Taiwan Asks Powerchip to Resubmit Bailout Proposal

The Taiwan government rejected an application for aid by its largest DRAM chip maker on Tuesday, saying the company needed to submit a new proposal more in line with the government's expectations.

Powerchip Semiconductor and subsidiary Rexchip Electronics applied for government relief on Dec. 26, asking for undisclosed help to make it through one of the worst downturns ever for the DRAM industry.

In a statement, the government urged the chip makers to quickly resubmit a plan more in line with the government's goal of enhancing the Taiwanese DRAM industry's technological prowess and competitiveness.

Taiwan offered aid to its DRAM makers earlier this month in part due to the large amount of loans they hold that, if the chip makers went bust or defaulted, could ultimately harm its banking sector.

The government did not say specifically why it had rejected Powerchip's proposal. It said agencies are already working with other DRAM makers and added that any DRAM company accepting more than NT$1 billion (US$30.5 million) in aid would have to report its viability plan to the island's legislature.

The rejection of Powerchip's proposal comes just several days after Japanese DRAM maker Elpida Memory revealed recent talks with Powerchip and another Taiwanese DRAM maker, ProMOS Technologies, on a plan to bring the three companies together in some form of group structure.

Powerchip and Elpida already work closely in the DRAM business through their joint venture company, Rexchip.

The DRAM industry has been suffering through a chip glut that has lasted more than a year and sent chip prices down well below the cost of production. The global financial crisis has added to their problems by making access to new loans harder to attain, leading to governments in a few countries, including Germany, to step in and offer aid.

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