By V. Phani Kumar
Shares of Taiwanese semiconductor companies dropped sharply
Friday, as the government's proposal to consolidate a domestic
industry beset with struggling memory chipmakers failed to ease
investor concern over mounting losses and weak product prices.
Shares of Powerchip Semiconductor Corp. (PWSMF) fell 4.4%,
Inotera Memories Inc. (INMMY) slumped 5.5%, Nanya Technology Corp.
(NNYAF) shed 5.6% and ProMos Technologies (PTIQF) lost 2.4% in
Taipei afternoon trading, while the benchmark Taiex gave up 0.4% to
4,617.17, after struggling to find direction in early trading.
Elsewhere in the region, China's Shanghai Composite dropped 1.4%
to 2,190.59, Japan's Nikkei 225 Average lost 2.7% to 7,232.09 and
Hong Kong's Hang Seng Index gave up 1.1% to 12,074. South Korea's
Kospi fell 0.4% and Australia's S&P/ASX 200 slid 0.6%.
The tumble in the chipmakers' shares came a day after the
government said it will set up a state-funded company that will
negotiate with six local chipmakers on ways to go about the
consolidation.
Taiwan's Minister for Economic Affairs Chii-Ming Yiin said the
government will own less than 50% of the new company -- to be
christened Taiwan Memory Co. -- which will seek an alliance or
merger with either Japan's Elpida Memory Inc. or Idaho-based Micron
Technology (MU), according to reports.
The minister reportedly said John Hsuan, a former vice chairman
of United Microelectronics Corp. (UMC), will lead the government's
efforts to establish the new company.
A consolidated company with a tie-up with Elpida or Micron could
improve the Taiwanese memory chip-making industry's chances of
competing more effectively with South Korean giants such as Samsung
Electronics and Hynix Semiconductor Co.
In Seoul trading, meanwhile, shares of Hynix Semiconductor Inc.
(HXSCF) rose 0.6%, while Samsung Electronics Co. (SSNLF) was little
changed. Elpida (6665.TO) shares plunged 9.6% in Tokyo.
But it's seen as a negative development for existing
shareholders of the Taiwanese companies.
In a note to clients, UBS analyst Robert Lea wrote the
government bailout might involve the formation of a shell company
into which the production assets of the chipmakers will be
transferred.
"We expect the government to inject new capital into the shell
company. Debt/bond holders in the existing companies may receive
equity in the new shell company. We believe existing equity
shareholders would be [at] risk of getting nothing/very small
equity stake," Lea added.
Sophie Chuang, an analyst at Sinopac Securities Corp. in Taipei,
said that the government proposal was "basically neutral" to the
industry in the absence of further information from Elpida or
Micron that they are willing to form an alliance with the Taiwanese
companies, and the terms of such an alliance.
She expects prices of memory chips to decline further after a
brief rebound in recent weeks. "There could be some price
correction, but the fall probably won't be as bad as in the fourth
quarter of last year."
Prices of certain types of DRAM chips are estimated to have
fallen more than 60% over the past 12 months.