Toshiba Withdraws from Elpida’s Bidding

Toshiba Corp is no longer bidding for bankrupt Japanese chip maker Elpida Memory; leaving a handful of foreign firms including SK Hynix and Micron Technology in the race to take over the company.

Toshiba has decided not to join the second round of bidding set for Friday after talks stalled on a joint bid with potential partners, including South Korea’s SK Hynix.

Toshiba’s withdrawal was a relief to its investors, who questioned the merits of a bid for Elpida, the world’s No.3 maker of dynamic random access memory (DRAM) chips, by a company that pulled out of DRAM chip-making a decade ago by selling its US DRAM facilities to Micron.

It also clears the field for those still planning to take part in Friday’s bidding, which includes SK Hynix, Micron and private equity firms TPG Capital LP and Hony Capital.

Toshiba’s NAND memory chips are used heavily in smart phones and tablets such as Apple Inc’s iPad and iPhone, while DRAM chips, the bulk of which are used in PCs, have been hit by falling prices as consumers switch to mobile devices.

Toshiba, which was interested in Elpida’s engineering and marketing expertise but reluctant to take on its assets, approached SK Hynix about a joint bid after its solo bid in the first round was too low.

Although SK Hynix Company had been approached by Toshiba for a joint bid and they held initial talks, they did not lead to serious negotiations.

Toshiba would neither confirm nor deny whether it was withdrawing from the bidding, while SK Hynix declined to confirm whether it was bidding on its own.

Elpida, which trails Samsung Electronics and SK Hynix in DRAMs with a market share around 12 %, filed for creditor protection in late February with $5.6 billion in debt, marking the biggest bankruptcy of a Japanese manufacturer, as Reuters stated.

Suitors are likely to be interested in the DRAM chips it makes for mobile devices, an area of special expertise that contributed 50 % of its revenue in the latest fiscal year to March while only accounting for 15 % of the memory capacity it produced.

Micron, which had been discussing a tie-up with Elpida before the Japanese company went bankrupt, had offered at least 150 billion yen ($1.85 billion) in the first round of bidding that closed on March 30, the Nikkei business daily reported.

Elpida, formed over a decade ago via a merger of several big Japanese chip-makers’ struggling DRAM operations, has been hit particularly hard by the strong yen, which puts it at a competitive disadvantage against its aggressive, well-funded Korean rivals.