Struggling semiconductor maker Elpida Memory Inc. filed for bankruptcy protection Monday after giving up on efforts to rebuild itself with government support.
Elpida, the nation’s sole manufacturer of dynamic access memory chips, had liabilities of ¥448 billion at the end of March last year, the company said.
Elpida President Yukio Sakamoto is expected to step down over the bankruptcy, which was filed at the Tokyo District Court.
Elpida was facing an April deadline to get financing for ¥92 billion in bonds and loans as it watched its business crumble under pressure from the strong yen and declining DRAM chip prices. DRAMs are used in products ranging from computers to smartphones.
The company was formed in 1999 when the DRAM operations of NEC Corp. and Hitachi Ltd. merged. It was listed on the first section of the Tokyo Stock Exchange in 2004 after absorbing the DRAM division of Mitsubishi Electric Corp. the year before.
After running into financial difficulties from the deterioration of its business, Elpida became the first to benefit from a government financial aid program launched in 2009. It received ¥30 billion in emergency funds from the state-backed Development Bank of Japan and received big loans from its main creditor banks. But it wasn’t enough to deal with the rapid changes taking place in global markets.
“The impact from the worsening DRAM market and stronger yen was big on Elpida,” said Yoshihiro Nakatani, a Tokyo-based fund manager at Asahi Life Asset Management Co. “The government should have known that this business itself had a risk when they decided to support the company in 2009.”
The chip maker’s troubles, exacerbated by price falls as big as 85 percent and a hefty yen, may strengthen Taiwanese rivals and South Korea’s Samsung Electronics Co., whose semiconductor business remains profitable after diversifying into tablets and smartphones.
Trade minister Yukio Edano said Monday he believes the decision to financially help Elpida in 2009 was “inevitable” because it could not have anticipated the chip maker’s business would sour so significantly.
“It was impossible back then to foresee that the great earthquake and the Thai floods would happen one after another,” he said. “I think it was an inevitable decision at that time.”
Despite government support, Elpida failed to turn itself around and booked a group net loss of ¥98.91 billion for the period from April to December as competition led by Samsung compounded its currency woes.
To rebuild, Elpida even considered forming a capital and business alliance with U.S. chip maker Micron Technology Inc.
Elpida’s troubles reflect the difficulty Japanese firms face in competing head to head with Samsung, which generated 7.34 trillion won in operating profit from chip sales last year.
Chip prices became as cheap as a “rice ball,” Elpida Chief Executive Officer Yukio Sakamoto said last year.
Samsung boosted profits by producing specialty chips for smartphones, tablet computers and servers.
Those benefiting from Elpida’s bankruptcy will also include Taiwanese rivals, such as Nanya Technology Corp., said Andy Wei, who helps manage $80 billion at Eastspring Investments, the Asia asset management unit of Prudential PLC.
“In the short term, this may be positive news for Taiwan DRAM companies as there would be a supply shortage,” Wei said. “This will be good for the industry in the long term if the restructuring or takeover of Elpida means better control of capacity.”