Gov't Ready to Bail Out the DRAM Industry

Taipei, Dec. 17, 2008 (CENS)--The government is ready to offer a timely bailout to the beleaguered DRAM (dynamic random access memory) industry but is waiting for domestic makers in the line to present viable survival plans, Shih Yen-shiang, deputy economics minister, said yesterday (Dec. 16).

Shih pointed out, though, that the government will not bail out domestic DRAM makers indiscriminately, adding that the National Development Fund, under the Executive Yuan (the Cabinet), doesn't rule out direct investments in the DRAM industry. In the latter case, the government will aim to encourage the integration among domestic makers in the line and facilitate cooperation among domestic makers and their U.S. and Japanese counterparts.

In response, domestic DRAM makers, including Powerchip Semiconductor and Nan Ya Technologies, reported that they will come up with concrete survival plans in order to obtain government bail out soon.

This is the first time for a ranking government official to explicitly confirm the policy to bail out the DRAM industry, as many domestic DRAM makers are being mired in huge red inks and appear to be unable to service their enormous debts, amounting to some NT$700 billion.

Shih noted that government bailout is a short-term emergent method, for which the government can only wait passively for the application by DRAM makers with a concrete survival plan before its intervention. So far, revealed Shih, some 100 domestic enterprises have applied for government bailout.

The government is adhering to three major principles in dealing with the problem of the DRAM industry, including helping the industry establish its independent technology, helping it upgrade its international competitiveness, and assuring maximum efficacy for government input, according to Shih.

The deputy minister stressed that the government's ultimate goal is to see the industry realize horizontal integration domestically and vertical integration internationally, following the strategy of "joint investment and joint R&D," in the hope of facilitating the cooperation among Taiwan, the U.S., and Japan for the development of the industry.

Frank Huang, Powerchip chairman, pointed out yesterday that the company will cooperate with its Japanese partner Elpida in presenting a concrete survival plan by year end, in order to apply for government bailout. The statement ran counter to Huang's remark earlier this year stressing that the company didn't need government bailout. Industry insiders attributed the reversal in stance to sharp plunge of DRAM prices to US$0.6 per unit on average in the second half, down from US$1 in the first half, far below local makers' production cost, slashing the room of survival for domestic makers.