It was a setback for the “flagbearer of Japan’s semiconductor industry,” and it symbolizes the decline in Japan’s industrial competitiveness.

Elpida Memory Inc., the only domestic manufacturer ― and the No. 3 maker in the world ― of dynamic random-access memory (DRAM) used for personal computers and other products, has given up its self-rehabilitation efforts and filed for protection under the Corporate Rehabilitation Law. This means the company has gone bankrupt.

Competition is fierce in the DRAM market, as South Korea’s Samsung Electronics Co. and Hynix Semiconductor Inc. hold a combined market share of well over 60 percent. Affected by the hyperappreciation of the yen, depreciation of the won and the market slump, Elpida’s business performance has deteriorated rapidly.

Elpida strove to come back from its near-dead status through business tie-ups with U.S. and Taiwan companies, but none of its attempts came to fruition. As a result, the company could not raise sufficient funds. It is very regrettable Elpida was forced to choose legal liquidation.

During the 1980s, Japanese chip makers dominated the global market for semiconductors, which were dubbed the “rice of industry” due to their indispensability.

Elpida was born through a merger of the DRAM operations of Hitachi Ltd. and NEC Corp., and later took over the DRAM operations of Mitsubishi Electric Corp. However, the company fell into a serious business slump after the 2008 financial crisis.

It was the Economy, Trade and Industry Ministry that came to Elpida’s rescue.

METI changed its policy to enable an injection of public funds into private companies and in the summer of 2009, it approved Elpida as the first company to qualify for the revised Law on Special Measures for Industrial Revitalization and injected 30 billion yen into it.

The action was designed to preserve the DRAM business, a specialty field for Japan, in the country and support Elpida as a “national policy concern” so it could compete with rapidly emerging South Korean companies.

However, Elpida was defeated in its competition with the South Korean firms, and METI’s attempt failed in a little less than three years. It is inevitable that the public assistance program was criticized as a mere life-extension measure.

The possibility that the taxpayers’ burden will swell to as much as 28 billion yen because of Elpida’s failure is also a problem.

Why did the government’s assistance to Elpida result in a strikeout? Were there mistakes in Elpida’s business strategy against the South Korean firms, which engaged aggressively in a sales war through major investments and low-price goods?

METI must squarely verify these points and utilise its findings to chart appropriate ways to help corporations and policies for industrial promotion.

The most important point hereafter is measures to rehabilitate Elpida.

It is likely that the U.S. company Micron Technology Inc., which had been negotiating a tie-up with Elpida, will extend support to the company. To make the best use of Elpida’s advanced technological capacity, it is important to find a company that can extend support as soon as possible and pave a way to reconstruction.

Yet the government needs to be careful to prevent an outflow of technologies and human resources to other countries.

A sense of distrust has mounted among the general public against the administration, as a high-ranking METI official in charge of assisting Elpida was arrested and indicted over insider trading with Elpida shares. METI must also recover people’s confidence in the ministry as soon as possible.

In addition to the semiconductor business, Japan’s manufacturing sector companies are facing an ordeal as, for instance, electric appliance companies have suffered huge losses due to the slump in TV sales.

To regain international competitiveness and survive in the world, we hope the Elpida case should serve as a good lesson.

(The Yomiuri Shimbun)

(Asia News Network)