Taiwan memory-chip maker Powerchip Semiconductor Corp. (5346.OT) is in talks with Japan's Elpida Memory Inc. (6665.TO) and their joint-venture Rexchip Electronics Corp. on a three-way merger, Powerchip spokesman Eric Tang said Thursday.

"We hope to make a decision on the merger as soon as possible," Tang said.

The merger talks started after the Taiwan government said Wednesday it may only buy some dynamic-random-access-memory chip plants instead of acquiring local DRAM makers, dashing the companies' hopes for a government bailout.

Taiwan's DRAM makers have been suffering from hefty losses following the plunge in chip prices from the second quarter of 2007. They had expected the government to step in after it said in mid-December it may invest in companies to facilitate an industry consolidation.

-By Jessie Ho, Dow Jones Newswires; 88622 502-2557; jessie.ho@dowjones.com