Chip company Hynix's decision to reject a $3.1bn bid by US-based Micron should force down spot market DRam pricing, analysts have predicted.
The deal, which collapsed late last week, would have made Micron the biggest memory player in the market, but the board of directors at South Korean firm Hynix, which has made a $6bn loss over the past two years, dismissed the offer.
According to Gartner, the deal's collapse is likely to cause a drop in spot market DRam pricing, a trend that the analyst predicts will continue into the third quarter of this year.
Gartner analyst Andrew Norwood, said: "Hynix will need cash flow and will look to get as much product into the market as possible. Some manufacturers may also want to push prices down to keep pressure on Hynix.
"Hynix has more than $6bn in debts, and some form of court receivership now looms as a distinct possibility.
"Failure of Hynix, or its break up, would significantly affect the DRam market since it would leave only four large-scale DRam producers: Elpida Memory, Infineon Technologies, Micron and Samsung.
"Hynix doesn't appear to have much of an alternative plan. The company stated that it wants to sell off its non-memory operations, but doing so will raise little capital; not enough to service debt and upgrade its DRam production capabilities."
Norwood added that the South Korean government has limited ability to intervene. Even if it wanted to help, International Monetary Fund rules and upcoming government elections would make giving Hynix further financial assistance difficult.
"Hynix may enter some form of bankruptcy; an undesirable outcome from either the company's or the Korean government's point of view since an intact Hynix is worth far more than the sum of its pieces," he said.
"The company's fate rests with its creditors, and their actions depend on the DRam market. If prices drop precipitously, the chance increases that Hynix will go into receivership and possibly be broken up. If prices stabilise, or possibly even go up, Hynix may yet survive," Norwood concluded.
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