Elpida and Taiwanese DRAM makers in tie-up talks

Hit by an industry-wide downturn that means they lose money on every chip they make, three Asian DRAM (dynamic RAM) makers have begun talks on bringing their companies together under a single group.

Japan's Elpida Memory has recently begun talks with Taiwan's Powerchip Semiconductor and ProMOS Technologies over bringing the companies together, a spokeswoman for Elpida said late Friday. The companies are not looking at a complete merger but possibly coming together under a single group company, she said, declining to provide further details.

Since 2006, Elpida has run a DRAM manufacturing joint venture with Powerchip called Rexchip Electronics. Earlier in December it said it would raise its stake in Rexchip from 48.8 percent to 52.2 percent to provide Powerchip with some much-needed cash. At the time they said the deal would be done by the end of March 2009.

Now, though, the two companies appear to have bigger plans.

DRAM is used as the main memory inside personal computers and a surplus in production has put pressure on all makers of the product.

The market is highly cyclical and manufacturers, which are used to ups and downs, typically run through the downturns and make money when demand jumps back and prices increase. However, with the global economy worsening, there's no sign of an increase in demand to pull prices out of their current trough. To make matters worse the credit crunch has made it much more difficult for chip makers to borrow money.

Earlier this month the German state of Saxony came to the rescue of DRAM-maker Qimonda with plans to offer a €150 million (US$203 million) loan on the condition that the company's majority stock holder, Infineon Technologies, matches the investment. The Taiwanese government also said it would help the country's five major chip makers.

The IDG News Service is a Network World affiliate.