TAIPEI: The economic affairs authorities have suspended the processing of applications by DRAM companies for financial assistance to support their restructuring plans. The rollback stems from opposition from lawmakers to the funding, Hwang Jung-chiou, deputy chief of the economic affairs authorities said yesterday.

Among companies affected is the government-backed Taiwan Innovation Memory Co (TIMC), Hwang said.

The economic affairs authorities also put on hold applications by Powerchip Semiconductor and Kaohsiung-based Taiwan Creative Lab, he said.

The decision followed the adoption of a resolution by the Legislative Yuan's Economics Committee Wednesday to ask the authorities to withdraw its proposed financial support for TIMC, which was established in August as part of the government's effort to restructure Taiwan's dynamic random access memory, or DRAM, industry.

The resolution stated that the commitment to fund the company should be withdrawn "to prevent a waste of government funds."

TIMC, which was to incorporate technology from Japan-based Elpida Memory, has requested NT$4.9 billion in government investment.

Hwang said the economic affairs authorities respect the lawmakers' resolution, which will become binding after it clears the second and third readings on the legislative floor.

However, he noted, the cancellation of the restructuring plan will lead to the invalidation of the technology transfer agreement between TIMC and Elpida, which he said "would be a pity."

Meanwhile, TIMC Chairman John Hsuan said he respects the legislature's decision and that if the government decides to give up its dominant role in restructuring the DRAM sector, all pre-operation preparations by the company will be discontinued.

The project was originally intended to salvage the local DRAM sector, which was losing money during the global financial crisis because of oversupply and plummeting demand.

However, doubts are mounting about the need for the venture as the market is picking up again.

According to the economic affairs chief, Shih Yen-shiang, who was in Singapore for the Asia Pacific Economic Cooperation (APEC) forum, although the operational risks of DRAM manufacturers have become lower now, they still need to pay an average NT$20 billion per year in technology licensing fees.

Now that the TIMC project seems to have failed, the economic affairs authorities will try to figure out other ways to help the DRAM sector, he said.

Expressing a similar view, former head of the Executive Yuan, Liu Chao-shiuan, said it would be a mistake to think that all their problems have been resolved just because DRAM prices are rising again.

It is crucial for Taiwan to secure core technology in order to cope with the intense international competition, Liu said.

China Daily/CNA

(HK Edition 11/13/2009 page2)