Japan's Elpida Memory files for bankruptcy protection with a record $5.5 billion debt, dealing a fresh blow to an already struggling Japanese economy.
TOKYO, JAPAN (FEBRUARY 27, 2012) (REUTERS - Japan's Elpida Memory Inc said on Monday (February 27) it filed for protection from creditors with 448 billion yen ($5.55 billion) in debt, the biggest bankruptcy filing by a Japanese manufacturer.
Japan's sole maker of dynamic random-access memory (DRAM) chips has been hobbled by weak prices after a surge in demand for Apple Inc's iPad, which is much less reliant on DRAM chips than conventional PCs.
It was also saddled with heavy capital spending to keep pace with well-funded South Korean rivals Samsung Electronics Co and Hynix Semiconductor Inc, while a strong yen hurt its global competitiveness.
Elpida President Yukio Sakamoto told a news conference that the company had expected concrete offers from potential partners, but when they did not appear the firm decided to file for bankruptcy.
"We've been waiting for various offers from other companies until the last minute, but most of them were not concrete commitments but mere intentions," Sakamoto said.
Monday's filing suggested that a possible rescue by domestic lenders and would-be overseas equity partners had stalled, the Nikkei newspaper said.
Media reports in recent weeks said Elpida was in talks with Micron Technology and its Taiwanese partner Nanya Technology on a possible equity tie-up.
Sources familiar with the matter also said this month that several large Japanese chipmakers were in talks about consolidating their struggling system chip operations with government backing in a scheme including U.S.-based GlobalFoundries and that could also involve Elpida.
Sakamoto said the record-high yen was an impassable challenge for the memory chip exporter.
"I've never imagined that the yen would surge this high, though I admit it was one of my mistakes in management," Sakamoto said.
The Tokyo Stock Exchange said on Monday that shares of Elpida Memory will be delisted on March 28.
The filing raised concerns that the curtain could be lowered on Japan in the PC memory chip business that it once dominated.
However, speaking in a briefing, Japanese Trade Minister Yukio Edano said he hoped domestic DRAM production could be continued.
"I hope Elpida Memory's rehabilitation process moves in way that its domestic production operations can be maintained," said Edano.
Elpida could owe the government as much as 28 billion yen ($347 million) in public funds, but the chipmaker's troubles will not create an additional public burden, Edano added.
The company, formed more than a decade ago by the merger of several large Japanese chipmakers' struggling DRAM operations, is scrambling to meet deadlines in the next two months to repay 92 billion yen in bonds and loans.
Lenders to Elpida, which is a supplier to Apple as well as a victim of the iPad's success, had given the company until this month to devise a turnaround plan, extending an earlier deadline, sources familiar with the situation told Reuters earlier this month.
The company had said it expected to reach an agreement with the relevant parties on the plan. But two weeks ago it said it had been unable to reach a final agreement and it doubted its ability to continue as a going concern.