"If [Rexchip] doesn't perform financially, Micron doesn't have to pay down the debt," Howard said. "If the market takes a turn, they're going to be insulated. I think they're getting a really good deal."
The acquisition will immediately double Micron's DRAM wafer production. Elpida has a fabrication facility for 300 millimeter DRAM in Hiroshima, Japan, and Rexchip runs a 300mm DRAM fabrication facility in Taiwan, and an assembly and test plant in Akita, Japan.
The fabrication assets of Elpida and Rexchip together can produce more than 200,000 300mm wafers per month. The cost to build fabrication facilities to produce 200,000 chips a month would be considerably more than what Micron is paying for Elpida and Rexchip, Howard said.
Jim Handy, director of research firm Objective Analysis, said with DRAM marketplace revenues growing at rate of about 5% year-over-year, Micron could not have afforded to build a new fabrication facility. The buyout was the best method of immediately increasing its market share. The cost of constructing a fabrication facility is going up 12% every year, Handy said.
"They're getting good quality production capacity for pennies on the dollar. There are a lot of synergies between the two companies and Elpida brings a lot of good technology to Micron," he said.
"They've got a major challenge with integration," Howard said. "Once they close this deal, they'll start to try to push customers over from an Elpida design to a Micron design. I think they'll get 95% of the way there in six to 12 months. The other challenge is they need to implement Micron's technology in Elpida's fabs. That can be a very difficult process."
The latest buyout is not the first time Micron has dealt with integrating another company's fabrication facilities. In the past, Micron has struggled to do so.
For example, in 2001, Micron purchased Toshiba's fabrication facilities in Manassas, Va., and struggled to get them online. Then, in 2008, Micron acquired a 35.5% stake in Inotera Memories from Qimonda AG, acquiring wafer foundaries in Taiwan. It again struggled for the better part of two years to integrate them and bring them up to speed, the analysts said.
Micron lost about $500 million in potential revenue during that time because it couldn't get production online when the DRAM market was at its peak, Handy said. "Hopefully, this integration will go better than some of their past attempts."
Critical to Micron's integration success will be "disentangling themselves" from Powerchip Technology, the other joint owner of Rexchip.