Micron Technology Inc.
's (
MU
) decision to bid for Japanese chip maker Elpida might well turn
out to be a great one. Now that the company has won an excusive
right for helping to pay off Elpida's debt, the news of tablet
maker
Apple Inc.
's (
AAPL
) reliance on Elpida for DRAM (Dynamic Random Access) chip supply
is definitely a reason for cheer.
On the flip side, this news might put off Samsung Electronics,
as Apple's decision to choose Elpida as its chip supplier reduces
the company's dependence on Samsung's chips. Eventually, this could
put pressure on Samsung's fundamentals, and the concern was soon
reflected in Korean stock exchange through a 6.0% drop in its stock
price yesterday.
Of course, this will further spice-up the ongoing battle between
Samsung and Apple over smart-phone and e-Reader market share.
Mobile DRAM Market Share
According to the U.S. technology market research firm IDC,
Samsung headed the mobile DRAM market with roughly 52.0% share in
2011, followed by Hynix Semiconductor with 27.0% and Elpida with
17.0%. Amongst these key players, Micron seems to be an amateur
with merely 4.0% share in the market.
With Elpida, Micron will be in a position to create competitive
pressures on the others. Moreover, supplying chips to Apple will be
an added advantage, which could boost its market share.
Though Micron's prospects in the mobile DRAM market look
promising, it will not be easy to outpace Samsung. Samsung has held
the largest share of this market for years and there are
indications that it will sustain the same rank for the coming years
as well. Recently, another research firm TrendForce revealed that
mobile DRAM production capacity was increasing. The firm has also
estimates that Samsung has already taken roughly 7.0% market share
in the first quarter of 2012.
Market Scenario
DRAM chip production capacity is growing. However, the market
could face challenges due to the oversupply situation, which is
leading to slowing ASPs (average selling prices). Though the DRAM
market will feel the pressure of oversupply and low pricing in the
first half of 2012, Gartner affirms that a decelerating supply and
increasing demand will lead to an improved scenario starting from
the second half of 2012 and running into 2013.
With a solid cash position, we believe that Micron will be able
to win the bid for Elpida and position itself to capitalize the
consolidation in the DRAM market.
Micron Technology has a Zacks #3 Rank, implying a short-term
Hold recommendation.
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