Solutions Needed for Taiwan's Struggling DRAM Industry

Taipei, July 11, 2011 (CENS)--While Economics Minister Y.S. Shih recently said he could accept the idea of allowing mainland Chinese investors to invest in Taiwan's DRAM (dynamic random access memory) industry, the United Microelectronics Corp. Vice Chairman Emeritus John Hsuan suggested that the Taiwan industry should be integrated under the leadership of an enterprise “with experience and abundant capital.”

Shih's recent comment on how to restructure the island's struggling DRAM industry was far cry from what he responded in late 2009 to questions concerning whether he would consider opening Taiwan's DRAM industry to mainland China's investors.

Shih changed his stance on the issue of whether or not to allow the mainland's capital into Taiwan's DRAM industry for the first time since March this year, when Taiwan government conditionally opened the island's semiconductor industry to the mainland's investors.

According to Taiwan's revised regulations, the mainland's investors are allowed to have a maximum stake of 10% in Taiwanese-owned semiconductor companies, and their maximum ownership in Taiwan-mainland joint ventures should be under 50%. All investment plans are subject to MOEA's scrutiny.

Speaking of ProMOS Technologies' recent decision to cut capital by 85% and invite creditor banks as its strategic investors, Shih said the company “finally took a correct step.” He added that the company's debt would become very tricky to settle should the firm fail to cut capital.

Hsuan pointed out that Taiwan's DRAM industry is running into another predicament and manufacturers may try again to integrate themselves although the first attempt was a failure. But he stressed that he should avoid leading the integration effort as he is not a DRAM manufacturer. In 2009, Hsuan was consigned by the ministry to lead a project to integrate the island's DRAM industry and set up a brand new company when the Taiwan industry was experiencing huge loss.

Hsuan suggested that the integration effort should be spearheaded by local companies with “abundant experience in DRAM manufacturing and capital.” People have associated his suggested terms with Nanya Technology Corp. and Inotera Memories Inc., both of which are subsidiaries of the Formosa Plastics Group.

Executives of the group noted that it is very hard for the island's DRAM industry to integrate, a task which they estimated would take at least NT$100 billion (US$3.4 billion at US$1: NT$29) to complete. They suggested that the Taiwan industry should play on market mechanism, which will decide who should stay and who should phase out.

The group's executives stressed that since the group has heavily invested in DRAM business, it will not quit. They noted Nanya and Inotera are working on 20nm process technology after migrating to 30nm process from 40nm to stay competitive.