Chip prices on the rise

Chip prices shot up after Elpida announced that it was going bankrupt. It seems that rather than holding a wake for their fallen competators, the remaining DRAM makers got on the blower and immediately jacked up the prices.

According to the Wall Street Journal, the heart warming tale of business caring and sharing is a good thing as it will tighten global supply in the short term.

Share prices of Elpida-rivals Samsung, Hynix and Micron were also higher after Elpida announced it filed for bankruptcy protection with debt exceeding $5.5 billion.

Elpida is Japan’s last remaining maker of dynamic random access memory, or DRAM, chips.

But there are hopes that the survivors will start making money after years of oversupply and paper thin margins.

Barclays Capital said today that Elpida’s bankruptcy will likely be a “sentimental increase in DRAM price”. This has us puzzled as we have never seen a price increase for old times’ sake and wonder what one would look like.

Spot prices of DRAM chips surged by more than 13 percent, according to beancounters at DRAMeXchange.

Mizuho Investors Securities analyst Yuichi Ishida told the Wall Street Journal that Elpida’s demise may prop up chip prices, as DRAM makers should have more bargaining power with major clients buying on contract.

Other analysts claim that Korean DRAM makers will be laughing manically while dancing all night in Karaoke bars on the back of the news. They have good reaon. They should gain market share and benefit from less competition, allowing them to cope with the volatile industry cycle over the medium-to-long term.

Elpida said Monday that it is seeking a sponsor as part of its “rehabilitation process” so that it can ring someone up if feels like it needs another substantial loss.

Hopes that Elipida might find someone to bail it out out of rehab were dashed when Samsung said no, no, no.