Taiwan DRAM consolidation effort losing steam

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The government led initiative to reform Taiwan’s DRAM industry through the formation of Taiwan Memory Company (TMC) appears to be losing steam as other priorities have surfaced, an insider familiar with the situation and analysts following the situation told dealReporter.

There has been little progress since TMC was first created in March and the initiative may now even be on the back-burner following a recent cabinet reshuffle as the immediate focus for the government is on rebuilding areas of the island that were ravaged by a typhoon.

One major concern that has surrounded TMC from the start is that of capital, and it appears that there will be even less support from the government as funds from their budget now needs to be allocated to rebuilding efforts, they said.

“The typhoon has caused a lot of damage…so hands may be tied with how much they can give to the DRAM consolidation,” the insider said.

The rumored investment amount from the government has shrunk considerably as the months have passed. “Originally, it was more than TWD 30bn (USD 933m). But right now its like TWD 3bn, this is the latest number that has been whispered recently,” one analyst said. “TWD 3bn is nothing…saving the DRAM sector is not a priority any more for the government,” he said.

Another analyst believes the government has also taken the foot off the pedal on consolidation in the DRAM industry as the outlook for the sector has recovered considerably given a recovery in chip prices. “The best timing for (DRAM) consolidation is over,” he opined.

The analyst added that apart from the rebuilding efforts on the island following the typhoon, the high-profile debt restructuring needs of Taiwan High Speed Rail Corp – a train operator linking Taiwan’s two largest cities - has also taken precedence over consolidation of the DRAM industry.

Officials at Taiwan’s Ministry of Economic Affairs (MOEA) denied that the government has placed DRAM consolidation plans on the back burner. “The process is still on-going,” the first official said. He, however, admitted that the consolidation will not be completed “so soon.” A second official added the government is currently evaluating the proposal that TMC submitted in July and has not made a decision on whether to accept or revise the proposal. He declined to reveal details of the proposal and could not provide a time line on when the government would decide.

As reported, besides the proposed technology partnership with Japan’s Elpida Memory, TMC also plans to tie up with local chip makers including ProMOS Technologies.

A ProMOS spokesperson confirmed that the company has been in talks with TMC. “They have talked to us and we both have expressed the willingness and the intention to cooperate on technology R&D,” he said. “We will provide the Tai Chung fab as a platform for development. Then it really makes sense that once we have the technology we will provide the foundry service for them if we have the capacity,” he added.

However, the spokesperson stressed that any co-operation was subject to the government’s approval of TMC’s business proposal. He was unable to provide a timeline saying “TMC is still in the incubation stage”.

A third analyst said the government may make a decision on TMC’s proposal by the end of the year based on what has been reported till date. Even then, it will take “a very long time” before anything is produced by TMC, he said. If the government makes a decision at the end of the year, TMC will then start working with Elpida on R&D and it could be another year before the company produces a new product, he explained.

“Time is running against the government (if they still want to consolidate the DRAM industry),” the first analyst said. “The longer they wait, there’s a higher chance that they end up with nothing. TMC, it may not happen.”

The Taiwan government first announced in March the formation of TMC to spearhead consolidation in the local DRAM industry as companies struggled to stay afloat amid the sector’s worst downturn in recent years. In July, it opened up the invitation to local chip makers to send in proposals within three months for consolidation. As reported, Powerchip Semiconductor and Nanya Technology had also considered submitting proposals.

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