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The US-Taiwan Business Council has published its "Semiconductor Quarterly Report - Annual Review, 2008," that puts forth the issues facing the Taiwanese DRAM manufacturing industry. As the Taiwan government looks at several available bailout options, it seems the rescue plan is not as easy as just dipping into the US$3 billion cookie jar the government has set aside for the industry.

The government has stressed the criteria involved in qualifying a situation for eligibility for access to the fund, and that investment at the moment depends on the likelihood of it resulting in development of Taiwan-owned intellectual property and increasing competitiveness.

"Taipei appears to want to take the simplest approach and press domestic players into consolidation, but that is problematic due to contracts between Taiwan DRAM makers and their foreign partners," said Rupert Hammond-Chambers, president of the Council. He continued, "The bolder approach would be to look at assets held by recently insolvent Qimonda AG, and to engage Taiwan's DRAM companies in a dialogue evaluating purchasing them. The proprietary technology in Qimonda's 20,000 patents, including the Buried Wordline manufacturing process, could offer Taipei the wholly owned IP base it seeks."

Attention has so far focused on Japan’s Elpida Memory potentially being at the heart of merger activity on the Island as it has long-term partnerships with Taiwan’s largest DRAM manufacturer, Powerchip Semiconductor Corp (PSC).

Rumours have been rife in the local media that Elpida could also tap into Taiwan Government funds if a merger could be agreed, though initial Government support is rumoured to be focused on mergers from domestic producers, while seeking long-term IP alliances of some kind.

U.S.-based Micron Technology has already moved to secure partnerships with Nanya and Inotera and has publically said it would be active in any consolidation efforts should they arise. Not surprisingly, rumours have started to circulate that Micron is considering acquiring Qimonda. 

The Council’s report advises that the future of the semiconductor industry as a whole, and the DRAM industry in particular, depends on the daring of the Taiwanese government. A promising solution to the problem, according to the Council, is if the government agrees to underwrite a major technological manufacturing change and allow movement of dormant 200mm facilities into China. The Council also wants the Government to support Taiwan companies on acquisitions.

Additional reporting by Mark Osborne.

Further information on the US-Taiwan Business Council is available here.