UPDATE 4-Japan's Elpida secures lifeline with $1.7 bln aid
* State-backed bank to invest 30 bln yen, lend 10 bln
* Private banks to lend 100 bln yen
* Taiwan Memory, Elpida may take stakes in each other
* Move supports Elpida but demand woes remain - analysts
* Elpida's shares up 60 pct in 3 months, outperform market (Adds quote from Elpida CEO, other details)
TOKYO, June 30 (Reuters) - Japan pledged to shore up Elpida Memory Inc (6665.T) with public money, bringing the total aid expected to come to the loss-making chip maker to $1.7 billion as it struggles to compete with its larger South Korean rivals.
With an injection of 30 billion yen ($313 million) from the state-backed Development Bank of Japan, Elpida will become the first Japanese firm to get aid under a scheme that makes public funds available to businesses hit by the global financial crisis.
Besides 100 billion yen in loans from its banks, the aid package includes a possible 20 billion yen capital injection from Taiwan Memory Company, which was set up by Taiwan to save its own chip sector and had chosen Elpida as a technology partner. [ID:nTP325749]
Elpida is Japan's last hope in PC memory chips in an industry dominated by Samsung Electronics (005930.KS) and Hynix Semiconductor Inc (000660.KS).
Elpida lost the No 3. slot to U.S. chipmaker Micron Technologies (MU.N) in January-March.
Years of price slides and weak consumer demand have hammered the sector, dragging DRAM makers into the red and forcing Germany's Qimonda (QMNDQ.PK) to file for insolvency this year. Elpida reported a record operating loss of 147 billion yen in the year ended March 31.
"This ensures that Elpida will survive, but can it win?" said Yoshihiro Shimada, chief analyst at research firm SPI Analysis. "That depends on how quickly it can catch up to its competition in shrinking its chips."
Elpida, which posted its sixth straight quarterly loss in January-March, has fallen behind Samsung in using smaller circuitry on its DRAM chips, which are mainly used to power PCs.
Smaller circuitry on semiconductors allows makers to pack more power onto smaller chips and lower per-chip costs, but it also yields more chips per wafer and exacerbates oversupply.
Elpida said it would use the funds to shrink chips and expand output of advanced DRAM chips at its Hiroshima plant in southwest Japan to cut costs by 20 percent. Continued...
