Jun. 18--TOKYO -- Struggling chipmaker Elpida Memory Inc. is set to become the first Japanese company to apply for a new government aid program Friday in a bid to shore up its financial health, sources familiar with the matter said Thursday.

The state-backed Development Bank of Japan is in the final stages of negotiations to invest between 20 and 40 billion yen in Elpida. Four other banks including the Bank of Tokyo-Mitsubishi UFJ are also likely to provide between 80 and 90 billion yen in syndicated loans, the sources said.

Elpida, the world's third-largest maker of dynamic random access memory chips mainly used for mobile phones and personal computers, will make use of the de facto public funds to ride out the tough business conditions caused by the erosion of chip prices and stagnant demand due to the global economic downturn.

Elpida's move may prompt other high-tech companies in Japan to consider the new program the government mapped out in April, but some analysts warned against the state stepping too deeply into corporate revitalization.

The company has been studying various measures to strengthen its financial standing as it sank into the red for the second straight year with a group net loss of nearly 180 billion yen in fiscal 2008 that ended in March.

It recently inked a technology partnership with Taiwan Memory Co., a new company set up by the Taiwanese government to support its loss-making chipmakers. Reports are also spreading that the Taiwanese firm will acquire about a 10 percent stake in Elpida.

In addition to close ties with Taiwanese firms, Elpida hopes to compete better with rivals in South Korea and the United States by boosting its production capabilities, the sources said.

Under the new corporate rescue program, non-financial companies like Elpida will be able to receive capital investments from the state-backed DBJ on condition the government would cover 50 to 80 percent of possible losses on their failure.

One of the conditions of eligibility for the program is that companies must secure investments or syndicated loans from private financial institutions.

Japanese government officials have indicated they are ready to rescue the country's sole DRAM chipmaker, which was established in 1999 originally as a joint venture between Hitachi Ltd. and NEC Corp.

It later absorbed Mitsubishi Electric Corp.'s DRAM division.

The DBJ and the four banks intend to provide Elpida with funds necessary to finance massive capital spending that will be required to turn around its operations.

Other firms like Pioneer Corp. have also expressed their intention to consider the use of public funds in face of massive losses caused by the deepening global economic recession.

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