TAIPEI, 21 JULY 2009 - Taiwan announced a new plan Tuesday to allow its embattled DRAM makers to apply for government bailout funds over the next three months, but the money will come at a price.
The government cash is an investment, not a loan, a government statement said, and technology will be required as part of the deal, along with a proposal on how the company will restructure itself for the greater good of Taiwan's DRAM sector.
Some of the requirements may put off foreign companies with Taiwanese partners, which include U.S.-based Micron Technology and Elpida Memory of Japan. The Taiwan government stipulates that companies applying for funds must have a foreign technology partner willing to ensure the Taiwan partner can use the technology rights freely and ensure next generation technology is being jointly developed in Taiwanese labs.
"The Taiwan technology center should not have inferior technology to the foreign technology holder," the government statement says, adding that technical training for Taiwanese personnel must also be included.
Micron and Elpida were not immediately available for comment.
A major difference between the two companies is that Elpida has already been chosen as the foreign technology partner for Taiwan Memory Company (TMC), the government-sponsored memory company established as part of the plan to restructure Taiwan's indebted DRAM makers.
Micron has said it cannot be part of TMC because its proprietary technology could fall into the hands of Elpida. The Boise, Idaho, company instead established its own alliance with Taiwanese partner Nanya Technology and their joint venture Inotera Memories. The companies have lobbied Taipei to grant them the same funding as TMC, a sum that has not yet been decided but will likely be around NT$30 billion (US$916.9 million), according to government officials.
TMC has already pledged to invest ¥20 billion (US$213.4 million) in Elpida.
Over-investment in new production facilities and a global recession have hurt DRAM makers. TMC was conceived of to restructure Taiwan's DRAM industry. DRAM companies on the island hold over NT$430 billion (US$13.14 billion) in debt to Taiwanese banks, and a few are in danger of running out of cash. The government also hopes TMC will beef up the technology prowess of Taiwanese memory chip makers, which have long manufactured chips using technology from foreign companies.
Prior to Tuesday's announcement, some of Taiwan's DRAM makers had already met their own financial needs.
Powerchip Semiconductor, Taiwan's biggest DRAM maker prior to the downturn, last month convinced holders of US$158.05 million in convertible bonds to settle for company stock instead of cash for a portion of the repayment. The company also worked out a US$125 million loan from chip distributor Kingston Technology.
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