Elpida Receives $1.7 Billion Rescue

Japanese chip-maker Elpida was thrown a 160 billion yen (US$1.7 billion) financial lifeline Tuesday, including public funds, to help it survive the economic downturn, officials said. Elpida Memory Inc., Japan's only maker of dynamic random access memory chips, will sell securities worth 30 billion yen to the government-backed Development Bank of Japan, which will also extend it a loan of 10 billion yen. It is also expected to receive an investment of 20 billion yen from Taiwan Memory Co., a state-backed company set up to boost the island's memory-chip industry, Japan's trade ministry said in a statement. Private-sector banks meanwhile will offer loans totaling 100 billion yen to the chip-maker under a government scheme aimed at providing funds to companies hit hard by Japan's worst post-war recession, it said. Elpida, a maker of dynamic random access memory (DRAM) chips used in mobile phones and other home electronics, faces growing competition from rivals such as South Korea's Samsung and Hynix. Elpida is in a "severe situation" and its survival is important for the wider economy, said Toshihiro Nikai, minister of economy, trade and industry. "If Japanese manufacturers have to procure chips only from Hynix or Samsung, that will reduce their international competitiveness," he said. Elpida is the first company to secure funds under a government program launched in April to support ailing firms, but it is unlikely to be the last. Other companies, including the troubled electronics maker Pioneer Corp., have also said they are considering applying for assistance. The trade ministry on Tuesday approved Elpida's three-year restructuring plan aimed at bolstering its financial situation, a ministry official said. Elpida, which lost 178.9 billion yen in the year to March, aims to improve profitability by cutting manufacturing costs by one-fifth and reducing its debt burden. Copyright Agence France-Presse, 2009