Elpida shares up on aid prospect, outlook uncertain

TOKYO, June 29 (Reuters) - Shares of Elpida Memory Inc (6665.T) jumped on Monday on chances that the loss-making Japanese computer memory chip maker will gain an edge over rivals if it receives a reported $2.1 billion in support.

Elpida, the world's fourth-biggest DRAM maker, rose as much as 7.8 percent after news that it would receive public funds worth tens of billions of yen, as well as loans from its creditors amounting to 100 billion yen.

"We are doing our best to receive approval under the industrial revitalisation law" for an injection of public money, CEO Yukio Sakamoto said at Elpida's annual general shareholders' meeting on Monday, according to a spokesman.

But even with the extra money, turning around the business plagued by weak prices and demand for dynamic random-access memory would be tough, some investors said.

Elpida competes with South Korea's Samsung Electronics Co Ltd (005930.KS) and Hynix Semiconductor Inc (000660.KS) and U.S. firm Micron Technology Inc (MU.N) for share in a dwindling market.

"Will Elpida spend the new funds to expand capacity? Will that bring prices down further? What if demand doesn't come back? Will they need more money again?" said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.

"I don't see any signs yet of a recovery in DRAMs."

The spot price of DRAMs is around $1.10 per gigabit of "double data rate 2" memory, far below most memory makers' cost of around $2 to make them. Elpida's executives said in May it could make a profit in the $1.50 to $2 range.

Six straight quarters of losses have eaten into capital at Elpida, which now faces debt and corporate bond repayments of 127 billion yen in the year to March.

The Development Bank of Japan is prepared to buy some 30 billion yen worth of preferred securities issued by Elpida, while its banks including Mitsubishi UFJ Financial Group (8306.T) are considering extending loans worth some 100 billion yen, two sources told Reuters.

The Nikkei business daily said a newly set up state body would inject additional tens of billions of yen into Elpida, while the state-backed Japan Bank for International Cooperation will also consider supplying emergency loans worth 20 to 30 billion yen [ID:nT364877].

Its shares were up 4.5 percent at 1,065 yen, outperforming Tokyo's electrical machinery index .IELEC.T, which was up 0.8 percent. (Reporting by Mayumi Negishi and Kentaro Hamada; Editing by Michael Watson)