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SK Hynix CEO Kwon Oh-chul (right) shakes hands with Spansion CEO John Kispert after signing an agreement on patent cross-licensing and the Korean firm’s NAND supply to the U.S. Flash memory technology provider last week. (SK Hynix) |
Analysts had mixed reactions to the bid by SK Hynix Inc., the world’s second-largest memory chipmaker, to take over the embattled Japanese rival Elpida Memory.
The Korean chipmaker entered the M&A battlefield on March 30 by filing an official bid for Elpida, sparking keen interest among investors and analysts.
The global memory chip market is now poised to go through a sweeping change as the sale of Elpida is expected to reconfigure the balance among heavyweights such as Samsung Electronics and foreign competitors such as Micron and Toshiba.
The underlying issue is how serious SK Hynix is about actually taking over the Japanese company. Some analysts said joining the bidding process might be a strategic move aimed at keeping its rivals at bay.
“SK Hynix demonstrated its will to play a part in the bidding battle as it does not want Toshiba and Micron to buy Elpida at a significant discount,” said Song Jong-ho, analyst at Daewoo Securities.
Song said if a competitor takes over Elpida at a steep discount, the merged entity could pose a serious threat to SK Hynix, a possible development that should be avoided for the top executives at the Korean company.
SK Hynix itself knows the importance of M&A, as it re-emerged as a unit of SK Group, one of the biggest family-owned Korean conglomerates, following a take-over deal valued at 3.34 trillion won. SK Telecom, SK Group’s flagship mobile unit, paid the sum in return for a 21.05 percent stake in the chipmaker, formerly called Hynix Semiconductor.
According to market research firm iSupply, Elpida’s global DRAM market share was 13.1 percent last year. If combined with SK Hynix’s 23 percent share, a take-over deal would create a company with about 36 percent share, accelerating a chase after No. 1 player, Samsung, which maintains a 42.2 percent share.
Shinyoung Securities said SK Hynix, regardless of the bidding results, appears to be aiming to explore its competitors’ situation and identify the strengths of Elpida before setting up a long-term strategy in the fast-changing computer memory chip market.
Investors, however, did not take SK Hynix’s move favorably, as the shares tumbled 4 percent on Friday following a public disclosure filed by the company.
Samsung Securities said the chance for SK Hynix’s acquisition of the Japanese chipmaker is slim at best in consideration of both firms’ internal conditions.
Elpida is said to have debts amounting to some 448 billion yen ($4.9 billion), and is set to see as much as 3 trillion won worth of loans maturing within this year.
SK Hynix plans to spend 4.2 trillion won for investment this year, with its extra cash power for M&A estimated at a maximum of 1.5 trillion won.
Earlier, analysts in Seoul predicted that Elpida’s crisis would help Korean frontrunners like Samsung and Hynix to firm up their control in the market.
Demand for DRAM chips is also showing signs of a recovery, which will prop up SK Hynix’s earnings and share price.
The Korean chipmaker posted 2.55 trillion won in sales and an operating loss of 167 billion won in the final quarter of last year. SK Hynix, whose 2011 revenue came in at 10.4 trillion won, ships more than 95 percent of its output offshore.
Analysts said the tech firm’s operating loss might have continued through the first quarter of this year but would swing to a profit ― as much as 44 billion won ― in the second quarter.
The yearly projection for the company’s operating profit is set at 925.9 billion won.
By Yang Sung-jin (
insight@heraldcorp.com)
