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Taiwanese banks warm to DRAM makers Powerchip, Winbond

Dan Nystedt | July 16, 2009
New loan repayment schedules and fresh bank loans will help more Taiwanese DRAM makers survive

TAIPEI, 16 JULY 2009 - Taiwanese DRAM makers Powerchip Semiconductor and Winbond Electronics both gained concessions from banks to ease their fiscal pain on Wednesday, a further sign they could survive the global DRAM downturn.

The deals could also delay consolidation among Taiwan's DRAM makers. The government moved earlier this year to establish a new chip maker, Taiwan Memory Company (TMC) to speed consolidation among the island's cash strapped chip makers, but the plan appears to be in limbo as officials decide on the best way to move forward.

TMC was originally supposed to consolidate suffering DRAM makers into one big company. Now, officials say TMC will focus on developing new DRAM technology for Taiwanese memory chip makers, and will not bail companies out.

The revised plan addresses the long term intellectual property problem in Taiwan's DRAM industry, but it does not settle fiscal problems for chip makers nor the banks that have loaned them billions of dollars. Government officials have said they will wait until TMC formally submits its business plan to them before commenting further on Taiwan's DRAM industry.

Banks and chip makers on the island appear to be moving forward on their own.

On Wednesday, a group of Taiwanese banks agreed to extend the repayment deadline for Powerchip, formerly Taiwan's biggest DRAM maker, on loans reported to be worth NT$63 billion (US$1.91 billion). The new six-month grace period ends December 30, 2009, Powerchip said in a statement to the Taiwan Stock Exchange. The company only has to make interest payments on the loans until then.

This is the second loan extension banks have granted the chip maker. The previous one was brokered by government officials to help ease problems for DRAM makers early this year. The due date on that deal passed on June 30.

The new loan extension will help shore up Powerchip's financial situation. The debt-laden company last month convinced holders of US$158.05 million in convertible bonds to settle for company stock shares instead of cash for a portion of the repayment. A company executive said another corporate bond, NT$2 billion, said to have been due this month, will also not pose a problem for Powerchip.

"That doesn't actually come due until next year," said Eric Tang, a vice president at Powerchip.

Powerchip was also boosted by a US$125 million loan from Kingston Technology, a DRAM module maker and chip distributor, earlier this month. The cash will go a long way in easing its financial burden. Analysts had estimated the company's cash position had fallen to just NT$500 million after the settlement on the US$158.05 million convertible bond.

Winbond Electronics, the smallest of Taiwan's big five DRAM makers, said it signed an NT$3.7 billion syndicated loan agreement on Wednesday with a group of Taiwanese banks. The company will use the funds for loan repayments and for working capital, it said in a statement.


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