TAIPEI, Jan 21 (Reuters) - Taiwan's DRAM industry is in dire need of restructuring, as the global memory chip sector faces its worst downturn, which has dragged on for more than a year and caused all major players to haemorrhage cash.
Worried the collapse of one or more players could have a ripple effect, the government has been working with the top three local DRAM makers, Powerchip, Nanya Tech and ProMOS, and their foreign partners, Japan's Elpida and U.S. firm Micron Technology, to craft a long-term plan to keep the sector viable.
The following are some of the outcomes considered most likely:
ELPIDA-POWERCHIP TIE UP
Elpida and Powerchip have previously confirmed they would consider a number of tie-ups, including a merger. The two already have a close relationship through their chip-making joint venture, Rexchip, and Powerchip gets most of its advanced technology from Elpida under licensing agreements. Reports of a Powerchip-ProMOS tie-up have also surfaced periodically, which could bring ProMOS into any Elpida-Powerchip combination.
A Nanya-Micron tie-up is likely for similar reasons. The two companies are already partners in a joint venture, Inotera, and Nanya also licenses advanced chipmaking technology from Micron. An Inotera executive confirmed this week that it, Nanya and Micron were working on a joint reorganisation plan, but declined to comment further on the nature of the tie-up.
ONE BIG HAPPY FAMILY
One possibility that many analysts consider less likely would be a merger of all three Taiwan firms with either Elpida, Micron or both.
Taiwan media reported on Wednesday that the government would prefer such a merger, which could create a giant capable of competing with the top two global players, Samsung and Hynix Semiconductor, both of South Korea. But analysts say such a massive tie-up could run into problems due to technology and contractual issues.
PROMOS FACES CASH CRUNCH
The situation for ProMOS is believed to be the most serious of the top three makers, leading some to say it is the most likely of the trio to face potential liquididation if it cannot resolve its problems soon.
The Taiwan government has said it hopes that none of the top players will go out of business, but the gravity of ProMOS' situation is underscored by its recent sales of chip-making machinery to raise cash.
More importantly, ProMOS could face a major cash crunch when $330 million worth of convertible bonds it issued come due in mid-February. (Reporting by Doug Young; Editing by Lincoln Feast)