Taiwan restructures D-Ram chip industry

Taiwan on Thursday unveiled a long-awaited plan to restructure the country’s struggling dynamic random-access memory (D-Ram) chip industry, announcing a government-backed company that will buy key technology from foreign competitors and consolidate the domestic market.

The initiative could transform the global D-Ram chip industry, which had sales of $23.6bn last year, by allying Taiwan’s large production base with technology from Japan or the US.

The alliance, which analysts estimate could claim as much as 35 per cent of global market share, would pose a threat to South Korea’s Samsung, the world’s biggest D-Ram maker.

The new Taiwan Memory Company will seek to invest in either Elpida of Japan or Micron of the US within three months, in exchange for D-Ram patents and technologies, said John Hsuan, chairman of TMC.

Elpida and Micron, respectively the world’s third- and fourth-largest D-Ram makers, have approached the Taiwan government for aid as falling demand for the chips, mainly used in personal computers, caused heavy losses across the industry. Elpida in Taiwan declined to comment on Thursday and could not be reached in Tokyo.

“Micron will continue to work with the Taiwan government on Micron’s proposal to assist in the consolidation of the industry. Micron believes it can ensure and provide the best technology path for the Taiwan D-Ram industry’s success,” Micron said.

“There really is no clear plan yet by the government as they have yet to decide between Elpida or Micron,” said Daniel Amir, analyst at Lazard Capital Markets.

Memory chipmakers have slashed capacity, and some, such as Germany’s Qimonda, have fallen into bankruptcy. But prices for D-Ram chips have yet to recover significantly and many D-Ram producers are still losing money.

Yiin Chii-Ming, economics minister, said the government would seek out private investors to capitalise TMC, adding the government’s stake in the company would be less than 50 per cent. He declined to say how much the government would invest. “This is not to save individual companies. This is a project to transform the entire industry,” he said.

He declined to say whether the government would take stakes in existing companies but said because of the situation’s complexity, “we could not proceed with the traditional way of industry consolidation. We had to think outside the box to create this new platform for consolidation.”

Frank Wang, an analyst for Morgan Stanley, said the announcement helped set a direction for consolidation, even if it lacked details.

“Of course the market would prefer that everything is laid out clearly, but this is a complicated process,” he said.

Additional reporting by Chris Nuttall in San Francisco