Taiwan Outlines DRAM Industry Bailout

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In a move to avert a meltdown among one its five major DRAM makers, Taiwan on Tuesday announced plans to help them both technologically and financially.

The government plans to work with DRAM makers to build more homegrown technology, boost their ability to repay loans ,and encourage companies to combine in order to become more competitive, the island's economics ministry said in a statement.

The move came on the same day the state of Saxony announced a bailout for Germany's only DRAM maker, Qimonda. The state government will loan Qimonda €150 million (US$203 million) on the condition that the company's majority stock holder, Infineon Technologies, matches the investment.

DRAM makers worldwide have been suffering from a chip glut for over a year, and the global financial meltdown has added to their woes, pushing some to the brink of bankruptcy.

Most of Taiwan's DRAM makers have been posting losses since the second quarter of last year due to record low chip prices caused by the glut. The global financial crisis has added to those problems by making loans harder to come by, and some companies have turned to the government for support.

Taiwan believes its five DRAM makers are an important part of its PC supply chain and directly accounts for thousands of jobs beyond the five companies, according to the statement. The chips they produce are tested and packaged on the island, and many are sold to Taiwanese module makers who put them on PC boards before they're sent to China and elsewhere to be placed inside PCs and notebook computers.

In the near term, the government plans to work with banks to delay repayment on loans made so companies could build their massive factories.

Taiwan is home to five DRAM makers that operate 11 state of the art 300-millimeter chip factories, each costing between US$2.5 billion and US$3 billion each, the statement says. Current debt among the companies, which include ProMOS Technologies and Powerchip Semiconductor, stands at NT$431.3 billion (US$13.10 billion), the government said.

Officials have said in the past that the failure some DRAM makers could hurt Taiwan's financial system due to the size of their loans with banks on the island.

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