Shares in Japan's Elpida Memory Inc. (6665.TO) and Taiwan's major dynamic random access memory chip makers fell Thursday after a government official said Taiwan may buy factories from chip makers rather than acquire the companies outright.

The comments, made late Wednesday by Minister of Economic Affairs Chii-Ming Yiin, dashed hopes for a government-led consolidation of Taiwan DRAM companies and their foreign partners, Elpida Memory Inc. and Micron Technology Inc. (MU).

Just a week after the government unveiled a plan to consolidate the companies under a new company called Taiwan Memory Co. and seek to have the new entity merge or partner with Elpida or Micron, Yiin told reporters Wednesday the new company may only acquire DRAM plants from chip makers in exchange for the DRAM companies getting a stake in the new entity.

"The government may have realized it can't possibly rescue all the companies so it looks like it is dropping its original plan," said Sophie Chuang, an analyst at SinoPac Securities. "This means the DRAM makers are on their own again with the same problems and should forget about any help from the government."

Japan's sole DRAM maker, Elpida, led the declines, with its shares plummeting 19% to Y422 in Tokyo, its lowest level since mid-December.

The change in the government's strategy "would give Elpida no cash," said Yuichi Ishida, an analyst at Mizuho Investors Securities.

Ishida said cash-strapped Elpida may now have to find other ways to raise cash.

In Taipei, Powerchip Semiconductor Corp. (5346.OT) fell 3% to NT$3.23, ProMOS Technologies Inc. (5387.OT) fell 6.7% to NT$0.97 and Inotera Memories Inc. (3474.TW) declined 1.4% to NT$10.75.

"This is very different from what we had expected earlier," said ProMOS spokesman Ben Tseng.

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.

"The new guidelines suggest DRAM companies with severe liquidity issues will see heightened risk to their business continuity," said Citigroup analyst Timothy Lam.

Following the government's apparent change of strategy, Powerchip spokesman Eric Tang said his company is now in talks on a three-way merger with Elpida and their joint-venture Rexchip Electronics Corp.

Two weeks ago, Elpida President Yukio Sakamoto had said his company was considering a capital alliance with a to-be-formed Taiwan government entity that would combine the operations of four Taiwanese DRAM makers - Powerchip, Rexchip, ProMOS and Winbond Electronics Corp. (2344.TW). Sakamoto also said at the time Elpida was in talks with the Taiwan government to offer access to its DRAM technology in exchange for financial assistance.

"We hope the consolidation of our capacity will create more efficiency," Tang said. "For now, it's easier to carry out a merger plan on our own."

Officials at Powerchip, ProMOS and Winbond said the government hasn't approached them about the new plan to possibly purchase chip facilities.

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

(Yuzo Yamaguchi in Tokyo contributed to this story.)