ProMOS plans to sign R&D pact with Taiwan Memory

ProMOS Technologies may soon sign a deal to work on DRAM manufacturing technology with Taiwan Memory Company (TMC), the government-sponsored entity designed to take over debt-ridden DRAM makers in Taiwan. "We have reached a mutual understanding to start working with them," ProMOS vice president Ben Tseng said by phone on Monday. ProMOS has been manufacturing DRAM in Taiwan since 1996 and was the first company on the island to run a factory making chips on 12-inch wafers. The cooperation will begin with research and development work, but Tseng says ProMOS is hopeful it will turn into a manufacturing partnership as well. "It only makes sense," he said. "Once the R&D is done, then you do the manufacturing on the same site." TMC could not immediately be reached for comment.

TMC is a brand-new company designed by the government to bail out its heavily indebted DRAM makers. DRAM prices have rallied over the past several months, recently hitting profitable levels for most DRAM companies. Taiwan's five big DRAM makers ran into financial trouble amid the global recession and after suffering two years of losses caused by a massive chip glut. Before ProMOS and TMC can enter an agreement, TMC needs to finalize its funding plans. The company slashed production as the DRAM downturn bit, and is currently producing chips on fewer than half of its production lines. The Taiwan government has discussed investing NT$30 billion (US$925.9 million) in the new company, while TMC chairman John Hsuan has said private investors will also be invited to put money into TMC. ProMOS needs money to move forward.

It has used up most of its cash paying off debt. The coming launch of Microsoft's new operating system, Windows 7, has stirred demand for new PCs and they need DRAM chips inside. New funds from TMC would help ProMOS reopen closed factories just as DRAM prices are hitting profitable levels. Tseng said his company must also soon decide whether to invite workers back full time after keeping some on unpaid leave for months due to the global recession. Once the company ends the unpaid leave, however, it will have to start paying full salaries again. Under Taiwanese labor law, companies putting workers on unpaid leave must do so for fixed periods of months at a time, but ProMOS may need them back quickly to ramp up factory lines if it signs a deal with TMC soon.