Market Insight

Elpida Launches $150 million TDR Offering

February 15, 2011

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Elpida launched its $150 million TDR (Taiwan Depository Receipt) offering today, making it the first major Japanese company to do so. The move by Elpida is designed to further its position in the Taiwanese DRAM market (it currently has manufacturing and technology sharing agreements with three of the main Taiwanese DRAM makers – Winbond, ProMOS, and Powerchip). To put things in context, iSuppli estimates that Elpida, in combination with its Rexchip partner, will spend approximately $700 million on capex in 2011 – nearly five times the $150 million it hopes to raise with the offering.

The benefit of launching the TDR offering goes beyond the capital raised, however. As Elpida looks to better leverage Taiwan’s DRAM manufacturing ecosystem, its presence in the local financial markets could provide valuable clout. Furthermore, a successful fundraising endeavor in Taiwan may prove invaluable in the coming months if the DRAM market suffers another steep decline and cash once again becomes scarce. In this eventuality Elpida will be up the experience curve and should be able to initiate Taiwan-based funding more easily. Elpida does not have the strongest balance sheet in the DRAM industry and any move that improves its cash position could prove hugely valuable.

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