Taiwan's top three DRAM makers, Powerchip, Nanya Technology and ProMOS, have all been meeting with government officials to discuss possible mergers or other measures aimed at reducing a chronic supply glut in the market for DRAM chips, which mostly power personal computers.

Executives from Japan's Elpida and U.S. firm Micron Technology, partners for Powerchip and Nanya, respectively, were also planning trips or had come recently for talks as the industry grapples with its worst ever downturn.

Makers of DRAM chips are battling a long supply glut and now a slump in demand amid a spreading global recession that is causing them to lose money on each chip they make.

Shares of Powerchip, ProMOS and Elpida all jumped by more than 6 percent on Wednesday after a string of media reports and company statements that indicated efforts were heating up to restructure the industry before the week-long Lunar holidays start next week.

Japan's Elpida Memory said it was in talks with Taiwanese DRAM makers including Powerchip, ProMOS Technologies and Rexchip, its chip joint venture with Powerchip, on a possible merger as well as some other options.

"We are discussing several possibilities, but nothing has been decided," Elpida spokesman Hideki Saito said.

Elpida and Powerchip have previously said they are considering a number of tie-ups, including a merger.

Single company?

Meanwhile, Taiwan's Chinese-language Economic Daily, citing an executive at No. 2 DRAM maker Nanya Technology, said the Taiwan government would like to merge all of the island's struggling DRAM makers into a single company.

Analysts agreed such a combination would likely be better placed to compete with the top two global players, Samsung Electronics and Hynix Semiconductor but remained sceptical such a vision could be achieved.

"Ideally that is good for Taiwan if we can see a super party emerge but, for now, I would say it is just a dream," said Primasia semiconductor analyst Kenneth Lee.

Without a single, powerful, local company to drive consolidation, Taiwan's government has been trying to engineer mergers as a severe cash crunch threatens the island's DRAM chip makers.

Taiwan's government has asked ProMOS to resubmit a reorganisation plan jointly filed with Elpida, apparently seeking assurances of support for the domestic sector.

Local media reported Micron CEO Steve Appleton is coming to Taiwan again as talk heats up about tie-ups between Micron and its local technology partner, Nanya, as well as other Taiwan DRAM makers.

An official at Micron's Taipei office said Appleton was not in Taipei on Wednesday but his schedule was not available.

Powerchip spokesman Eric Tang said his company was not negotiating with Micron.

Elpida's chairman recently came to Taiwan to talk to ProMOS, but a spokesman could not immediately comment on whether company executives were in Taiwan on Wednesday or planning to come.

BNP Paribas analyst Peter Yu said a company created in any kind of mega-merger could face difficulties.

"When you combine semiconductor makers, you can not simply add up market share. There will be a painful integration process that will be costly and time consuming, with lots of trials and errors," he said.

"Execution-wise, the merged company will be at a disadvantage compared with standalone companies like Samsung and Hynix which are likely to benefit more when the market recovers as they will not have gone through a merger process."

By: DocMemory
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