based analyst at NH Investment & Securities Co. said by telephone. “Since they don’t have economy of scale, they seem to be trying to boost efficiency by shifting to Taiwan.”

In response to “an extremely harsh business environment” caused by the appreciation of the yen and a drop in chip prices, Elpida will also try to accelerate reducing the circuitry of its chips to 30 nanometers from 40 nanometers to cut production costs, while expanding procurement in U.S. dollars to minimize currency-related risks, the company said.

DRAM Prices

Prices for dynamic random access memory, or DRAM, chips that are used in PCs to help run multiple programs simultaneously have dropped as PC sales slowed.

The price of the benchmark DDR3 2-gigabit DRAM has slumped more than 70 percent over the past 12 months, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.

Nanya Technology Corp. cut DRAM production because of a supply glut, Pai Pei-lin, a spokesman for the Taiwanese chipmaker said yesterday.

Inotera Memories Inc. also lowered DRAM output, President Charles Kau said yesterday.

Output reductions may help chip prices rebound as early as from the end of this month, Lee Ka Keun, a Seoul-based analyst at Hana Daetoo Securities Co. said in a Sept. 14 report.

--With assistance of Tim Culpan in Taipei. Editors: Dave McCombs, Subramaniam Sharma

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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