TAIPEI: The Legislative Yuan's Economics Committee adopted a resolution yesterday to ask the economic affairs authorities to discard a restructuring plan for Taiwan's DRAM industry.

The resolution asked the economic affairs authorities to withdraw the proposed financial support for the company that was established in August as part of the government's plan to restructure the DRAM industry.

The commitment to fund the company should be withdrawn "to prevent a waste of government funds," the resolution stated.

The economic affairs authorities in March put forward the idea of setting up the Taiwan Memory Co (TMC) , which was later renamed Taiwan Innovation Memory Co (TIMC), as part of its efforts to consolidate Taiwan's ailing dynamic random access memory, or DRAM, industry.

Soon after its establishment in August, TIMC filed an official application with the economic affairs authorities to request NT$4.9 billion in government investment.

While the Executive Yuan has approved the request in principle, the investment project is awaiting approval by the Legislative Yuan before it can be implemented.

Woody Duh, head of the Department of Industrial Technology, said the latest resolution by the legislature will have a very serious impact on the government's efforts to promote the plan.

Duh said he has passed the information to the head of the economic affairs authorities, Shih Yen-shiang, who is in Singapore for the Asia Pacific Economic Cooperation (APEC) forum.

Shih said at a press conference yesterday that he respects the legislature's wish and will seek the Executive Yuan's advice on how best to deal with the situation, when he returns from Singapore next week.

Under the restructuring plan, TIMC was to consolidate ProMOS, Rexchip Electronics and Powerchip - Taiwan's largest DRAM maker prior to the economic downturn - and incorporate technology from Japan-based Elpida Memory.

The venture was originally intended to salvage the local DRAM sector, which was bleeding money at an alarming rate 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.

In another development, the economic affairs authorities said yesterday a settlement reached between Shanghai-based Semiconductor Manufacturing International Corporation (SMIC) and Taiwan Semiconductor Manufacturing Company (TSMC) could test a law that restricts semiconductor investment projects on the mainland by local firms.

SMIC agreed to pay TSMC $200 million and an undisclosed amount of stock and warrants to settle a trade secrets dispute after losing a lawsuit to TSMC in the United States last week.

The settlement could end up leaving TSMC with a 10 percent stake in the mainland chipmaker. The deputy chief of the economic affairs authorities, Lin Sheng-chung, told lawmakers that the deal could be interpreted as an acquisition and that it is without precedent.

Lin said the government will have to study whether Taiwanese companies are allowed to acquire mainland semiconductor companies under existing laws, which to date have prevented local enterprises from buying into the mainland semiconductor sector.

He indicated that the economic affairs authorities' Investment Commission will conduct an in-depth study of the case and inform TSMC if it is found to be in violation of the law.

China Daily/CNA

(HK Edition 11/12/2009 page2)