Vice Minister of Economic Affairs Hwang Jung-chiou (黃重球) said yesterday the government would allocate a maximum of NT$30 billion (US$915 million) to support one or two local dynamic random access memory (DRAM) companies to compete with South Korean firms.
Hwang’s remark came after the Industrial Development Bureau (IDB) announced earlier yesterday new and existing players may now apply for capital investment from the National Development Fund if they meet four major criteria set by the IDB.
“The Ministry of Economic Affair’s [MOEA] mission has always been consistent ... which is to help the local DRAM industry survive this difficult time and transform the sector from a production-intensive business model highly dependent on order flow, to one driven by innovation,” Hwang told a press briefing. “We do not call this a rescue plan, but rather a rebuilding project.”
Earlier this year, the government said it would establish a new firm, the Taiwan Memory Co (TMC, 台灣記憶體公司), by pumping in NT$10 billion in public funds to save the nation’s DRAM sector. The plan has come under fire and fueled skepticism about whether TMC’s plan to develop its own technologies in collaboration with Japan’s Elpida Memory Inc would work.
Hwang yesterday dismissed speculation that TMC’s inability to gain traction from local chipmakers was a failure. He also declined to comment on whether TMC would be one of the chosen parties.
Instead, he said that countries like Japan and the US have only one major DRAM company each, while South Korea has two big ones. Taiwan, in contrast, has six significant players.
“If the government allows the domestic DRAM industry to falter, a mass engineering brain drain will ensue, banks will have massively uncollected debt, investors will suffer greatly and a leading national industry will disappear overnight,” Hwang said.
“The formation of Elpida in Japan is unique because the Japanese government mandated a consolidation of several DRAM companies into Elpida. But such a scenario is unlikely to happen in Taiwan where there are too many divergent voices and production standards vary from company to company,” he said.
The IDB’s four main requirements for the application include the ability to efficiently obtain overseas intellectual property and technology usage rights, as well as fair and balanced research and development records from both domestic firms and overseas partners.
It also demands that the international collaboration must provide adequate training of local engineering talent, and lastly, the re-organization plan must aim to improve existing company structure and incorporate possible merger and acquisition possibilities.
“The draft measures seem to be in favor of TMC as it is planning to develop technologies with Elpida and is mulling acquiring capacities from shaky DRAM companies,” Liu Szu-liang (劉思良), a DRAM industry analyst with Yuanta Securities and Investment Consulting (元大投顧), said by telephone. “But, it is still good that local DRAM makers can get fresh cash to help them ride out this downturn.”
The application submission process for state funds started yesterday and will last for three months.
“Afterward, there will be another three-month inspection period to examine all the documents to make sure they meet the criteria set by the IDB,” Hwang said.
“So far, we have heard many comments from employees at Formosa Plastics Group [FPG, 台塑集團], but we are still waiting for their actual proposal,” he said.
Earlier this month, Nanya Technology Corp (南亞科技) and Inotera Memories Inc (華亞科技), both under FPG, were reportedly seeking government funds for research and development purposes.
Powerchip Semiconductor Corp (力晶半導體), the nation’s top computer memory chipmaker, yesterday said it was considering filing a proposal to vie for a possible cash injection from the government, as company spokesman Eric Tang (譚仲民) said the IDB’s four main requirements looked achievable.
Nanya Technology, the nation’s No. 2 DRAM supplier, which has called for fair government support for players beside TMC, said it would try for a new capital infusion.
“We have been doing what the government wants. Now we have clearer ideas about how to meet the government’s requirements,” Nanya Technology spokesman Pai Pei-lin (白培霖) said by telephone. “We will vie for [government funding].”
Shifting away from Germany’s Qimonda AG, Nanya Technology is now collaborating with Micron Technology Inc in developing 50-nanometer and more advanced technologies and will own the intellectual patents jointly with the US memory company.
To match government demand, Pai said “we will not rule out mergers and acquisitions.”
DRAM company representatives were scheduled to meet IDB officials today to obtain more information.
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