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Powerchip Semiconductor mulls merging with Elpida

Powerchip Semiconductor Corp (力晶半導體), the nation’s largest computer memory chipmaker, yesterday said it was considering a merger with Japan’s Elpida Memory Inc to weather an industry slump and to create a company big enough to compete with South Korean chip giant Samsung Electronic Co.

Powerchip’s comments came after speculation swirled that the government is pushing for consolidation in the nation’s major chipmakers to help them through the tough times.

“We are talking [with Elpida] to tighten our partnerships. There are all kinds of options, as you can imagine. We will not rule out any possibility,” Powerchip chairman Frank Huang (黃崇仁) said in response to a question from the Taipei Times about a merger between Powerchip and Elpida, the world’s No. 3 memory chipmaker.

“The government should not play a major role [in industrial consolidation]. It should respect the market mechanism,” Huang said.

Elpida and Powerchip had a combined share of 21.9 percent of the DRAM market by capacity in the third quarter, compared to Samsung’s 27.2 percent, Taipei-based market researcher DRAMeXchange Technology Inc’s (集邦科技) figures showed.

COOPERATION

“The board has given us the authority to discuss further cooperation with Rexchip Electronics Corp (瑞晶) and Powerchip,” Elpida chief executive Yukio Sakamoto told a press briefing in Taipei yesterday.

Closer cooperation between the three companies would help them weather the industry downturn, Sakamoto said.

Sakamoto, however, said a final agreement had not been reached on how much money his company would invest in Powerchip. Elpida is a cash-rich company with about US$2.2 billion in cash, Sakamoto said.

Rexchip is a joint-venture by Elpida and Powerchip with each holding a 48 percent share.

In addition, Elpida was open to buying another ailing Taiwanese DRAM supplier, ProMOS Technologies Inc (茂德科技), via share swap if it ended its existing partnership with South Korea’s Hynix Semiconductor and lowered its enormous debts, Sakamoto said.

OVERSUPPLY

Oversupply and shrinking demand have driven down DRAM prices and sent most players deep into the red.

The price of benchmark DRAM chips has fallen 53 percent to US$0.81 since the beginning of the year, DRAMeXchange figures showed.

Separately, Powerchip said it was not seeking financial support from the government as it believed it would get through the downturn on its own, pinning its hopes on a industry-wide cut in production.

By the end of January, overall output is expected to fall by 25 percent to 30 percent after major DRAM makers lower factory usage, Huang said.

That would help bring in more cash for DRAM makers after prices bounce back to around US$1.7 or US$1.8 per unit as supply is reduced, Huang said.
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