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Ministry rejects ProMos proposal

The Ministry of Economic Affairs yesterday turned down an industry consolidation proposal filed by the nation’s third-largest computer memory chipmaker, ProMOS Technologies Inc (茂德科技), and Tokyo-based Elpida Memory Inc, citing concerns that a joint venture between the two had not endorsed the plan.

ProMOS and Elpida filed the proposal on Wednesday with the goal of seeking governmental bailout funds ahead of the maturity date next month for ProMOS’ corporate bonds, which have a market value of US$330 million.

Last month, the government also rejected a bailout plan submitted by the nation’s top computer memory chipmaker, Powerchip Semiconductor Corp (力晶半導體), and Elpida.

The ministry said in a statement yesterday that it suspected the consolidation plan proposed by ProMOS and Elpida, which is Japan’s No. 1 memory chipmaker, would ultimately fail.

ProMOS and Elpida hoped to use Rexchip Electronics Inc (瑞晶電子) — a joint venture between Elpida and Powerchip Semiconductor Corp — as a platform for consolidation, but Rexchip chairman Frank Huang (黃崇仁) did not support the plan, the statement said.

The ministry said it therefore feared the three companies might not reach a consensus on consolidation, the statement said.

Beleaguered ProMOS said it could review the consolidation and bailout proposal with Elpida and try again.

“We may revise the proposal after further discussions with Elpida and then submit a revised version,” ProMOS spokesman Ben Tseng (曾邦助) said on the telephone after learning of the government’s decision.

“To remedy [the situation], we have to sort out what the proposal lacks. We will continue to communicate with the government,” Tseng said.

Yuanta Securities (元大證券) DRAM analyst Liu Szu-liang (劉思良) was not surprised by the proposal’s rejection.

“The proposal by ProMOS is doomed to fail because the government wants to push for a merger between either ProMOS and Powerchip or ProMOS and Nanya Technology Corp [南亞科技],” Liu said.

A proposal by Nanya, the nation’s No. 2 DRAM maker, may be more appealing to the government, Liu said.

Nanya Technology may seek to merge with ProMOS and transform it into a company making another kind of memory chip, NAND, using more advanced technology from Nanya’s US partner, Micron Technology Inc, Liu said, citing unnamed sources.

Nanya Technology is still in talks with Micron to draw up a bailout plan.

The ministry said that the proposals by Powerchip and Elpida and by ProMOS and Elpida failed to incorporate the government’s goals to build a sturdy and lasting DRAM industry in Taiwan, develop technologies locally and maximize the government’s investment.

The government will not accept any DRAM consolidation plan that fails to align memory chipmakers’ goals with those of the government, the ministry said.

Ministry officials met yesterday with ProMOS, Rexchip and Powerchip representatives and requested that they submit revised plans as soon as possible.

The ministry said that other, unnamed DRAM companies were also in talks with the government over their own proposals to invigorate the ailing industry.

It called for patience and encouraged all DRAM companies to help find a solution at a moment of crisis.
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