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Trade group remains dubious of Taiwan DRAM plans

Posted: 19 Aug 2009 ?? ?Print Version ?Bookmark and Share

Keywords:US Taiwan trade group? DRAM? Taiwan DRAM bailout?

Despite the launch of Taiwan Memory Co. (TMC) and its subsequent investment in Japan's Elpida Memory, broader issues of consolidation and high levels of debt among Taiwan's DRAM players remain unresolved.

This is according to a recent report on the Taiwan semiconductor market, in which the U.S.-Taiwan Business Council calls on the Taiwan government to "move forward with a fair and equitable consolidation of the DRAM industry."

The report, "Taiwan Semiconductor ReportQ2, 2009," cites rumors that John Hsuan, the United Microelectronics Corp. (UMC) executive who was picked to head TMC, wants out of the venture. The report notes that the mandate for TMC has changed multiple times since it was first proposed and said Hsuan has avoided public comment on the rumors.

The government of Taiwan proposed in March to help bail out the island's DRAM industry, including the consolidation of DRAM makers into TMC. But the DRAM makers balked, and the government yielded to public criticism by changing the plan to make TMC an R&D firm mandated to turn Taiwan into a technological powerhouse in the DRAM industry, according to the U.S.-Taiwan Business Council report.

Even if this plan succeeds, Taiwan's DRAM makers would need a massive cash injection to upgrade their production lines to the latest technology before they can move forward, according to the report.

DRAM spot prices have risen over the past several months, but Taiwan DRAM vendors still have considerable mothballed production capacity that can be brought online and flood the market with chips if the firms are looking to increase short-term revenue, the group warned. Such a scenario would negatively impact the improving DRAM revenue picture.

Oversupply fears
Market research firm Gartner Inc. reported earlier this week that DRAM spot pricing was again up across the board last week, with average spot pricing across all densities and technologies increasing by 10 percent to $1.55. The biggest gains last week came not from emerging DDR3 technology but on DDR2 devices, which had double-digit percentage gains, according to the firm. Gartner warned that, with DDR2 pricing up 30 percent in the past few weeks, Taiwan vendors might be tempted to restart idled capacity.

Taiwan's troubled DRAM vendors have been scrambling for survival for months amidst a lingering memory downturn and a global recession. The island's government has stepped in to help the industry, including the creation of TMC. Meanwhile, Intel Corp. is reportedly mulling plans to invest in Inotera and ProMOS Technologies has severed its alliance with South Korea's Hynix Semiconductor Inc.

"Overcapacity looms over the nascent attempts to place Taiwan's DRAM industry on a more solid footing," said Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council, in a statement. "The domestic DRAM industry still requires consolidation around several players, ideally with their own global technology partners."

Rupert Hammond-Chambers repeated his group's warning that the creation of TMC simply added a seventh Taiwan DRAM vendor to an already crowded field. "It is not clear that any of the remaining players will willingly fold themselves into TMC as the government previously outlined," he said.

- Dylan McGrath
EE Times

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