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Taipei sends lifeline to chip sector

The government yesterday announced a major relief plan for the nation’s computer memory chipmakers, including an extension on bank loans, to help the sector endure the severe industrial slump.

The Ministry of Economic Affairs would help makers of dynamic random access memory (DRAM) chips obtain a six-month grace period from creditors, Vice Minister Shih Yen-shiang (施顏祥) told legislators.

After independent reviews by the Bankers Association (銀行公會) and the banks involved in the plan, financial institutions have been given the right to extend interest and debt liabilities to debtors for up to six months, Shih said.

Total bank financing assumed by Taiwanese DRAM makers reached NT$420 billion (US$12.81 billion) this year, ministry statistics showed yesterday.

In addition, local DRAM companies could obtain a six-month grace period for checks paid to suppliers after an agreement was reached between the central bank and the Taiwan Payments Clearing System Development Foundation (台灣票據交換所) to ensure companies have sufficient funds in their accounts.

The six-month period would allow companies to continue normal operations and maintain good credit while they work out how to fulfill their obligations to their creditors, Shih said.

In response, industry analysts said the latest rescue plan for the struggling industry would not spell an end to the sector’s troubles, but would provide more leeway.

“The cash crunch is a pressing problem faced by local DRAM chipmakers as oversupply and shrinking demand have caused massive losses and cash outflows. This is a problem that the government is unable to resolve,” said Liu Szu-liang (劉思良), a semiconductor analyst at Yuanta Securities (元大證券).

The industry downturn has caused Taiwanese DRAM chipmakers NT$90.82 billion in losses in the first three quarters, with Powerchip Semiconductor Corp (力晶半導體) suffering the brunt.

However, with government backing, a six-month extension on bank loans or even a reduction in interest rates would give local firms more time to come up with appropriate measures, Liu said.

“This is quite important. As long as companies manage to remain on the market, they will have a chance to make a comeback when demand bounces back, which will probably occur in the second half of next year, following recent output cuts by major players,” Liu said.

Powerchip said it welcomed the government’s rescue measures.

“The extension on bank loans will help relieve our cash pressure,” Powerchip spokesman Eric Tan (譚仲民) said.

Powerchip will soon begin paying banks loans in installments and will need to make a payment of about NT$5 billion before corporate bonds expire in July.

Nanya Technology Corp (南亞科技), the nation’s second-largest DRAM chipmaker, did not have great expectations for the government’s ability to help the sector.

“There is little the government can do to help [DRAM companies] as the problem is an industry-wide slump,” Pai Pei-lin (白培霖), a spokesman at Nanya Technology Corp (南亞科技), the nation’s second-largest DRAM chipmaker, said by telephone.

Pai said Nanya Technology had no immediate need to repay bank loans, nor did it face any credit problems. The Taoyuan-based company obtained a syndicated bank loan last month to repay NT$10 billion in corporate bonds due later this month, he said.

Shares of Powerchip, Nanya Technology and ProMOS Technologies Inc (茂德科技), the nation’s third-largest DRAM maker, jumped 6.72 percent, 5.61 percent and 4.08 percent respectively, outperforming the benchmark TAIEX index, which lost 0.04 percent yesterday.

The Taiwanese semiconductor industry includes design, manufacturing, packaging and testing. Statistics for last year showed the total value of the industry was more than NT$1.467 trillion, with annual growth of 5.3 percent, Council for Economic Planning and Development Chairman Chen Tain-jy (陳添枝) said.

“With more than half of output value dominated by contract chipmaking and DRAM integrated circuit manufacturing, this is a huge business engine in the Taiwan economy. Given this, the government is working closely with businesses to assist them every step of the way,” Chen said.

The US subprime crisis, high inflation and high oil prices earlier this year have had a negative impact on the semiconductor sector, market watcher Gartner said in its latest report. As a result, growth in the global semiconductor industry has been revised from 4.2 percent to 2 percent, it said.
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